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The purpose of this document is to provide background information about the Federal Tort Claims Act (FTCA); to discuss recent developments in its application to employees of the VA-affiliated nonprofit research and education corporations (NPCs); to suggest steps an NPC may take to improve the chances that the FTCA will provide coverage; and to provide guidance on alternative coverage.

The FTCA and Its Application to VA

The FTCA (Title 28, Chapter 171 or 28 U.S.C. 1346 and 2671-2680) details the handling of suits against the federal government for money damages when “personal injury or death is caused by the negligent or wrongful act or omission of any employee of the government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” (28 U.S.C. 1346(b)). Excepted from the application of the FTCA are claims arising out of certain intentional acts such as assault, battery, false imprisonment, libel, slander, and misrepresentation (28 U.S.C. 2680). The FTCA provides that in civil negligence actions involving money damages, only the government may be sued, not individual federal employees.
An employee of the government includes “persons acting on behalf of a federal agency in an official capacity, temporarily or permanently in the service of the United States, whether with or without compensation.” (28 U.S.C. 2671) To be covered by the FTCA, the Attorney General must certify that an employee was acting “within the scope of his office or employment” at the time of the alleged act. If the Attorney General denies certification, an appeal may be made to a district court. Contractors are specifically excluded from FTCA coverage.

Section 7316 of Title 38, the statute that contains law applicable to VA, invokes FTCA coverage for VA employees for damages for personal injury, including death, arising from malpractice or negligence “while in the exercise of that employee’s duties” for the VA.

Relevance to the NPCs and Prospects for FTCA Coverage

In a letter dated March 29, 2000, the Department of Justice (DOJ) discussed its view that physicians employed by the VA-affiliated nonprofit research and education corporations cannot be considered federal employees for purposes of the FTCA even though they have VA without compensation appointments (Attachment 1). This opinion clarified to some extent an April 13, 1989, DOJ opinion written shortly after the corporations were authorized by Congress (Attachment 2). At that time, the VA-affiliated corporations had few if any employees, and the opinion was interpreted to exclude from coverage only administrative employees of the corporations. Until the March 29 opinion, the understanding was that corporation employees actively engaged in research were covered, subject to the Attorney General’s certification that the work being performed was within the scope of government work. To assure such certification, corporation employees have been required to have VA WOC appointments and all projects they work on must be VA-approved.

Even though the March 29 opinion addresses only physician employees of the NPCs, it was interpreted to mean that DOJ believed no corporation employees - physicians, nurses, technicians or allied health care professionals - are covered by the FTCA. As a result, they would have been personally liable for suits alleging negligence or malpractice while working on VA approved research and education.

Disagreeing with DOJ’s view that VA WOC appointments for NPC physicians were a “sham,” VA appealed the DOJ determination to the DOJ Office of Legal Counsel, an office tasked with resolving disputes between DOJ and other agencies. Further, VA attorneys maintained that the facts of a case, had one ever occur, were very likely to invoke FTCA coverage regardless of the recent DOJ opinion. It took as much as a year for the Office of Legal Counsel to respond and despite the assurances of VA attorneys, the opinion raised the degree of uncertainty to a level that made many NPC boards uncomfortable.

NAVREF then asked the House and Senate Committees on Veterans Affairs to provide a permanent solution by adding a clause to the NPC authorizing statute that explicitly provides FTCA coverage for certain employees.  In 2003, Congress approved legislation that provides NPC employees with Federal Tort Claims Act (FTCA) coverage against personal liability to the same extent as federal employees.  This was approved and signed by President Bush in 2003. 

Statutory language (as promulgated in the 2010 revision of the NPC authorizing statute):

§7365. Coverage of employees under certain Federal tort claims laws
(a) An employee of a corporation established under this subchapter who is described by subsection (b) shall be considered an employee of the Government, or a medical care employee of the Veterans Health Administration, for purposes of the following provisions of law:
    (1) Section 1346(b) of title 28.
    (2) Chapter 171 of title 28.
    (3) Section 7316 of this title.
(b)  An employee described in this subsection is an employee who --
    (1) has an appointment with the Department, whether with or without compensation;
    (2) is directly or indirectly involved or engaged in research or education and training that is approved in accordance with procedures established by the Under Secretary for Health for research or education and training; and
    (3) performs such duties under the supervision of Department personnel.

In order to ensure NPC compliance, NAVREF recommends that NPCs 1) carefully evaluate all employees to assess whether they meet the above criteria; 2) make any necessary adjustments in their working conditions; and 3) ensure that NPC nurses and other health care professionals continue to have private insurance. Such coverage provides reasonably priced back up protection and access to legal advice should the Attorney General determine that an employee does not qualify for FTCA coverage. Whether NPC-salaried physicians should have more expensive private coverage is a decision that should be based on the circumstances of each individual’s NPC employment.

Steps an NPC Can Take to Improve the Chances of FTCA Coverage

IRS Publication 15A, Employer’s Supplemental Tax Guide (available at http://www.irs.gov), provides general information about how the government distinguishes employees from contractors. More specifically, however, the FTCA and subsequent court rulings provide criteria upon which the government will evaluate a given situation for FTCA coverage.

The individual must be a federal employee at the time of the alleged incident.  WOC status is an accepted mechanism for conferring federal employment status for purposes of the FTCA. Therefore, VA WOC appointments are essential for all VA employees who conduct NPC-administered work during their non-VA duty hours and for all NPC employees who have patient contact. VA Human Resources Management agrees with this position and is developing guidance to the field that clarifies that such appointments are not only possible, but are desirable even for VA employees. A copy of the HR guidance will be shared with all NPCs as soon as it is available.
An NPC WOC employee must work under the supervision of VA personnel. Two Supreme Court cases from the 1970s determined that the critical element in distinguishing a covered government employee from a contractor, or other individual who is not covered, is the power of the federal government to control the detailed physical performance of the worker. These cases also found that the key test of control is whether the government supervises the day-to-day operations of the individual. This means that NPC WOC employees must have one or more qualified, VA-salaried supervisors. Such a supervisor should physically supervise the employee, sign the time card and conduct a regular performance evaluation. Supervisors also generally exercise some measure of control over compensation.

The work performed at the time of an alleged incident must be within the scope of the employee’s government work. NPC employees should perform only VA-approved research and/or education. Both are part of the VA mission and support for VA research and education is the NPCs’ only statutory mission. Employee time cards may be expanded to identify the VA approved project the employee worked on during the specified time.

Applications for WOC status for NPC employees should be strengthened to state explicitly that the individual would be working on VA-approved research and/or education under the supervision of the named VA supervisor. If possible, name the project(s) and provide a brief job description consistent with the equivalent Title 5 or Title 38 VA position. Also, it would be useful for the VA to respond with a letter welcoming the NPC employee to the VA health care “team” and noting that he/she is subject to same standards of conduct as VA employees, must partake in applicable VA training and may access other services such as the employee assistance program, preventive immunizations, etc.

In conclusion, NPCs must work hard to ensure that their employees will be covered under FTCA. Taking the steps detailed above should increase the chances that the Attorney General or­on appeal­a district court will certify that the employee was working within the scope of government employment at the time of an alleged incident and was not acting as a contractor. All NPC employees should be aware of the NPC’s policies regarding how to respond to an allegation or suit. NPC management should be aware of VA’s policies and procedures for responding to a suit as well as steps required by private sector insurers.

Alternatives to FTCA Coverage

Individual coverage:  For several years a few NPCs have been paying for private sector medical malpractice coverage for their nurses. Coverage for nurses, pharmacists and other health professionals is available at a reasonable price from McGinnis, Seabury & Smith, the same firm that provides liability coverage for the American Nurses Association and a number of allied health professional organizations. Individuals applying for coverage do not have to be a member of a professional organization in order to obtain coverage.  However, they must be licensed in the state where they work because the coverage is provided only for work the employee is licensed by the state to perform.

Coverage is provided for whatever work the employee is registered, licensed or certified to perform within the state and which is within the scope of work of the occupation for which the individual is registered, licensed or certified. Please note that if an NPC wishes to insure an employee who has no official credentials, the employee will have to obtain a state registration, license or certification even though this may not be a prerequisite for working in a VA facility.

