Position Paper 3 in Healthcare

Tunkl v. Regents (Week 7)

C. EXCULPATORY CLAUSES

Tunkl v. Regents of Univ. of California

Supreme Court of California, 1963. 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441 .

Tobriner, Justice.

This case concerns the validity of a release from liability for future negligence imposed as a condition for admission to a charitable research hospital. For the reasons we hereinafter specify, we have concluded that an agreement between a hospital and an entering patient affects the public interest and that, in consequence, the exculpatory provision included within it must be invalid under Civil Code section 1668.

Hugo Tunkl brought this action to recover damages for personal injuries alleged to have resulted from the negligence of two physicians in the employ of the University of California Los Angeles Medical Center, a hospital operated and maintained by the Regents of the University of California as a nonprofit charitable institution. Mr. Tunkl died after suit was brought, and his surviving wife, as executrix, was substituted as plaintiff.

The University of California at Los Angeles Medical Center admitted Tunkl as a patient on June 11, 1956. The Regents maintain the hospital for the primary purpose of aiding and developing a program of research and education in the field of medicine; patients are selected and admitted if the study and treatment of their condition would tend to achieve these purposes. Upon his entry to the hospital, Tunkl signed a document setting forth certain “Conditions of Admission.” The crucial condition number six reads as follows: “RELEASE: The hospital is a nonprofit, charitable institution. In consideration of the hospital and allied services to be rendered and the rates charged therefor, the patient or his legal representative agrees to and hereby releases The Regents of the University of California, and the hospital from any and all liability for the negligent or wrongful acts or omissions of its employees, if the hospital has used due care in selecting its employees.”

Plaintiff stipulated that the hospital had selected its employees with due care. The trial court ordered that the issue of the validity of the exculpatory clause be first submitted to the jury and that, if the jury found that the provision did not bind plaintiff, a second jury try the issue of alleged malpractice. When, on the preliminary issue, the jury returned a verdict sustaining the validity of the executed release, the court entered judgment in favor of the Regents.1 Plaintiff appeals from the judgment.

We shall first set out the basis for our prime ruling that the exculpatory provision of the hospital’s contract fell under the proscription of Civil Code section 1668; we then dispose of two answering arguments of defendant.

We begin with the dictate of the relevant Civil Code section 1668. The section states: “All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”

* * *

In one respect, as we have said, the decisions are uniform. The cases have consistently held that the exculpatory provision may stand only if it does not involve “the public interest.”

* * *

If, then, the exculpatory clause which affects the public interest cannot stand, we must ascertain those factors or characteristics which constitute the public interest. * * *

* * * It concerns a business of a type generally thought suitable for public regulation. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public. The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards. As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services. In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence. Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

* * *

In the light of the decisions, we think that the hospital-patient contract clearly falls within the category of agreements affecting the public interest. To meet that test, the agreement need only fulfill some of the characteristics above outlined; here, the relationship fulfills all of them. Thus the contract of exculpation involves an institution suitable for, and a subject of, public regulation. [ ] That the services of the hospital to those members of the public who are in special need of the particular skill of its staff and facilities constitute a practical and crucial necessity is hardly open to question.

The hospital, likewise, holds itself out as willing to perform its services for those members of the public who qualify for its research and training facilities. While it is true that the hospital is selective as to the patients it will accept, such selectivity does not negate its public aspect or the public interest in it. The hospital is selective only in the sense that it accepts from the public at large certain types of cases which qualify for the research and training in which it specializes. But the hospital does hold itself out to the public as an institution which performs such services for those members of the public who can qualify for them.

In insisting that the patient accept the provision of waiver in the contract, the hospital certainly exercises a decisive advantage in bargaining. The would-be patient is in no position to reject the proffered agreement, to bargain with the hospital, or in lieu of agreement to find another hospital. The admission room of a hospital contains no bargaining table where, as in a private business transaction, the parties can debate the terms of their contract. As a result, we cannot but conclude that the instant agreement manifested the characteristics of the so-called adhesion contract. Finally, when the patient signed the contract, he completely placed himself in the control of the hospital; he subjected himself to the risk of its carelessness.

* * *

We turn to a consideration of the * * * arguments urged by defendant to save the exemptive clause. Defendant contends that while the public interest may possibly invalidate the exculpatory provision as to the paying patient, it certainly cannot do so as to the charitable one. * * *

* * *

In substance defendant here asks us to modify our decision in Malloy, which removed the charitable immunity; defendant urges that otherwise the funds of the research hospital may be deflected from the real objective of the extension of medical knowledge to the payment of claims for alleged negligence. Since a research hospital necessarily entails surgery and treatment in which fixed standards of care may not yet be evolved, defendant says the hospital should in this situation be excused from such care. But the answer lies in the fact that possible plaintiffs must prove negligence; the standards of care will themselves reflect the research nature of the treatment; the hospital will not become an insurer or guarantor of the patient’s recovery. To exempt the hospital completely from any standard of due care is to grant it immunity by the side-door method of a contractual clause exacted of the patient. We cannot reconcile that technique with the teaching of Malloy.

* * *

The judgment is reversed.

Notes and Questions

1.Written waivers of the right to sue are typically upheld in settings other than health care, if the waiver of negligence is clearly described, the activity is a voluntary one, the waiver freely given by a party who understands what he is giving up, and there is not a serious imbalance of bargaining power. Courts view such waivers as a valid exercise of the freedom of contract. See generally Jaffe v. Pallotta Teamworks, 276 F. Supp.2d 102 (D.C.D.C. 2003) (upholding waiver by a runner in an AIDS charity event, a voluntary activity).

2.The Tunkl context is a special case of a charitable teaching hospital. Why does the court view this context as special? In other health care situations other than emergencies, why shouldn’t a patient be able to waive the right to sue in exchange for lower cost or free treatment? See Esquivel, above, and discussion of consumer-driven health care, below. Is there something special about medical care in general, or Tunkl’s situation in particular, that makes such a choice by a patient suspect? Do the court’s arguments convince you as to the reasons for invalidating such attempts by health care institutions to limit their liability? Short of a complete waiver of a right to sue, how else might hospitals or doctors protect themselves? Can a patient be asked to waive the right to sue for punitive damages? Could the parties agree on liquidated damages? Could the parties agree that an action would be brought in the local state court? Could treatment be conditioned on the patient submitting any malpractice claim to an administrative body, or to arbitration? Should the patient’s source of payment determine whether an exculpatory agreement should be enforced?

California has continued to follow Tunkl’s analysis. See, e.g Health Net of California, Inc. v. Department of Health Services (2003) 113 Cal.App.4th 224, 6 Cal.Rptr.3d 235 (2003) (exculpatory clause related to managed health care for Medi–Cal beneficiaries).

Other courts have also rejected exculpatory agreements under a Tunkl-influenced analysis. See, e.g., Vodopest v. MacGregor, 128 Wash.2d 840, 913 P.2d 779, 783 (1996) (invalidating, under Washington law, a release related to medical research). One exception that has been found to be acceptable is an exculpatory agreement for treatments involving experimental procedures as the patient’s last hope for survival. See Colton v. New York Hospital, 98 Misc.2d 957, 414 N.Y.S.2d 866 (1979) . See also, 42 CFR § 46.116 , governing research funded by HHS and discussed in Chapter 20: “No informed consent, whether oral or written, may include any exculpatory language through which the subject or the representative is made to waive or appear to waive any of the subject’s legal rights, or releases or appears to release the investigator, the sponsor, the institution or its agents from liability for negligence.”