First Reference company logo

Inside Internal Controls

News and discussion on implementing risk management

machine cogs image

No good deed goes unpunished

liabilityReaders of a certain age will recall the damage and the aftermath of Hurricane Katrina. Hurricane Katrina hit the Gulf Coast of the United States in August 2005. In the aftermath of the Hurricane the levees in New Orleans broke and flooded much of the city. The damaged areas were primarily the poorer parishes of New Orleans which mean that those most affected by the hurricane were of low income.

There was a great deal of discussion over the role of government in helping to repair the city (indeed there was a discussion as to whether or not to even bother repairing it). Amongst the individuals who stepped forward to help was an actor by the name of Brad Pitt. At the time (and perhaps still) Brad Pitt was an A list actor and besides his movies known for adopting children from around the world with his wife Angelina Jolie. To cement his bona fides as a humanitarian, Brad Pitt and an organization he founded called “Make it Right” built dozens of homes in New Orleans.

It has now been over 10 years since the hurricane and the residents of these homes are finding them to be substandard. Apparently, the homes are rotting and dangerous. There is mould and they are collapsing. There are electric fires and gas leaks. The resident’s claim that the houses were built too quickly with low quality materials and that the designs did not take into account New Orleans humid climate.

Over the years the problems have worsened and complaints were made to Make it Right. Apparently, the downtown New Orleans office has been closed and the organization is not returning calls. While a spokesperson says that Mr. Pitt ordered inspections of the homes in 2016 the results of the inspection have not been released and the repairs have not happened. Now it seems that two residents have actually sued Pitt and Make it Right to force them to repair the homes.

This situation raises some interesting questions. What exactly is the responsibility of a charity that provides substandard goods to the beneficiaries it helps, in the course of helping them? Put another way can a charity be successfully sued by its beneficiaries for circumstances in which it is fulfilling its charitable mandate. For example, what were to happen if a soup kitchen were to serve food causing illness to one of its patrons? And is this question any different from one where an attendee of a Gala event gets sick from a meal he or she have purchased at the Gala but hosted by a Charity.

Fundamentally, charities are actors in society as are any others. We all have a duty of care to some degree to our neighbors. Indeed, generally the closer the relationship the higher the standard of care one expects. Consequently, charities need to be aware that even in the pursuit of the charitable activities, they could be liable if their activities do not take into account the safety and the potential damage of their actions to either their beneficiaries or to their patron donors.

The net effect of this duty of care is such that charities must examine their liability insurance policies to ensure that even in situations where they are giving away items to unknown beneficiaries, the liability insurance policy covers potential damages. Certainly, in situations where a charity has a premises, and people attend at the premises, one would expect the liability policy to cover activities there. However, many smaller organizations operate without a specific location and tend to operate without the safety of a liability policy. The current situation in New Orleans should show that all charities should be very careful about all their actions even where they are simply in pursuit of their charitable activities. As they say no good deed goes unpunished.

By Adam Aptowitzer

Follow me

Drache Aptowitzer LLP

Tax and Charity Lawyers at Drache Aptowitzer LLP
Drache Aptowitzer LLPis one of Canada’s foremost experts in the law related to charities and non-profit organizations. Their team of bloggers is led by Adam Aptowitzer LLB. He is a lawyer practicing in the areas of charity and tax law. He is a member of both the bars of Alberta and Ontario. He has been speaking and writing on the topic of charity law for several years and been published in numerous publications including the Canadian Taxpayer, the Canadian Fundraiser and the Not-for-Profit News and has been cited as an expert in many publications including the National Post.Read more here
Follow me
Send to Kindle

, , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.

This site uses Akismet to reduce spam. Learn how your comment data is processed.