U.S. Supreme Court Strikes Down State Prohibition on Nursing Home Arbitration

Court invalidates West Virginia law prohibiting pre-dispute arbitration agreements in nursing home admissions contracts. This will likely impact other states who have similar prohibitions like Oklahoma.

The Supreme Court of the United States has recognized “an emphatic federal policy in favor of arbitral dispute resolution.” See KPMG LLP v. Cocchi, 132 S.Ct. 23, 25 (2011). This policy is codified in Section 2 of the Federal Arbitration Act (FAA) which makes arbitration clauses “valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

In contrast to the federal policy, West Virginia has recognized that the public policy of that state requires its Courts not to enforce in personal injury or wrongful death suits “[a]rbitration clauses in nursing home admission agreements—which were signed prior to the alleged occurrence of negligence that resulted in the person injury or wrongful death of a nursing home resident . . .” See Brown v. Genesis Healthcare Corp., 2011 WL 2611327 (W.Va. 2011). The tension between West Virginia’s policy and the FAA was apparent when three families brought suit against West Virginia nursing homes. In each instance, a family member signed an agreement with the nursing home on behalf of the resident. Each agreement included a clause to arbitrate disputes with the nursing home. The Supreme Court of West Virginia held that the public policy of West Virginia was not preempted by the FAA. According to the State Court, “Congress did not intend for the FAA to be, in any way, applicable to personal injury or wrongful death suits that only collaterally derive from a written agreement that evidence a transaction affecting interstate commerce, particularly where the agreement involves a service that is a practical necessity for members of the public. See Brown.

The Supreme Court of the United States disagreed. In Marmet Health Care Center, Inc. v. Brown, 565 U.S. ___ (2012) (per curiam), the Court held that the FAA included “no exception for personal-injury or wrongful-death claims . . . [but] required courts to enforce the bargain of the parties to arbitrate.” See Marmet (slip op. at 3) (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985)). The Supreme Court reaffirmed its holding in AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740, 1747 (2011) (slip. Op. at 6-7) that “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”

Upon remand, the Supreme Court states that the West Virginia may still consider whether the clause in unconscionable. See Marmet, (slip. op. at p. 4). But the reasoning for that decision must rely on factors “that are not specific to arbitration and pre-empted by the FAA.” Id. (slip op. at 5).

Although the Marmet Health Care Center opinion soundly abrogates state decisions that invalidate any and all arbitration agreements based on state public policy prohibiting arbitration in personal injury or wrongful death claims, we do not think it goes so far as to affect the states that have more narrowly-tailored public policies that prohibit certain limitations on arbitration of nursing home wrongful death and personal injury suits. For instance, in Florida, the state supreme court recently held that arbitration agreements that limit recovery, such as placing caps on noneconomic damages or eliminating punitive damages, or that place procedural limitations on the arbitration process by, for instance, limiting discovery or requiring a greater burden of proof, violate public policy expressed in Florida’s statutes governing nursing home resident’s rights. See, e.g., Shotts v. OP Winter Haven, Inc., Case No. SC08-1774 (Fla. Nov. 23, 2011). The Florida Supreme Court directed the state courts to examine arbitration agreements for those prohibited provisions and find those agreements with the violating limitations invalid.

Nevertheless, as demonstrated in two recent opinions from Florida’s Second District Court of Appeal, nursing home arbitration agreements that are not contested for containing limitations that violate public policy are still valid and enforceable under Florida law. See SA-PG Sun City Center, LLC v. Kennedy, Case No. 2D11-95 (Fla. 2d DCA Feb. 17, 2012) and Cornwell v. Kennedy, Case No. 2D11-105 (Fla. 2d DCA Feb. 17, 2012). Unlike the West Virginia prohibition on arbitration for entire classes of cases—personal injury and wrongful death—the Florida public policy continues to permit arbitration in these types of cases but forbids certain limitations on the arbitration process. Therefore, we anticipate that the Marmet Health Care decision will have little effect on arbitration decisions in Florida and states with similar public policies.

Authors: Amy L. Miles and Marc L. Penchansky

Nursing Homes Can Enforce Arbitration Agreements Even After Florida Supreme Court Rulings

In two opinions released on February 17, 2012, the Second District Court of Appeal reversed a trial court order denying a nursing home and its Director of Nursing’s motions to compel arbitration. See SA-PG Sun City Center, LLC v. Kennedy, Case No. 2D11-93 (Fla. 2d DCA, Feb. 17, 2012), and Cornwell v. Kennedy, Case No. 2D11-105 (Fla. 2d DCA, Feb. 17, 2012).

