September 24

Assisted Living Resident May Proceed with Breach-of-Contract Claim Against Long-Term Care Insurer

A U.S. district court in California denies summary judgment to a long-term care insurance company that refused to provide nursing home benefits to a claimant who was residing in an assisted living facility that had a nurse on call 24 hours a day. Gutowitz v. Transamerica Life Insurance Co. (U.S. Dist. Ct., C.D. Cal., No. CV-14-06656 MMM (JPRx), Aug. 14, 2015).

Erwin Gutowitz purchased a long-term care insurance policy in 1991. The policy included a daily nursing home benefit that defined a nursing home in part as a facility with a nurse on call at all times. In 2013, Mr. Gutowitz moved into a facility that was licensed as a residential care facility, not as a nursing home. While the facility did not provide skilled nursing care, there was a nurse on call 24 hours a day. The insurance company refused to cover Mr. Gutowitz’s care because he was not in a nursing home.

Mr. Gutowitz sued the insurance company for breach of contract, breach of good faith, and bad faith denial of insurance benefits. The nursing home filed a motion for summary judgment, arguing that the facility was not a nursing home because it was not licensed to provide nursing services on an ongoing basis.

The U.S. District Court, Central District of California, denies the insurance company summary judgment, holding that the terms of the contract were ambiguous. According to the court “a reasonable insured would have interpreted the policy as covering a facility that employed an on duty or on call nurse to provide nursing services in the facility on a ongoing basis to persons residing there.” The court concludes that there are issues of fact remaining as to whether the insurance company breached its contract, so the case may proceed to trial.

For a summary of the case and brief commentary by Penn State Dickinson Law professor Katherine C. Pearson, click here. 

For the full text of this decision, go to: http://sites.psu.edu/professorkatherinecpearson/wp-content/uploads/sites/17176/2015/08/Order-in-Gutowitz-v.-Transamerica-USDC-Central-District-of-CA-August-14-2015.pdf

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August 29

Normal Agency Principles Apply to Arbitration Agreement

When Evergreen Woods’ admissions coordinator visited May Robinson in her room to review and sign admission documents, May stated that she wanted her husband, also present, to sign the documents. The packet of documents contained an arbitration agreement, and the coordinator stated that entry into the agreement was not a condition of admission. The husband signed the documents. At issue in the appeal is the trial court’s order denying the nursing home’s motion to compel arbitration on the grounds that the husband was not authorized to sign the arbitration agreement.

The appeals court held that a party to an arbitration agreement is bound to the agreement when the signatory was authorized to act as the party’s agent. The lower court failed to distinguish prior case law setting aside arbitration agreements where the facility relied solely on the representations of the agent and no apparent agency relationship existed. In this case, May represented to the facility that her husband was authorized to sign documents on her behalf, and the nursing home accepted the representation. It is true that arbitration agreements result in a waiver of the fundamental right to a jury trial; nevertheless, general agency principles apply when considering whether the agreement is enforceable. The facility’s care coordinator identified the document in May’s presence and stated that its execution was not a condition of admission. When May’s husband executed the agreement, it was reasonable for the nursing home to rely on his authority and all information contained therein was imputed to May. The order was reversed with instructions to grant the motion to compel arbitration.

Evergreen Woods, LLC v. Estate of Robinson, 2015 WL 4486504 (Fla. App. July 24, 2015)

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August 24

Medicaid-Eligible Nursing Home Resident Is Stuck With Costs of Private-Pay Room

An Illinois appeals court rules that Medicaid does not cover a Medicaid-eligible nursing home resident who was in a private-pay room and that the nursing home was not required to move her to a Medicaid-certified bed earlier than it did, meaning that the resident could be discharged from the nursing home for nonpayment. Slepicka v. State (Ill. Ct. App., 4th Dist., No. 12MR743, July 7, 2015).

Mary Slepicka entered a nursing home as a Medicare patient. When her Medicare nursing home coverage ran out in April 2011, she became a private-pay resident.  At the time Ms. Slepicka signed the private-pay contract, money from the sale of her house was her main asset. The nursing home did not place Ms. Slepicka in a Medicaid-certified bed until March 2012. After visiting a financial planner, Ms. Slepicka put the assets from the sale of her house in an annuity and applied for Medicaid. The state granted her benefits retroactive to June 2011.

