Tort Reform And House Bill 383: How Public Servants in Health Care Were Left Out in the Cold. by Stephen G. Wohleb

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1 I. Introduction. Tort Reform And House Bill 383: How Public Servants in Health Care Were Left Out in the Cold by Stephen G. Wohleb The 74th Legislature brought sweeping changes to tort law in Texas in Among the tort reform measures enacted by the Legislature were amendments to the Medical Liability and Insurance Improvement Act 1 aimed at strengthening health care providers' position in medical malpractice suits. 2 The Legislature also passed House Bill 383, 3 in recognition of the value of providing governmental employees a limitation on liability similar to the limitation that governmental units enjoy by virtue of its sovereign immunity and the protections of the Texas Tort Claims Act. 4 House Bill 383 amended Chapter 108 of the Texas Civil Practice & Remedies Code, which governs limitations on liability of public servants. In most circumstances, the amendments place limits on the personal liability of governmental employees for acts committed within the course and scope of their employment where the employee is covered by insurance or is eligible for indemnity. 5 Unfortunately, the Legislature apparently decided that they had already conceded enough in the way of medical malpractice reform and specifically excluded "health care providers" from the protections of House Bill 383. As a result, government employees who are providers of health care are not afforded the same shield as their non-health care counterparts. II. Sovereign Immunity and Official Immunity. Sovereign immunity is the doctrine that shields governmental entities, including governmental hospitals, from tort liability absent a constitutional or statutory waiver of that immunity. 6 The doctrine of sovereign immunity and the concept that government and governmental officials should not be held to answer in court for actions involving their governmental duties is well-entrenched in our common law. However, in 1969, the Texas Legislature enacted the Texas Tort Claims Act, which provided a limited waiver of this immunity under certain circumstances. 7 As it exists today, the Texas Tort Claims Act provides that: [a] governmental unit in the state is liable for: * * * (2) personal injury and death so caused by a condition or use of tangible personal property or real property if the governmental unit would, were it a private person, be liable to the claimant according to Texas law. 8 Since the enactment of the Tort Claims Act, a large body of case law interpreting the extent of this waiver of immunity has evolved, much of it in the specific context of medical or health care professional liability. 9 Even suits allowed to proceed under this waiver of immunity, however, are subject to monetary limitations on damages, 10 and punitive damages are not recoverable. 11 Further, while the Legislature has opened the door for a partial waiver of governmental or sovereign immunity by the enactment of the Act, immunity is still the rule where the Act does not apply. 12 Liability for individual employees of a governmental unit is also limited in some ways at common law. When an employee of a governmental unit is sued for acts performed in the course and scope of his or her authority as a governmental employee or official, that individual may be afforded the protections of official immunity. 13 The elements of the affirmative defense of official immunity 14 are (1) the defendant took his actions in good faith, (2) the defendant acted within the course and scope of his authority, and (3) the defendant was performing a discretionary function. 15 However, where a claimant seeks to hold an individual employee personally liable and the doctrine of official immunity is inapplicable, there was formerly no limitation on the employee's

