• Key point: Some states protect charities from being sued by the beneficiaries of their services who are injured or damaged as a result of those services. The fact that a charity in such a state carries liability insurance will not necessarily affect its immunity from liability.
• A New Jersey court ruled that a state charitable immunity law that immunizes charities from liability for injuries sustained by “beneficiaries” was not affected by the fact that a charity purchases liability insurance. New Jersey law specifies that “[n]o nonprofit corporation … organized exclusively for religious, charitable, educational or hospital purposes shall … be liable to respond in damages to any person who shall suffer damages from the negligence of any agent or servant of such corporation … where such person is a beneficiary, to whatever degree, of the works of such nonprofit corporation ….” A drug rehabilitation center was sued by a patient who was injured on the center’s premises. The state charitable immunity law clearly prevented the patient (who was a beneficiary of the charity’s services) to sue. However, the patient argued that he should be allowed to sue the charity since it carried liability insurance and its assets would not be depleted to the extent that any court judgment did not exceed the insurance policy limits. The court disagreed. It began by describing the purpose of the charitable immunity law: “[If a charity’s assets] were used to satisfy the damages suffered by recipients of the charity through the negligence of the agents or servants of the charity, the [assets] would be diverted to purposes not within the charitable intention of the founders and patrons of the charity, and thus the benevolent object would be subverted. The common good and welfare is deemed the better served by the preservation of the [charity’s assets] than by [their] diversion to the making of compensation for injury to beneficiaries attending the operation of the charity.” The court concluded that this purpose was not affected by the fact that a charity has obtained liability insurance: “Insurance premiums are based on a number of variables, one of which is the nature of the risk to be insured. If a nonprofit charitable organization seeks to purchase insurance, the premiums charged to that organization should be lower than other organizations whose purposes are not charitable in nature due to the immunity status afforded by the Charitable Immunity Act. However, if courts were to hod that the Charitable Immunity Act was inapplicable to insured charitable organizations, then the premiums charged to such charitable organizations would ordinarily be higher due to this greater risk of exposure to liability for negligence claims. Therefore, the court rejects [the patient’s] argument because the eventual costs of paying these claims would fall on the charities themselves in the form of higher insurance premiums, thereby depleting the resources of such organizations which are available for the pursuit of their charitable purposes.” This case will be relevant to churches and other religious organizations in New Jersey, as well as those other states that have a similar charitable immunity provision. Pelaez v. Rugby Laboratories, Inc., 624 A.2d 1053 (N.J. Super. L. 1993).
See Also: Negligence as a Basis for Liability – Defenses
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