Friday, December 14, 2007
Is a foundation set up to administer the clinical practices of faculty at a medical school in Virginia eligible for charitable immunity? Part I is here.
As a normative matter, the foundation's claim should be rejected. An immunity operates against tort law's traditional purposes. It thwarts compensation; the loss cannot be spread from an entity with funds to a plaintiff who presumably can show serious economic loss. It hinders deterrence because physicians are not held responsible for their negligence. Finally, to the extent negligence creates a moral imbalance, immunity prevents the imbalance from being rectified. To justify an immunity, there must be some purpose outside of traditional tort law that the immunity furthers.
Charitable immunity was created to help charities in their good work, primarily by preserving charities' resources. There is a general problem with this rationale. Charitable immunity was created prior to liability insurance. Thus, frequently the choice was between a charity, often poorly funded, being able to continue its work or paying a tort judgment. Liability insurance altered that dilemma.
Furthermore, there are several problems with applying charitable immunity on these specific facts. First, another common reason proffered for charitable immunity is the preservation of donations. It is argued that donations to a charity will dry up if the funds are used on tort claims instead of the charity's mission. However, HSF actually prohibits donations; it will not accept them. Second, HSF has been operating, VERY successfully, for nearly thirty years without the benefit of the immunity. It has been able to fulfill its mission AND compensate those arguably injured by its negligence. Just like similar medical schools in all those jurisdictions that don't have charitable immunity.
Third, simply put, HSF is not a charity. Essentially, it provides billing and collection services to the medical school faculty, and then distributes the vast majority of the money it collects to the medical school faculty, the same people that earned the money in the first place. The record does indicate that, in 2005, HSF reported $22,500,000 in forgone collections for care provided to indigent patients. An impressive number, except it must be put in context. That is money HSF pursued, but was not able to recoup. In an analogous context, a Virginia lawyer could not count the services as pro bono: "services for which fees go uncollected would not qualify." Virginia Rules of Professional Conduct, Rule 6.1, comment 6. Furthermore, only 1.5% to 2% of the physicians' services is to indigents without payment from any source.
HSF was set up to "get billing and collection straight." There is no shame in that. Just because the primary motivation of an actor is financial does not mean the actor doesn't do a lot of good. It does, however, mean it is not a charity.
Full disclosure: My former firm, Tremblay & Smith, played a tangential role in this case. Two fantastic lawyers from the firm, Thomas E. Albro and R. Lee Livingston, wrote an amicus brief for the plaintiff on behalf of the Virginia Trial Lawyers Association. (Tom was recently one of five lawyers recommended for two Fourth Circuit vacancies by Virginia Senators John Warner (R) and Jim Webb (D).)