Another State Invalidates Nursing Home Arbitration Agreements

Picture-410On October 16th, the Nebraska Supreme Court ruled that an arbitration agreement between a nursing home and one of its residents was invalid because the resident’s son did not have the authority to sign a voluntary arbitration agreement on her behalf.

Frank Koricic lived with his elderly mother, Manda Baker, and assisted her in her activities of daily living.  Ms. Baker was originally from Croatia and had limited ability to read, speak, or understand English.  Because of a decline in health, Ms. Baker was admitted to the Beverly Hallmark nursing home (now doing business as Beverly Enterprises) in Omaha, Nebraska.

Upon admission, her son, Frank, signed several documents on her behalf, including an optional arbitration agreement (“Resident and Facility Arbitration Agreement”).  This arbitration agreement was not a condition of admission and provided that all claims or disputes arising out of any services or health care provided by the nursing home facility would be resolved exclusively by binding arbitration.

In 2007, Ms. Baker allegedly sustained injuries as a result of nursing home negligence while in residence at the Beverly Hallmark.  Ms. Baker later died in September 2007.  Frank, Manda’s next of kin and trustee of her estate, filed suit against Beverly Enterprises, alleging negligence, breach of contract, and breach of fiduciary duty.

Beverly Enterprises moved to dismiss the case and compel arbitration under the arbitration agreement that Frank had signed at the time of his mother’s admission.  Frank argued that the facility could not enforce the agreement because he, not his mother, had signed the arbitration agreement.  The district court ruled that that the arbitration agreement was valid and enforceable against Ms. Baker’s estate because she had authorized her son to sign medical authorizations for her.

The Supreme Court reversed and remanded the decision of the district court, concluding that Ms. Baker’s son did not have authority to sign the arbitration agreement because it was not a condition of admission.  Frank had actual authority as his mother’s agent to sign medical documents for her.  Frank also had actual authority to sign the paperwork required for her admission to the nursing home facility.

However, the arbitration agreement was optional and not required for Ms. Baker to reside at the facility.  Therefore, Frank did not have actual authority to sign the arbitration agreement.

The Nebraska Supreme Court also determined that Frank did not have apparent authority to sign the arbitration agreement because there was no evidence that Ms. Baker knew Frank would be asked to sign an arbitration agreement, or that she indicated to any staff members that she authorized Frank to sign such an agreement, or that she later ratified the agreement.

Furthermore, a reasonable person should not have expected an arbitration agreement to be included in the nursing home’s admission documents.  Thus, the nursing home facility was not justified in relying on Ms. Baker’s authorization of her son to sign admission papers as authority to bind her to an arbitration agreement.  The Nebraska Supreme Court reversed the trial court’s order to dismiss Frank Koricic’s complain and remanded the case for further proceedings.

This decision could affect the validity of optional arbitration agreements where surrogates sign nursing home admission materials, depending on the extent of the surrogate’s authority to sign documents on the resident’s behalf.

Thanks to Heather Keil, J.D. for her assistance with this article.

For laws related to Nebraska nursing homes, look here.

Sources:

Frank Koricic v. Beverly Enterprises, Nebraska Supreme Court, 2009

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