Law Offices of McEldrew and Fullam, P.C.

Liability of Charitable Hospitals

In the past, the courts of many states concluded that private charitable hospitals were not liable for the tortious conduct of their doctors and nurses. The principal reasons given in defense of this blanket immunity included:

Trust fund theory. Under this theory, assets acquired for charitable purposes were held in trust for beneficiaries and should not be used to pay tort claims. These assets would be improperly depleted and the charity's work would be prematurely ended if its assets were subject to tort judgments.
Implied waiver theory. This theory requires acceptance of the belief that when a patient accepts the benefits of a charity, he or she has waived any right to sue in tort for injuries negligently caused by the charity's agents or employees.
Inapplicability of respondeat superior. A number of courts refused to find a charity liable for the actions of its servants because the servant was not employed to produce a profit for the charity.
Public policy. Some courts advanced the theory that charitable institutions were to be encouraged and therefore treated more leniently than for-profit institutions.
Public function. Some jurisdictions found that charitable institutions were entitled to immunity from tort actions because they were performing a public or governmental function.
Stare decisis. Often, courts were unwilling to deviate from prior decisions granting immunity to charities based on the ground that such a significant change in the law was a matter for the legislature, not the courts.

Total immunity for charitable hospitals was a harsh rule, and many states carved out exceptions for corporate negligence, paying patient/non-paying patient distinction, and liability to the extent of non-trust fund assets.

Currently, an institution engaged in a charitable, educational, religious, or benevolent enterprise is not immune from tort liability simply because of the nature of its activity. Generally, tort liability is imposed on charitable hospitals to the same extent as it is imposed on other private institutions. It is generally recognized that modern non-profit hospitals bear little resemblance to the nineteenth century hospitals that used meager assets to provide care to indigents. Charitable hospitals, like for-profit institutions, carry liability insurance to recover loss payouts to patients, thereby overcoming the theory that tort awards would divert substantial resources from charitable purposes. In addition, the rejection of the doctrine of charitable immunity reflects a general trend toward the expansion of liability in all areas of tort law in order to compensate individuals who are injured by business activities.

However, some jurisdictions have limited the extent of the liability of charitable hospitals by:

Imposing a statutory cap on recoverable damages.
Permitting recovery only to the extent of existing liability insurance.
Permitting recovery only for paying patients.