The trial court had determined that the arbitration agreement was unconscionable, finding both procedural and substantive unconscionability present in the agreement. Specifically, the trial court found that the representative signing the agreement was unable to read it, did not understand the terms, and had no opportunity for the agreement to be explained to her. These findings, if supported by the evidence, amounted to procedural unconscionability. The Second District Court of Appeal, however, disagreed with the findings. The appellate court found that the trial court’s finding of procedural unconscionability was not supported by the evidence and, therefore, was error as a matter of law.

Contrary to the trial court’s factual findings, the Second District determined that the record showed the representative did not inform anyone that she could not read the agreement and, when given the opportunity, did not ask any questions about arbitration. Because the director of admissions testified that she discussed the arbitration agreement and spent twenty to thirty minutes reviewing the entire admissions agreement with the representative, the evidence could not support the trial court’s findings. The appellate court emphasized that the burden is on the party seeking to avoid arbitration to present evidence to show why it should be avoided. The representative’s argument that she was unable to read the documents was insufficient when she was not prevented from knowing their contents.

Consistent with its prior decisions, the Second District determined that because there was no procedural unconscionability, it did not need to address the substantive unconscionability arguments. The court reversed the order denying the motion to compel arbitration and remanded the case to the trial court.
In light of the Supreme Court of Florida’s recent decision in Shotts v. OP Winter Haven, Inc., SC08-1774 (Nov. 23, 2011), which overturned much of the Second District’s nursing home arbitration jurisprudence, these opinions are significant reassurances that arbitration provisions in nursing home admissions agreements remain valid and enforceable. In SA-PG Sun City Center, LLC, the court acknowledged that Shotts abrogated its line of cases stemming from Rollins, Inc. v. Lighthouse Bay Holdings, Ltd., 898 So. 2d 86 (Fla. 2d DCA 2005).

The issue in Shotts was whether an arbitration agreement that contains provisions limiting the rights granted to nursing home residents by sections 400.022 and 400.023, Florida Statutes, may be enforced by the courts and sent to an arbitrator to determine whether the limitations violate public policy and whether they can be severed. The Supreme Court held that the courts, not the arbitrator, must decide whether any limitations of statutory or procedural rights are contrary to public policy and invalidate the arbitration agreement as a whole. The arbitration agreement—and the issues raised by the representative—in the Kennedy cases did not raise any public policy questions. Therefore, from these decisions enforcing the agreement, we can be assured that, at least for now, carefully drafted arbitration agreements are still valid and enforceable in Florida.

Author: Amy L. Miles

Payment but not Remittance is Required to Secure MCARE Fund Coverage

In order to defray escalating malpractice premiums, Pennsylvania established the Medical Care Availability and Reduction of Error (MCARE) Fund. 40 P.S. 1303.712. The MCARE Fund provides secondary coverage for professional liability claims. Participating health care providers are required to have $500,000 in primary liability coverage. The second $500,000 of liability comes from the MCARE Fund. The MCARE Fund is supported by annual assessments paid by participating health care providers. Providers pay their assessment to their primary insurer who is required to remit the payment to the MCARE Fund. There is no mechanism for a health care provider to pay their assessment directly to the MCARE Fund. 31 Pa.Code § 242.6(a)(3). Any provider who fails to pay their assessment within sixty days will not be covered by the MCARE Fund. 31 Pa.Code § 242.17(b). So this leads to the question: Will the MCARE Fund cover a provider for their loss when the provider timely paid the assessment but the primary insurance company, unbeknownst to the provider, failed to timely remit the assessment to the MCARE Fund?

This very scenario played out for the facility sued in Scampone v. Grane Health Care, et al, 11 A.3d 967 (Pa. Super. 2010), allocatur granted, 15 A.3d 427 (2011). As noted in an earlier blog entry, the Scampone matter concerns allegedly deficient care provided at a nursing facility. The facility, Highland Park Care Center, timely paid its assessment to its primary insurer but the carrier did not remit the assessment within the required sixty days. After the facility was sued, the primary insurer submitted a request to the MCARE Fund for excess coverage for the facility. The MCARE Fund denied the request because the assessment was not paid on time.

A Hearing Examiner found that the MCARE Fund was required to provide coverage to the facility. The Hearing Examiner noted that the facility did everything right and that the late Assessment was the “result of the MCARE Fund’s ‘collection and remittance’ system whereby medical care providers are directed to pay the carrier but they are not warned or otherwise notified of a carrier’s failure to remit the assessment on time.” See Highland Park Care Center v. Medical Care Availability and Reduction of Error (MCARE) Fund, — A.3d —, 2012 WL 280576, *1 (Pa.Cmwlth., 2012) (publishing prior unpublished opinion).

