Charity Case: Is a Donation a Collateral Source?

When these sources reimburse an injured plaintiff for lost wages and/or make payments for medical care and treatment as a result of the negligence of another, this is considered a collateral source, and collateral sources may operate to reduce the amount of recovery of an injured person in a lawsuit.1

Alternatively, when a person is injured, sometimes family, friends, and even unknown persons and/or entities may make donations or contributions to aid the injured person in his or her time of need. As long as these are voluntary donations or contributions, they are not collateral sources and may not, therefore, reduce a plaintiff’s recovery.2

These types of charitable contributions to an injured plaintiff fall under a statutorily recognized exception to the general collateral source rule found in CPLR 4545(a), and said exception is noted in CPLR 4545(b), which states as follows: Voluntary charitable contributions received by an injured party shall not be considered to be a collateral source of payment that is admissible in evidence to reduce the amount of any award, judgment or settlement.3

Surprisingly, there does not appear to be any case law interpreting CPLR 4545(b), and the statute fails to define what constitutes a “voluntary charitable contribution.” For example, does the exception cover only donations made from charities, or can these contributions come from individuals who are not recognized by law as a formal charity?
Both Professor David D. Siegel and a Memorandum in Support from the New York State Senate regarding the legislative intent behind the statutory exception provide guidance to clarify this potential ambiguity.

Professor Siegel argues that contributions by friends and relatives should be included within the statute. Specifically, he argues as follows:
“Suppose the plaintiff receives money from a charitable source. May the defendant try to show that the contribution is in some way designed to repair one of several of the plaintiff’s losses that trace to the defendant’s tort, e.g., medical expenses, lost earnings, pain and suffering, etc.?

An amendment adding a subdivision (d) to CPLR 4545, which became law on December 9, 2002 and took effect immediately, says no. If the contribution qualifies as a ‘voluntary charitable contribution,’ the tortfeasor is to be allowed no share of it, through the collateral source rule or otherwise.

There may be many examples of such charitable gestures, and perhaps there will be some contest on the matter. If a formally constituted charitable organization makes the payment, it should clearly fall under the statute. But what about a gift from a concerned friend, or a rich uncle? Those things should also be deemed within the statute. Perhaps the statute’s aim is best effected by applying the word “charitable” not to define the legal status of the donor, but the generosity of the gesture.4

Although clearly believing that individual contributions to injured plaintiffs should be exempted per the statute, Professor Siegel stops short of saying that said contributions are absolutely exempted.5

Looking to the legislative intent behind the exception as evidenced by the New York State Senate Memoran­dum in Support (hereinafter “Memor­andum”), it appears that these contributions would indeed be exempt.

The Justification Section of the Memorandum explains that the Charitable Contributions exception is being addressed “in light of the enormous and unparalleled potential claims arising after the September 11 attacks on the World Trade Center and the tremendous outpouring of generosity from donors seeking to assist those in need.”6

The Memorandum went further, explaining the rationale behind the exception, which was a concern that the tortfeasor or insurer might receive a windfall. Specifically, the Senate noted that “[t]he two innocent parties – the donor, who clearly would never intend for his or her gift to offset a legal obligation of a wrongdoer, and the insured, who paid its premiums for coverage against harm, are both penalized, an action never contemplated by donors when they give, insureds when their premiums are paid, or by the authors of CPLR 4545.”7

Moreover, the Senate highlighted the point that applying the collateral source rule to charitable contributions was “ill conceived;” saying, “most assuredly, contributions will dry up if diverted to the pockets of an insurer or wrongdoer.”8 Furthermore, the Senate argued that “[s]ettlements will be delayed, while the insurer waits to see what it can offset[, …] [i]ndividuals or institutions that have the ability or wisdom to protect themselves against harm will be penalized[, and …] a jury, not an insurance company, should decide what qualifies as ‘overcompensation.'”9

The Memorandum states that allowing charitable contributions to qualify as a collateral source was patently unfair as it “would inappropriately free the insurer from its contractual obligations even though the insured has paid premiums to insure against unforeseen contingencies.”10 In an appeal to do what the Senate felt was the right thing to do, the Memorandum stated, “[c]learly, neither the wrongdoer nor the insurer should benefit from the generosity of individuals who freely and voluntarily contribute to injured parties.”11

Finally, in its harshest language of the Memorandum, the Senate hammered home the point, “[t]o expect a donor’s generosity to replace an insurer’s obligation is tantamount to asking the donor to give directly to the insurer, a scenario that is, of course, absurd.”12

Thus, it is clear from the Memorandum that there was never any legislative intent whatsoever for the donations or charitable contributions to the injured person to come from a particular or formal, legally recognized, charity or organization. Reference to a “donor” or “individuals” is repeatedly made throughout the Memorandum, not to mention the singular pronouns of “his” and “her.” Moreover, the Memorandum never discusses or even mentions a formal charity or charitable organization of any kind, much less a requirement for same.

As such, CPLR 4545(b) should be construed to exempt, at the very least, donations from a single individual and should not require or mandate that the donation come from a formal, legally recognized, charitable organization.