2 liability. 16 As a practical matter, this often resulted in the employee being sued as an individual, either solely or in addition to the governmental entity, rather than merely the entity being sued. The Legislature apparently sought to remedy exactly this situation in House Bill 383. III. Prior Case Law under the Texas Tort Claims Act. Since the enactment of the Texas Tort Claims Act, court decisions have eroded the argument that the governmental employee is afforded the protections of the doctrine of sovereign immunity and the Texas Tort Claims Act. 17 For example, courts have specifically held that a suit against an employee of a governmental hospital is not a suit against the entity for mandatory venue purposes 18 or for purposes of the discoverability of insurance policies. 19 Case law has also undermined the ability of hospital employees to claim official immunity when sued for acts arising out of their discretionary functions in the provision of health care to patients. 20 The first line of cases may have prompted the Legislature to consider whether public servants should be afforded the same limitations on liability that their governmental employers enjoy. IV. House Bill 383. House Bill 383 should be considered a major success for governmental employees generally in terms of tort liability. The bill governs causes of action that accrued on or after September 1, 1995, and protects certain public employees and officers who formerly faced unlimited personal liability for their negligent or tortious acts under prior law. The new law places a limit of $100,000 on the personal liability of public servants. Specifically, the amendments provide that: (a) [e]xcept in an action arising under the constitution or laws of the United States, a public servant, other than a provider of health care as that term is defined in Section (c), is not personally liable for damages in excess of $100,000 arising from personal injury, death, or deprivation of right, privilege, or immunity if: (1) the damages are the result of an act or omission by the public servant in the course and scope of the public servant's office, employment, or contractual performance for or service on behalf of a state agency, institution, department or local government; and (2) for the amount not in excess of $100,000, the public servant is covered: (A) by the state's obligation to indemnify under Chapter 104; (B) by a local government's authorization to indemnify under Chapter 102; (C) by liability or errors and omissions insurance; or (D) by liability or errors and omissions coverage under an interlocal agreement. 21 The definition of "public servant" is very broad, and the limitations in subparagraph (2) encompass virtually all suits against governmental employees. Further, the limit applies whether or not the employee or officer performed his or her services for compensation. 22 As in the past, the law limits governmental liability for indemnity to $100,000 for a single person and $300,000 for a single occurrence in the case of personal injury, death, or deprivation of a right, privilege, or immunity, and to $100,000 for a single occurrence of damage to property. 23 Under the broad definition of "public servant," persons protected by the new law include present or former employees, members of the governing board, or other officers of a local government entity or of a state agency, institution, or department. 24 Unfortunately for most governmental hospital employees, the new law specifically excludes "health care professionals," which include: physicians, psychiatrists, pharmacists, registered nurses, podiatrists, chiropractors, psychologists, physician assistants, licensed vocational nurses, perfusionists, dietitians, respiratory therapists, occupational therapists, physical therapists, audiologists, speech

3 therapists, radiological technologists, social workers, professional counselors, and family marriage therapists. 25 House Bill 383 does not affect the rules that provide total immunity to certain public officers and employees performing discretionary governmental functions. 26 Further, despite the extensive exclusions, the statute appears to shield administrators and other non-excluded employees from previously unlimited liability. 27 V. Applicability to Administrators and Board Members. While health care professionals were left out of the broad protections of the new law, there is some good news for non-health care employees and other officials of governmental hospitals. Under the "public servant" definition, hospital administrators and other administrative personnel will be covered by the protections of the new statute. Plaintiff's attorneys have become increasingly creative in the theories under which they have sought to hold hospital administrators personally liable. Common theories of liability against hospital administrators and other hospital officials include negligent staffing or credentialling, negligent development or implementation of policies and procedures, and negligent equipping of (or failure to properly equip) the hospital. Due to the requirement of the Tort Claims Act that the negligence must involve a use or condition of real or tangible personal property, it is difficult to frame a cause of action against a governmental hospital under these theories of liability. Therefore, plaintiff's attorneys have simply sued those individual administrators or officials who were allegedly ultimately responsible for these matters. By suing the employee individually, the need to frame a cause of action that would fall under the Tort Claims Act was obviated, even though issues of official immunity remained. The passage of House Bill 383 offers considerable protection for public servants under these circumstances. Even if a defense of official immunity cannot be established, the liability of the official is limited under the new law. VI. Conclusion. Serious consideration should be given to eliminating the exception established for health care professionals from the protections of Chapter 108. The rationale for excluding health care professionals that this issue is better left to the medical malpractice reform bargaining table does not hold water for the simple reason that the most exposure in medical malpractice suits is borne by physicians and hospitals. However, very few physicians can take advantage of the protections of Chapter 108 because very few qualify as "public servants" under the definitions provided, and governmental hospitals were already afforded liability limitations long before the passage of the amendments to Chapter 108 through complete sovereign immunity and under the damages caps provided by the Tort Claims Act. Thus, it makes little sense to exclude a whole class of governmental employees from the protections of the new law. Further, the elimination of the broad exception of health care professionals from the protections of Chapter 108 would serve the legitimate purpose of attracting more qualified and capable providers to work in governmental hospitals and rural settings. An exception for physicians could even be preserved since physician liability is usually a major component of a malpractice claim, even though, as discussed above, the instances that a physician could take advantage of the protections of the statute would be rare. The current state of the law and the decision of the Legislature to exclude health care providers from the coverage of House Bill 383 is unfortunate. Many governmental hospitals are located in rural areas or have more limited resources and are simply unable to compensate nurses and other professionals on level commensurate with their urban counterparts. The protections of House Bill 383 would have given health care professionals added incentive to seek and obtain employment in rural areas and could have resulted in a more homogenous and higher quality of health care delivery throughout the state.