The MCARE fund appealed to the Commonwealth Court asserting that the Hearing Examiner’s ruling was contrary to applicable statutes, regulations and state law. In Highland Park Care Center, the Commonwealth Court agreed with the Hearing Examiner. The Court ruled that the statute requires only payment of the assessment with sixty days. Id. at *2. The act of remittance from the primary insurer to the MCARE Fund is a separate act that does not bear on coverage. Id.

This case is a common-sense result. With all the i’s that providers must dot and t’s they must cross, it is refreshing to see that providers will not now be required to track their payment and assure that their carrier was compliant.

Author: Marc L. Penchansky

. . . And the Sky is Blue: Study Shows that Plaintiffs Prefer to File Civil Cases in Philadelphia

Earlier this month, the International Center for Law and Economics issued an appendix to its previously published study entitled Are Plaintiffs Drawn to Philadelphia’s Civil Courts? An Empirical Analysis.” It is likely that many Philadelphia area attorneys did not need to break the spine of the study or await the publication of the appendix to answer the title’s question – yes, plaintiffs are attracted to the Philadelphia court system. Indeed, the American Tort Reform Foundation had already labeled Philadelphia with the attention-getting moniker, America’s Number One Judicial Hellhole.

The principal study found that Philadelphia courts had a larger caseload than expected. Further, the study found that Philadelphia plaintiffs overwhelmingly preferred jury trials and were less likely to settle. (p. 2). The preference for Philadelphia as venue for civil cases became particularly apparent when Pennsylvania restricted venue in medical malpractice cases. In 2003, the Supreme Court of Pennsylvania required medical malpractice lawsuits to be filed in the county where the cause of action arose. See Pa.R.C.P. 1006(a.1). The filings of medical malpractice cases in Philadelphia declined 64.9 % from 2000 through 2010. (p. 29). Other Pennsylvania counties observed only a 28.2 % decline during that same time period. (p. 29).

The study also focused on the Complex Litigation Center (CLC). The CLC was the nation’s first courthouse “designed exclusively for complex multi-filed Mass Tort cases . . .” According to the authors, the CLC actively sought to recruit the filing of lawsuits in Philadelphia. (pp. 8-9). The CLC accomplished this by offering to plaintiffs quick and rather rigid trial dates. (p. 9). Further, the CLC required only federally mandated minimum contacts to establish jurisdiction and was permissive in permitting venue. (p. 9). When these attributes are coupled with Philadelphia’s reputation as a big-verdict forum, the hope was that Philadelphia would become attractive to Plaintiffs’ attorneys and “tak[e] business away from other courts.” (pp. 8-9).

The recently released Appendix to the report collected data from mass tort cases filed in Philadelphia. The author tried to ascertain plaintiffs’ home addresses and the locations of the alleged injuries. In 1357 cases, the author learned the home address of the plaintiff and/or the injury location. In 67.2 % of those suits, no connection between Pennsylvania and the plaintiff was apparent (App. at p. 2). Only 13.3% of those cases were filed by plaintiffs who live or were allegedly injured in Philadelphia. (App. at p. 2).

When only home address is considered, 72.8 % of plaintiffs reside out-of-state while a mere 6.1 % of plaintiffs report Philadelphia home addresses. (App. at p. 2). In those cases where evidence of the site of the alleged injury was available, only 35.8% alleged injury in Philadelphia and another 33.1% alleged injury in another Pennsylvania county. When asbestos cases are removed from the calculations, the numbers are more startling. Only 16% of the injuries were located in Pennsylvania and 12% were located in Philadelphia. (app. at pp. 4 and 5).

However, the legal climate does appear to be shifting in favor of defendants. As mentioned above, medical malpractice reform has limited forum shopping for plaintiffs. A similar bill has made its rounds in the General Assembly to limit venue in all claims alleging injury and death to the county where the cause of action arose. However, it appears that the bill may simply be for show as the Commonwealth Court of Pennsylvania has ruled that such changes must originate from the judiciary. See North-Central Pennsylvania Trial Lawyers Ass’n v. Weaver, 827 A.2d 550 (Pa.Cmwlth., 2003).

