Wednesday, November 30, 2011

A Summary Explanation of the Doctrine of Charitable Immunity

Charitable immunity is perhaps one of the most misunderstood concepts in the law. Many charities are under the mistaken assumption that they are immune from any lawsuit simply because they operate as a non-profit and for a charitable purpose. This is a misunderstanding that can have unfortunate consequences.

In Virginia, “[a] charitable institution is immune from liability to its beneficiaries for [ordinary] negligence arising from acts of its servants and agents, but only if due care has been exercised in their selection and retention.” Ola v. YMCA of South Hampton Roads, Inc., 270 Va. 550 (2005). This statement obviously merits further analysis.

First, in order to obtain charitable immunity, the organization must be a charitable institution. To determine whether an institution is charitable, Virginia courts “apply a two-part test, examining (1) whether the organization’s articles of incorporation have a charitable or eleemosynary purpose and (2) whether the organization is in fact operated consistent with that purpose.” Davidson v. The Colonial Williamsburg Found., 817 F.Supp. 611 (E.D. Va. 1993). It is therefore imperative that non-profit organizations operating as charitable or public benefit organizations not only draft articles of incorporation that reflect their mission, but that they also operate in a manner wholly consistent with that mission.

Second, a charitable institution is immune from liability only to its beneficiaries. In Virginia, charities are not immune from liability to legal strangers. A beneficiary is someone that receives something of value, which the organization, through its charitable purposes, undertakes to provide. Egerton v. R.E. Lee Memorial Church, 395 F.2d 381 (4th Cir. 1968). As an example, the recipient of an in-home meal from a charity providing in-home meals to the sick or disabled would be considered a beneficiary of the organization’s charitable purpose. However, the victim of an automobile accident occurring on the roads while the same charity was delivering a meal would not be a beneficiary.

Membership in a class of individuals that could theoretically obtain benefits from the charity is also not enough. Thrasher v. Winand, 239 Va. 338 (1990). Merely because an individual may be eligible to receive the benefits of a particular charity does not mean that charity is immune from tort liability to that individual, unless that person actually receives the benefits of the charity.

Finally, a charitable organization is only immune from liability to its beneficiaries for ordinary negligence committed by the organization’s employees or agents. This means that the organization remains liable to its beneficiaries for acts of gross negligence, acts committed by other individuals that the organization had a duty to monitor (such as other beneficiaries) and for damages that do not result from negligence (such as a breach of contract). For example, a charitable organization may be liable to its beneficiaries for torts committed by other beneficiaries if the charity failed to properly supervise said beneficiaries. A charity can also be liable for the actions of its employees and agents if those individuals were negligently hired or negligently retained.

Going back to the in-home meal charity, the charity would likely be immune from a lawsuit by the recipient of an in-home meal for damages resulting from undercooked chicken if (1) the cook had been hired after appropriate screening; (2) the cook was not grossly negligent in cooking the chicken; and (3) the cook actually worked for or volunteered for the charity.

In conclusion, it is imperative that non-profits operating for charitable purposes take steps to ensure that they will be afforded the protections of charitable immunity. Specifically, the articles of incorporation must reflect a charitable purpose and the organization must operate consistent with that purpose. If the organization wishes to broaden or change its mission, the articles of incorporation must be amended. The organization should utilize proper hiring and training practices as well as appropriately supervise employees and agents. In addition, the organization should clearly understand and identify who actually receive the benefits of the charity.

At Gross & Romanick, we have considerable experience representing charitable organizations in matters ranging from drafting Articles of Organization to litigating tort claims. If you are forming or have formed a non-profit organization, you should retain experienced counsel to assist you in navigating the vast array of legal issues inherent in charitable organizations, including but not limited to the doctrine of charitable immunity.