4 Stephen G. Wohleb is an associate at the law firm of Davis & Wilkerson, P.C. His practice is concentrated in the areas of health law and hospital professional liability. Footnotes 1. Tex. Rev. Civ. Stat. Ann. art. 4590i (Vernon Supp. 1996). 2. Act of May 18, 1995, ch. 140, 1995 Tex. Sess. Law Serv. 985 (Vernon). 3. Act of May 18, 1995, ch. 139, 1995 Tex. Sess. Law Serv. 982 (Vernon). 4. Tex. Civ. Prac. & Rem. Code (Vernon 1986 & Supp. 1996). 5. Tex. Civ. Prac. & Rem. Code (Vernon Supp. 1996). 6. See Lowe v. Texas Tech Univ., 540 S.W.2d 297 (Tex. 1976). 7. See Texas Tort Claims Act, ch. 292, 1969 Tex. Gen. Laws 874 (codified as amended at Tex., Civ. Prac. & Rem. Code ). 8. Tex. Civ. Prac. & Rem. Code (Vernon 1986). 9. This article is not intended to be a comprehensive retrospective on the passage of the Tort Claims Act or the body of interpretive case law that has evolved as a result, which is far beyond the scope of the article. Information on the doctrine of sovereign immunity and the Tort Claims Act is provided merely for context. 10. Tex. Civ. Prac. & Rem. Code (Vernon 1986 & Supp. 1996). 11. Tex. Civ. Prac. & Rem. Code (Vernon 1986). 12. Hopper v. Midland County, 500 S.W.2d 552 (Tex. App.-El Paso 1973, writ ref'd n.r.e.); City of Houston v. Arney, 680 S.W.2d 867, 875 (Tex. App.-Houston [1st Dist.] 1984, no writ). 13. Casas v. Gilliam, 869 S.W.2d 671 (Tex. App.-San Antonio 1994, no writ). 14. Texas courts appear at times to use the terms "official immunity," "quasi-judicial immunity," "qualified immunity," and "discretionary immunity" interchangeably. See City of Mission v. Ramirez, 865 S.W.2d 579 (Tex. App.-Corpus Christi 1993, no writ). 15. Casas v. Gilliam, 869 S.W.2d See Gibson v. Spinks, 869 S.W.2d 529 (Tex. App.-Corpus Christi 1993), aff'd in part & rev'd in part, 895 S.W.2d 352 (Tex. 1995), holding that the Tort Claims Act does not eliminate an individual employee's liability for his or her negligence and that a cause of action against an individual employee is not a claim under the Act, rendering the damage caps inapplicable. 17. See Gibson v. Spinks, 869 S.W.2d McIntosh v. Copeland, 894 S.W.2d 60 (Tex. App.-Austin 1995, writ denied). 19. City of Bedford v. Schattman, 776 S.W.2d 812 (Tex. App.-Fort Worth 1989, no writ). Under Texas Civil Practice & Remedies Code , neither the existence nor the amount of insurance held by a governmental unit is subject to discovery in a suit against the governmental unit. The Schattman court held that when discovery of an insurance

5 policy purchased by the governmental unit which provides coverage to the employee is sought from the defendant employee, the suit against the employee is not "a suit under this chapter" (the Texas Tort Claims Act), and therefore the insurance policy is discoverable. In that particular case, the governmental unit was also a named defendant, and it is not clear from the court's opinion whether the argument was made that while the suit against the employee may not be a "suit under [the Texas Tort Claims Act]," the fact that the governmental unit was also a defendant in the suit technically renders the lawsuit a suit under the Act. Regardless, the proposition that a suit against an individual employee was not a suit under the Tort Claims Act was confirmed. 20. See Kassen v. Hatley, 887 S.W.2d 4 (Tex. 1994). 21. Tex. Civ. Prac. & Rem. Code (a) (Vernon Supp. 1996). 22. Tex. Civ. Prac. & Rem. Code (Vernon Supp. 1996). 23. Tex. Civ. Prac. & Rem. Code (b) (Vernon Supp. 1996). 24. Tex. Civ. Prac. & Rem. Code (1) (Vernon Supp. 1996). 25. Tex. Civ. Prac. & Rem. Code (c) (Vernon Supp. 1996). 26. Tex. Civ. Prac. & Rem. Code (b) (Vernon 1986). 27. See McIntosh v. Copeland, 894 S.W.2d 60.