Nursing Home Agreements Can Be Tricky

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Russo & Kieck

Hackensack, NJ

The decision to place a loved one in a nursing home is difficult. Many times an emergent situation exists and the family is convinced to enter into an agreement with the nursing home for the loved one's care. The agreement may simply set forth the financial obligations. However, there are agreements which go much further and seek to limit the liability of the nursing home in cases of abuse and neglect.

There is a trend today for nursing homes to put clauses in the agreement which prohibit claims from being decided by a court of law. These clauses compel that claims be submitted to binding arbitration, severely limit discovery and may bar certain damages or place a cap on the damage amount.

Always read the agreement thoroughly. If you find such a clause, cross it out or seek legal counsel. Also, if you are admitting a loved one under a durable power of attorney, it is important that you review the power with an elder care lawyer to consider putting limiting language in the power as to nursing home agreements.

If you find that you have entered such an agreement and there exists a claim for abuse and neglect, not all is lost. In August, 2010, the Appellate Division issued an opinion addressing two of these situations: one where the agreement was signed by a person operating under a durable power of attorney and the other where the wife signed the agreement for her husband. The Estate of Anna Ruszala v. Brookdale Living Communities, Inc., et. al. and Ida Azzaro v. Brookdale Living Communities et. als. (August 10, 2010).

First, the Appellate Division found that such provisions are enforceable under the Federal Arbitration Act which preempts public policy and the provision of the state Nursing Home Responsibilities and Rights of Residents Act which had attempted to invalidate arbitration clauses.

However, the Court found certain arbitration provisions to be unenforceable under the doctrine of substantive unconscionability.

In both cases before the Appellate Division, the resident suffered significant injuries at the facility and later died as a result. Lawsuits were filed alleging negligence and wrongful death against the nursing home.

The Appellate Division made several findings regarding these types of residency agreements:

  1. Residency agreements are contracts of adhesion which is the first step in the analysis of whether a contract, or any specific terms therein, should be deemed unenforceable based on policy considerations;
  2. The court looks to four factors: (a) the subject matter of the contract; (b) the parties' relative bargaining positions; ©) the degree of economic compulsion motivating the ‘adhering party; and (d) the public interests affected by the contract.

The Appellate Division fount that there are global characteristics that every potential nursing home resident shares: inability to continue to live in their homes due to ill health, advanced age, or both; and that the Legislature, in adopting the Nursing Home Responsibilities and Rights of Residents Act has identified nursing home residents as a vulnerable group of consumers, entitled to special protection against economic abuse, personal privacy abuse, the deprivation of their right to choose their own health care professionals, and an array of other abuses that speak to the core of human dignity; and the imbalance of resources that create relative inferiority in the bargaining position of nursing home residents.

The Appellate Division focused on the public interests affected by the nursing home agreement. The Court concentrated on whether the effect of the arbitration clause provisions that significantly restrict discovery, limit compensatory damages and prohibit punitive damages shield the nursing home from compliance with the laws of the state. The Court found that the restrictions on discovery with limits on compensatory damages and outright prohibition of punitive damages form "an unconscionable wall of protection for nursing home operators seeking to escape the full measure of accountability for tortuous conduct that imperils a discrete group of vulnerable consumers." The Court held that these provisions in the arbitration clause of a residency agreement are void and unenforceable.

The Court did uphold the requirement of arbitration in the case signed by the person acting as power of attorney. However, the offending provisions were severed. The other case was permitted to proceed to trial to determine if a valid contract was formed between the parties since the wife signed on behalf of her husband and did not have a durable power of attorney.

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