The nursing home claimed it could not bill Medicaid for the days Ms. Slepicka was not in a Medicaid-certified bed, so it billed Ms. Slepicka. Ms. Slepicka did not pay the nursing home, and the nursing home served Ms. Slepicka with a notice of discharge. Ms. Slepicka appealed the discharge, arguing that she could not be charged for the days Medicaid covered. The nursing home argued it did not put Ms. Slepicka in a Medicaid-certified bed right away because it believed she had assets that she needed to spend down. The trial court granted the nursing home summary judgment, and Ms. Slepicka appealed.

The Illinois Court of Appeals affirms, holding that Medicaid is not required to cover expenses incurred by private-pay residents even if the resident is eligible for Medicaid, and that the nursing home was not required to move Ms. Slepicka into a Medicaid-certified bed. According to the court, “just because a resident is financially eligible for Medicaid, it does not necessarily follow that Medicaid will cover every expense the resident incurs during the period of eligibility, regardless of where the resident incurs the expense.” In addition, the court holds that the nursing home did not know that Ms. Slepicka would qualify for Medicaid as soon as she did, so it was not required to move her into a Medicaid-certified bed any sooner.

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August 22

Probate Court May Appoint Public Guardian in Absence of Suitable Private Guardian

Colleen McIntosh suffered from schizophrenia and spent five years in various psychiatric hospitals. Concerned about her diagnosis and with the negative impact of constant medication changes Colleen was requesting, the Maine Department of Health and Human Services sought full guardianship authority to oversee Colleen’s medical care and financial management. Although Colleen’s mother had expressed interest in serving as Colleen’s guardian, the Department argued that her mother, serving as Representative Payee for Colleen’s Social Security benefits, had not provided any financial support to Colleen while hospitalized, and that she would also likely agree with Colleen’s request to change medications counter to physician recommendations. Following a full hearing the probate court determined Colleen to be an incapacitated person and appointed the Department as her guardian.

On appeal, the Maine Supreme Court held that there was clear and convincing evidence to support an order finding incapacity and warranting the appointment of the Department as public guardian. Colleen was appointed a court visitor, she had the opportunity to be present and testify at a hearing, all interested parties were served, and a hearing was conducted in a manner consistent with Colleen’s due process rights. The medical evidence verified Colleen’s incapacity, justifying the need for a guardianship. In determining the appropriate guardian, the court stated that a public guardian cannot be appointed when a suitable private guardian is willing to serve. In this case, however, there was sufficient evidence to show that Colleen’s mother would be unable to appropriately manage her daughter’s finances or address her medical needs outside of a hospital setting, and thus appointment of a public guardian was proper.

Guardianship of McIntosh, 2015 WL 4529747 (Me. July 1, 2015)

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August 20

Medicaid Applicant with Care Agreement Assessed Transfer Penalty Because Rate Was Too High

A New Jersey appeals court rules that the state properly disregarded a Medicaid applicant’s care agreement and assessed a transfer penalty because the rate charged under the agreement was too high and the applicant did not provide enough details about the services provided in order to calculate their value. E.A. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-2669-13T3, July 20, 2015).

E.A. lived with her daughter, B.C., from 2004 until 2012. In 2006, they entered into a care agreement in which E.A. agreed to pay B.C. a monthly fee for care. The fee was based on the amount charged by a private home health care company. B.C. occasionally made larger withdrawals than the contract called for and did not keep records of the services provided. In 2012, E.A. entered a nursing home and applied for Medicaid. The state ignored the care agreement and found that B.C. had transferred a total of $244,510 to B.C. and imposed a 936-day penalty period.

E.A. appealed, arguing that the state should not have disregarded the care agreement and that the state did not calculate the worth of B.C.’s services. After a hearing, the administrative law judge ruled the penalty period was appropriate, and E.A. appealed to court.

The New Jersey Superior Court, Appellate Division, affirms the state’s decision, holding that the state properly disregarded the care agreement. According to the court, B.C. and E.A. did not comply with the agreement when B.C. made additional withdrawals, and B.C. was not entitled to the rate charged by the private home health agency because she did not provide the same full-time services as the agency. In addition, the court rules that E.A. did not provide enough details of the types of services actually provided under the care agreement for the state to calculate the value of her services.

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