Pennsylvania has made or is considering other defense-friendly changes beyond stricter venue requirements. Pennsylvania passed the Fair Share Act which amended current law so that each defendant adjudged less than 60 % responsible only has to pay their share. Another bill currently passed by the Pennsylvania House and being considered in the Senate would limit punitive damages against nursing homes to 200% of the compensatory award. This is similar to a change made in 2002 that limited punitive damages against individual physicians to two times the compensatory award. The CLC has also suspended the practice of reverse bifurcation. This practice required a jury to first determine damages and then liability. The fear is that the jury will be so prejudiced by the initial testimony about the suffering endured by the Plaintiff, that by the time the defendants are permitted to put forth their defense, the jury will be substantially prejudiced against them.

Philadelphia’s reputation as a Plaintiff-friendly forum is well-entrenched. However, it will be interesting to watch as the Republican-controlled government in Harrisburg seeks to find ways to blunt the influence of Philadelphia on civil actions in Pennsylvania.

UPDATE: On February 15, 2012, the Court of Common Plea in Philadelphia County announced changes to the CLC. The Honorable Judge John W. Herron entered General Court Regulation No. 2012-01. The Order eliminated reverse bifurcation in mass tort and asbestos cases unless agreed upon by the parties. The order further limited consolidation in mass tort cases. Out-of-state counsel admitted pro hac vice may only try two mass tort cases a year in Philadelphia. The Court also asked out-of-state asbestos plaintiffs to seek other venues to file their claims in order to resolve a backlog of asbestos cases in Philadelphia.

Author: Marc L. Penchansky

Warfel v. Universal: The Case of the Vanishing Evidentiary Presumption of Fla. Stat. § 627.7073

The Florida Legislature has mandated that under certain circumstances, an insurance company is required to engage a licensed Professional Engineer or Professional Geologist to conduct sinkhole testing as provided in Fla. Stat. § 627.7072 and in accordance with § 627.7073[FN1]. As insurance companies do not typically have Professional Engineers or Geologists on staff, the carriers rely upon the findings and recommendations of these professionals when the carriers make their claims decisions[FN2]. If an insurance company denies a sinkhole claim based on the professional opinions of engineers or geologists, then the carrier should not be held liable on a breach of contract claim as long as its reliance upon the engineer of record and the subsequent denial were both in good faith. The legislature clearly contemplated this when it enacted § 627.7073 in 2005:

§ 627.7073(1)(c) The respective findings, opinions, and recommendations of the engineer and professional geologist as to the verification or elimination of a sinkhole loss and the findings, opinions, and recommendations of the engineer as to land and building stabilization and foundation repair shall be presumed correct. (2005)

After all, it really seems to be a matter of common sense…how could an insurance company be liable in a breach of contract action when it made a good faith denial based upon professional opinions of engineers and geologists, as is required by law pursuant to Florida Statutes? This was challenged at the conclusion of trial in Pasco County Florida and the issue made its way to the Florida Supreme Court. The Court’s analysis, in Universal Insurance Company of North America v. Warfel,[FN3] focused heavily on the Florida Evidence Code[FN4] as it applies to litigation. However, more focus should have been placed on timing, i.e., at the time of the claims decision, the report “shall be presumed correct,” thereby providing a statutory protection to the insurance company should it be sued in a breach of contract claim based upon the carrier’s reliance upon the “recommendations of the engineer.”

Notably, the Court recognized in its analysis that the “the presumption of correctness appears to be aimed at shielding the…insurance companies from claims of improper denials.” This recognition by the Court could have provided the basis for the Court to find that presumption of correctness should apply to the burden of proof. In almost all sinkhole related lawsuits where the carrier denied a claim, the allegations of the complaint are for a breach of contract action based on an improper denial. Those are the basic facts of the Warfel case. Thus, it was crucial that the Court allowed that statutory shield of § 627.7073 be used as an appropriate vehicle to allow evidence that the carrier could not be held liable for a breach of contract action when it denied a claim based upon “[t]he respective findings, opinions, and recommendations of the engineer and professional geologist,” which are to be presumed correct. Therefore, it would have been proper that the Plaintiff needed to prove by a preponderance of the evidence that the presumption was incorrect or improper at the time of claim denial. This makes the most sense as it puts everything in context based upon the information that was available to the insurance carrier at the time of the claim decision.

