Nursing Home Arbitration Provision Voided in Arizona Case

FEBRUARY 1, 2016 VOLUME 23 NUMBER 5

A recent series in the New York Times chronicled the increasingly common practice of including arbitration agreements in all sorts of consumer contracts. The series noted that such provisions are often buried in the fine print of everything from job applications to car rentals to nursing home admission agreements.

Why is this important? Because limiting consumers to arbitration proceedings to resolve disputes means they are likely to recover less, they will have a harder time hiring a lawyer, and they will be unable to sue at all for the kind of small-claim injuries that frequently arise. The very prevalence of arbitration agreements shows just how valuable they are to employers, car rental agencies, nursing homes and other businesses.

One arbitration issue that comes up frequently for the elderly (and their family members and loved ones) is in the care received in nursing homes or other long-term care facilities. Very nearly every nursing home admission agreement we have seen in recent years has included a provision mandating that all disputes must be submitted to arbitration — though the provision is usually buried deep in the admission agreement’s fine print.

Nursing home patients have one advantage not available to most other consumers, however — the nursing home admission agreement usually permits the applicant to decline the arbitration provision. Sometimes that is mandated by state law, and the federal government has indicated an interest in prohibiting mandatory arbitration provisions nationwide. For the moment, though, nursing home patients can usually simply cross out the provision on admission, and breathe more easily because the nursing home can be held to task for any failures in care or management.

When the mandatory arbitration provision is signed, though, the patient and family may not be able to file lawsuits for any later breach by the nursing home. That is not always the case, however, as shown in a new Arizona Court of Appeals decision issued last week.

Arthur Edwards (not his real name) admitted his mother Marta to the Hacienda Nursing and Rehabilitation Center in Sierra Vista, Arizona, in 2010. He later explained that her admission came after he found that he was unable to care for her in his home, and Adult Protective Services let him know that if he did not place her they would initiate proceedings.

By the time Marta arrived at Hacienda, her dementia was already advanced — she could not sign the admission agreement herself. Though Arthur did not have a power of attorney signed by his mother, and was just one of her several children, he signed the admission agreements for her. He also signed a provision agreeing to submit any dispute to arbitration.

Marta died at Hacienda a year later. Arthur believed that her death was hastened by the care she received at Hacienda, and a year after her death he filed a lawsuit on behalf of her estate. Hacienda responded by asking the judge to dismiss the lawsuit and tell Arthur he had to submit the case to arbitration instead.

The trial judge agreed, and dismissed the lawsuit. Arthur appealed, arguing that he didn’t actually have any legal authority to consent to arbitration on his mother’s behalf. Hacienda argued that he was acting on her behalf, that in fact he had authority to act even if he didn’t have a signed power of attorney, and that he had acted on her behalf in other matters, as well.

The Arizona Court of Appeals reversed the dismissal of the lawsuit, and sent it back to the lower court for a trial on the merits. The appellate judges distinguished the facts in Marta’s case from an earlier Arizona case, in which a wife signed her husband into the nursing home (and agreed to a mandatory arbitration provision). Arthur’s legal relationship to his mother was not as clear as the one between spouses, ruled the court. There was insufficient evidence that any of Arthur’s custom of taking care of his mother’s finances and care arrangements amounted to authority to waive her right to have her claims tried in a court. Escareno v. Kindred Nursing, January 29, 2016.

What does Marta’s case mean for consumers in Arizona? First, and most importantly: do not sign a nursing home admission agreement without looking for and crossing out the arbitration provision. Be on the lookout for arbitration provisions on readmission after hospitalization, or in moves between facilities.

Paradoxically, Arthur prevailed partly because he had not done what he should have. He really needed to get some legal authority over his mother’s affairs — whether by a power of attorney or by court proceedings seeking appointment as her guardian and/or conservator. Instead, he basically filled out his mother’s checks and had her sign them until she was unable to, then managed to get her to consent to putting his name on her bank account. If he had gotten a durable power of attorney signed, he would probably have lost his argument that he had no authority to sign the arbitration provision on her behalf.

Is there any other way to avoid mandatory arbitration provisions? Perhaps. The Court of Appeals in Marta’s case was asked to rule that arbitration provisions amount to a “contract of adhesion” — a legal term meaning that consumers are not presented with any real choices and therefore should not be bound by the agreements. The appellate judges took pains to note that that argument might still be available, but that it was unnecessary to reach it in Marta’s case because of the way in which the agreement was signed.

Please note: we are explaining some of the practice and significance of the mandatory arbitration provisions commonly found in admission documents for nursing homes, care homes and other facilities. We have not touched on another pervasive and objectionable practice: asking family members to sign guaranteeing payment of future care costs. There are other problematic provisions in such contracts, and we urge you to seek legal counsel before signing any admission agreement.

©2017 Fleming & Curti, PLC