History of the Doctrine of Charitable Immunity
The doctrine of charitable immunity originated in Great Britain in the 1800s. Under this doctrine, charitable organizations were legally protected from tort claims arising from a negligent act of a charitable organization or its agents. A tort is “a private or civil wrong or injury resulting from the breach of a legal duty that exists” (Barron’s Law Dictionary 516, 4th ed. 1996). Any claim that is related to a personal injury of some kind is likely a tort claim.
Historically, the doctrine of charitable immunity was based on the principle that nonprofit assets that are held in trust for the public good should not be used to pay off personal injury claims brought against charitable organizations. However, not long after the doctrine of charitable immunity became part of English common law, it was rejected. Despite its rejection in Great Britain, the theory was adopted in the United States. Many states codified charitable immunity statutes that shielded nonprofit organizations from tort liability, including Colorado.
Over time, states and courts in the United States began to reject the doctrine of charitable immunity as no longer necessary. Advocates argued that the doctrine was a product of its time when gifts to charity were small, mostly from private citizens. At that time, making sure that donations were being used for their intended charitable purposes was essential to keep charitable organizations funded. Modern charity, these advocates argued, was big business and no longer required an exception to the rule of liability and legal responsibility. In many states, this argument was accepted, and the charitable immunity doctrine does not apply in most states nowadays. And in fact, no state grants absolute immunity to nonprofit organizations or their agents.
Charitable Immunity Doctrine in Colorado
Under Colorado common law, charitable organizations could be sued for a tort perpetrated by the organization or its agent, but all assets of the organization held in trust for its charitable uses and purposes could not be used to settle a tort judgment. In other words, you could sue and win the lawsuit, but you wouldn’t get anything. Colorado common law was modified and codified by the state legislature with the enactment of C.R.S. § 7-123-105. This statute, which is current law, did not repeal the doctrine of charitable immunity, but it did limit it. Under this statute, a charitable organization may be responsible for paying any judgment entered against it up to the amount of its insurance coverage.
So, in Colorado, the doctrine is limited, but it is still a live doctrine. It is important for nonprofit organizations to remember that this doctrine does not protect a nonprofit from being sued. If a nonprofit organization is sued for a tort and a judgment is entered against them, the amount that can be collected should be limited to the extent of the nonprofit’s insurance coverage.
Charitable organizations should also keep in mind; this doctrine only applies to tort liability. It does not shield nonprofit organizations from other legal issues like a breach of contract, so there could be other types of judgments.
Organizations should carry insurance to cover liability of a variety of types. This will satisfy any judgment and make it less likely for the doctrine to be eroded further.
In sum, the charitable immunity doctrine is good to be aware of, and may be a defense in some situations, but should not drive your overall strategy around the nonprofit’s assets.