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News & Developments

Clarke v. OHSU: What does it mean to school boards?
The good news: Districts still have good liability coverage

April 24, 2008 - From OSBA's Spring 2008 Critical Issues Newsletter - What child is this, who laid open our Tort Claims Act? An infant, barely old enough to have received his legal name, became a key figure in Oregon's struggle to balance the scales of justice.

Lack of oxygen to Jordaan Clarke's brain shortly after heart surgery at Oregon Health & Sciences University rendered him brain-damaged for life. The trial court ruled that hospital staff were responsible. Attempting to protect individuals named in the lawsuit, OHSU sought to shift liability for the mistake onto the hospital itself.

Because Oregon's tort claims law limits liability for a state institution to $200,000, baby Jordaan's family appealed - and won.

The Oregon Supreme Court found the $200,000 limit wasn't substantial enough to cover the cost of Jordaan's care and loss of potential income for life. The decision keeps the door open for individuals, not just the public institutions they work for, to be named in lawsuits. Instead of providing clarity, the decision has triggered a cascade of concerns. Among them - will we struggle to recruit staff and volunteers, and how much more will insurance cost?

In the short term, there are four tracks running into the horizon: judicial, legislative, administrative and fiscal. At the unseen point where those tracks converge, there may be resolution that will satisfy those who seek remedy in cases such as Jordaan's and those who seek shelter from economic ruin.

Judicial approach

Historically, employees and others associated with public bodies (school boards, special districts, etc.) have not been sued individually. And plaintiffs have most often settled for far less than the statutory limit, often for less than their initial claim.

"In all likelihood, and thankfully so, the impact of this decision will never be fully realized at the district level," said Rebekah Cook, an OSBA attorney. "Tragic incidents are extremely rare."

Cook and others believe that determining what constitutes a "substantial remedy" for a plaintiff will continue to be decided case by case, severity of the injury and age being major factors. In each case, plaintiffs' attorneys will attempt to add individuals accused of wrongdoing to maximize potential damages.

Likewise, defendants will argue that individuals should not be named in the suit, thus limiting the liability.

Legislative action

Supreme Court Justice Thomas A. Balmer, in his concurring opinion of the Clarke v. OHSU case, said, "The Legislature should take this opportunity to reconsider the appropriate tort claims act limit for medical malpractice claims against OHSU."

In February, the Legislative Joint Committee on Ways and Means heard testimony on this issue. OSBA and other organizations potentially affected by the decision weighed in. A week later, House Speaker Jeff Merkley (D-Portland) and Senate President Peter Courtney (D-Salem/Gervais/Woodburn) announced the creation of the Oregon Tort Claims Act Interim Task Force. The group, co-chaired by Sen. Floyd Prozanski (D-Eugene) and Rep. Suzanne Bonamici (D-Beaverton), will meet over the next 10 months and recommend action to the 2009 Oregon Legislative Assembly.

Many expect the Legislature will at least consider raising the claims award beyond the current limits of $200,000 in economic and non-economic damages and $500,000 in the aggregate for all claims arising from a single occurrence.

"The Supreme Court made it clear that simply raising the caps on government tort claims would not fix the constitutional issues addressed in Clarke," Bonamici said.

"Comprehensive reform is the best way to achieve certainty for local and state governments," Prozanski added.

Cook suggested the Legislature could, as part of a remedy, statutorily separate OHSU from school districts and others. That way, riskier institutions with more exposure would not share the same risk pool as those with less exposure. OSBA's Legislative Policy Committee will study the issue and recommend a position for OSBA to take to the 2009 session.

Administrative review

In testimony to the Ways and Means Committee, Cook said OSBA's greatest concerns are the possible effect of Clarke v. OHSU on claims against school districts and the effect on school programs.

In a nutshell, OSBA's concerns are these:

Until there is a fix, plaintiffs may name individual defendants in lawsuits as well as the institution. Two potential impacts: Districts will have to prove the remedy ($200,000) is adequate and the district can be substituted in the lawsuit in place of the individual. And, finding an agreeable settlement will be more difficult as the amount of damages being sought increases.
The decision could cause potential school board candidates to shy away from service, fearing the risk and possible consequences of being named in a lawsuit.
Career-related classes with higher risk for accidents (welding, auto shop, woodworking, etc.) could disappear from school curricula.

OSBA has reminded its members that Oregon law requires districts to indemnify and defend their staff, board and volunteers when they've been acting "in the course and scope of their duties." In that respect, said Cook, the process and practice of defending against lawsuits has not changed. Those protections are still very much intact.

Cook said that OSBA will be actively engaged as the legislative task force works toward a viable outcome.

Blunting fiscal scares

Frank Stratton, Insurance Services program manager for the Special Districts Association of Oregon, outlined both the fiscal implications of this case as well as what PACE is doing to blunt those effects.

"The biggest financial exposure to public agencies will be from catastrophic claims, such as a severe bus accident, sexual abuse of a minor, and athletic injuries," Stratton said.

The good news: The court decision didn't change the statutory requirement for public bodies to indemnify and defend those under its umbrella.

"As a result, your liability insurance coverage still provides coverage up to the limits of your policy, for your employees, board members and volunteers if named individually in a lawsuit," Stratton said. He recommends, however, that public agencies review their liability insurance coverage limits.

Awaiting a judicial pattern to emerge from case law will take time. The 2009 legislative session may be the best short-term chance for reform. Meanwhile, OSBA, SDAO and PACE are involved at each juncture.

With a high quality team representing member's concerns and interests, a pledge for continued support, a consistent strategy, a good defense and the best liability coverage available, all that's left to do is cultivate a bit of patience, be safe, and wait.

In response to the Clarke v. OHSU decision, PACE: