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The privatization of certain child welfare services in Texas, which will begin next year, creates a liability risk for the private providers that state lawmakers may find difficult to limit. The problem, several legal experts say, is that the Texas Legislature lacks the authority, in most instances, to cap economic damages. Under S.B. 6, which the Legislature passed in 2005, the state’s Department of Family and Protective Services (DFPS) will contract with private organizations for case management services, requiring those organizations to make decisions that affect children’s lives. But the immunity from suit that DFPS has doesn’t extend to private entities, state Rep. Toby Goodman, R-Arlington, said at an April 18 hearing of the House Civil Practices Committee. “Case management decisions concerning a child would be subject to liability, if a wrong decision was made or a negligent decision was made,” Goodman said. Private entities that provide services to children in the state’s custody say they will need a limit on damages as the state phases in the outsourcing of case management services over the next several years. DFPS announced in an April 19 news release that in 2007 the department will begin outsourcing services, including the case management function, to private providers in a 28-county region that includes Bexar County. Representatives of several private nonprofit entities that provide services to children in the state’s custody asked the House committee for help.
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“In order to provide these services, we really do think we need a cap,” Peggy Pugh, senior vice president and chief financial officer for DePelchin Children’s Center in Houston, told the committee. “For us, it’s pretty scary,” Jennifer Carr, spokeswoman for Catholic Charities in Houston, said. “It’s a completely unknown risk we’re facing.” Dennis Noll, board chairman of the Children’s Shelter of San Antonio, says his organization is concerned it won’t be able to obtain liability insurance. The shelter requested bids from about a dozen insurers this year but only three submitted a bid, which is unusual, says Noll, general counsel for Kinetics Concept Inc. in San Antonio. Goodman, a family law attorney and owner of Goodman, Clark & Beckman, presented the committee a proposed liability cap modeled after Florida Statutes �409.1671. That section caps a private provider’s liability at $1 million per claim and $3 million per incident, if the entity has general liability insurance coverage for those amounts. Ability to Cap Jay Harvey, president-elect of the Texas Trial Lawyers Association, told the committee that he doesn’t think the Legislature can cap economic damages under Proposition 12, a constitutional amendment that voters approved in 2003 to authorize caps that state lawmakers enacted for non-economic damages in medical-malpractice suits. The amendment also authorizes lawmakers to enact similar caps for other types of suits. “They can cap any type of damages, except economic,” Harvey, a partner in Austin’s Winckler & Harvey, says in an interview. Charles “Rocky” Rhodes, a South Texas College of Law associate professor who teaches civil procedure and constitutional law, says if state lawmakers try to set caps on economic damages, they will run into trouble with the open courts provision in Article 1, �13 of the Texas Constitution. In 1988′s Lucas v. United States, the Texas Supreme Court struck down the $500,000 cap on medical-malpractice damages that the Legislature enacted in 1977, holding that the cap violated the open courts provision. The court found the cap unconstitutionally limited a person’s right of access to the courts for “a remedy by due course of law.” Rhodes says a cap on economic damages “strikes at the heart” of somebody’s ability to obtain a remedy. Bill Dorsaneo, a professor at Southern Methodist University Dedman School of Law and an expert in Texas civil practice, says the Lucas ruling struck down the damage cap with respect to common-law actions brought by persons seeking redress for injuries but left intact a statutory damage cap on wrongful-death actions. The holding that damage caps are not constitutional for common-law actions made Proposition 12 necessary, Dorsaneo says. However, Dorsaneo doesn’t rule out the possibility that the Legislature could cap economic damages in suits involving statutory claims. Harvey told the House committee that private child welfare agencies could be protected under Civil Practice & Remedies Code Chapter 84, which caps damages for charitable organizations and volunteers at $500,000. But Noll said the current $500,000 cap doesn’t seem to have had much effect.

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