Vendor:

McGinnis, Seabury & Smith: Chicago -  800-621-3008, ext. 45105 (Liability Department)

Sample premiums:

Occupation Premium Coverage
Nurse $89 per year coverage provides $1 million per incident up to $3 million per year 
  $104 per year  coverage provides $2 million per incident up to $4 million per year
Phlebotomist $87 per year coverage provides  $1 million per incident up to $3 million per year 
  $102 per year  coverage provides $2 million per incident up to $4 million per year
 Pharmacist  $151 per year  coverage provides $1 million per incident up to $3 million per year 
  $177 per year  coverage provides $2 million per incident up to $4 million per year


Provide the agent with the status of the employee (employed or self-employed) and his/her occupation. The agent will send the appropriate brochure and application.  Request one application per employee. McGinnis, Seabury & Smith does not provide coverage for doctors or dentists.

At this writing, it appears that VA-salaried doctors who do not receive any compensation for conducting NPC-administered research are likely to be covered by the FTCA during time spent on NPC projects or while treating patients involved in NPC-funded projects. However, VA physicians who receive compensation from an NPC may be at risk of not being covered by the FTCA for incidents that occur during their NPC compensated time or while performing medical services for the NPC. Until DOJ issues a new opinion saying NPC employees are covered by the FTCA or Congress approves a legislative solution, VA physicians who receive compensation from an NPC should obtain alternative coverage. Some physicians may be able to re-structure their appointments in such a way that the university will provide coverage.

Medical Malpractice Coverage for the NPC

If an NPC is sued in conjunction with a suit alleging medical malpractice by one of its employees, the NPC may incur costs to defend itself, even if ultimately the suit is dismissed or VA is judged to be responsible.  Most D&O/Professional Liability packages provide coverage for suits alleging negligent acts, breach of duty, errors, omissions, misstatement or misleading statement.  The policies do not intended to cover organizations against medical malpractice. 

To provide NPCs with entity coverage against medical malpractice suits, NAVREF previously recommended a special Chubb policy called "Health Care Consultant Professional Liability Insurance."  However, Chubb later sold this policy to another company and after subsequent review, NAVREF concluded that it could no longer recommend it for NAVREF members.  Until further notice, NAVREF is unable to recommend a policy providing NPCs with vicarious liability coverage for suits alleging research subjects' bodily injury.  NPCs interested in such coverage are encouraged to contact the NAVREF office before making purchase decisions.

Organizational coverage:  Though employees of the NPC are covered under FTCA, NPC's may wish to consider medical malpractice insurance coverag for the NPC as an entity.  A number of states sponsor catastrophic medical malpractice programs for organizations and/or medical personnel practicing within the state.  Contact the state insurance agency to learn whether the state has such a program, the coverage it provides and what is required to participate.  In states that have such a program, medical malpractice insurance is generally cheaper than it would otherwise be because the state picks up the cost of a judgment after a specified limit is reached.

NAVREF continues to search for reasonably priced, comprehensive private sector medical malpractice coverage that would protect an NPC, its employees and uncompensated workers against suits alleging negligence, errors and omissions in providing research related medical services. The insurance offered by McGinnis, Seabury & Smith seems to be a reasonable solution to the problem of covering nurses and allied health professionals. However, coverage for an NPC itself and physicians remains problematic. A few members of the Association of Independent Research Institutes (AIRI) conduct clinical research, but each one that NAVREF contacted requires physicians to obtain their own coverage, generally through their hospital appointments.  Any NPCs that obtain other policies that appear to provide reasonable coverage are welcome to submit them to NAVREF for review by an independent expert.

Directors and Officers coverage:  NAVREF recommends that NPCs should maintain their commercial Directors and Officers (D&O) liability policies.  Only the statutory VA board members (medical center director, chief of staff, ACOS/R and ACOS/E) serve on NPC boards in their official capacities and would be covered by the FTCA in the event of a suit (subject to certification by the Attorney General).  Other board members serve in their personal capacities and therefore continue to need the protections afforded by D&O coverage.

Conclusion
A better understanding of the limitations of the FTCA may make apparent that some employees have unknowingly been at risk because the level of VA supervision may not have been sufficient to demonstrate "supervision" by the government.  Even with Congress' approval of the statutory change, it is incumbent on each NPC to determine whether the circumstances of each employee’s work are likely to meet the FTCA requirements. If not, the NPC should obtain alternative coverage or should require the employee to obtain insurance as a condition of employment.
 

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