Nonetheless, it appears that the question regarding the effect of “the presumption of correct[ness]” has been definitively answered by the Florida Supreme Court. In its per curiam opinion released January 26, 2012, the Court sided with the respondent homeowner, ruling that the presumption created by § 627.7073(1)(c) is a “vanishing” presumption that drops out of a case once evidence to the contrary is introduced.[FN5] This is an unfortunate holding because it completely disregards that when the insurance carrier was evaluating the claim, it had a statutory right to presume that the engineering information that was available at the time of the claims decision was correct. Ultimately, the Court’s decision upheld the Second District Court of Appeal’s reversal of a jury verdict in favor of the Defendant-insurer based on an erroneous evidentiary ruling by the lower court. The jury instruction and closing arguments at issue essentially mandated that the jury presume the engineer of record’s findings concerning the existence of a sinkhole loss and the recommendations for repair were correct and that only by a preponderance of the evidence could Plaintiff-insured rebut the presumption.[FN6]

The Court determined that this was, in essence, awarding the Defendant-insurer a directed verdict, thereby shifting the long-standing burden from the insurer to insured in proving a claimed loss is covered. However, the Court could have upheld the presumption, but limited its scope and timing. Perhaps an appropriate jury instruction would be one that instructs it to presume that at the time of the claim decision, the report prepared pursuant to § 627.7073 was correct unless the Plaintiff has shown, by a preponderance of the evidence, that the findings should not have been presumed correct. Arguably, only if the Plaintiff was able to meet that burden, should the question then go to the jury on the issue of breach. The Supreme Court of Florida does not agree.

In reaching its decision, Florida’s high court discussed the history of presumptions in Florida’s jurisprudence. Briefly, there were two schools of thought predating the enactment of the Federal Evidence Code regarding the procedural strength a presumption should have in litigation. One view believed the presumption merely facilitated the resolution of evidentiary issues by proceeding through the course of litigation until evidence in opposition was produced, which would cause the presumption to vanish and never reach the jury. Because of its propensity to vanish when evidence to the contrary is produced, this type of presumption became known as a “bursting bubble” presumption. The other view maintained that the presumption remained in the action until reaching the jury even when evidence to the contrary existed. The jury was then instructed that the burden of persuasion rested with the party opposing the presumption. This is known as a “burden-shifting” presumption. This “burden-shifting” presumption is what the Defendant was seeking.

Florida codified both positions into the evidence code creating two types of presumptions.[FN7] Under the Florida Statutes, most presumptions are vanishing or “bursting bubbles.” Burden-shifting presumptions, remaining in the action even if the opposing party produces evidence to the contrary, exist only where the presumption was established primarily to implement public policy or where the legislature expressly stated it was creating a burden-shifting presumption.

While the Court considered various arguments asserting the § 627.7073 presumption was burden-shifting, it found that, although the legislature had the opportunity to explicitly state its intent to create such a presumption, it did not do so. Further, the Court read nothing in the sinkhole statutes that lead it to conclude the presumption created by § 627.7073(1)(c), was established to implement a particular public policy. Accordingly, the Court determined that the presumption of correctness that attaches to an engineer’s report under § 627.7073 is a vanishing presumption that disappears once evidence contradicting the report is produced. Significantly, however, § 627.7065, enacted in 2005, specifically states that “the Legislature finds that there has been a dramatic increase in the number of sinkholes and insurance claims for sinkhole damage in the state during the past 10 years.” (Emphasis added). The entire statutory scheme relating to sinkhole claims that was developed in 2005 relates directly to public policy, particularly as Florida continued (and still continues) to work through its insurance crisis.

In fairness, however, the sinkhole insurance statutes, including § 627.7073, have been amended twice since the 2005 version at issue in this case. Both times, however, the legislature refrained from changing the presumption language of § 627.7073(1)(c). In the early drafts of SB 408 (2011), it was clear that Senator Richter intended to clarify the burden-shifting presumption in § 627.7073 as he included the following language:

…shall be presumed correct, which presumption shifts the burden of proof in accordance with s. 90.302(2). The presumption of correctness is based upon public policy concerns regarding the affordability of sinkhole coverage, consistency in claims handling, and a reduction in the number of disputed sinkhole claims. (emphasis added)[FN8]

This language did not make it into the final version of the bill that was ultimately signed into law. Based on the analysis in Warfel from the Florida Supreme Court and the Second District Court of Appeal, these Courts wanted explicit language within the statute, as set forth above, in order to recognize the burden-shifting presumption.

The Florida Supreme Court may have been informed of these legislative changes in which the legislature left the presumption language substantially unchanged. Undoubtedly, while enacting the most recent changes, the legislature was aware of the question raised by the Second District Court of Appeal’s decision in the underlying Warfel case, as the district court decided and certified its question to the Supreme Court prior to the last legislative session. See 36 So. 2d 136 (Fla. 2d DCA 2010). The Court had enough of a basis that it could have reached a different conclusion and, perhaps, could still support a finding that because the insurer is entitled to presume the professional’s opinion is correct at the time it makes the coverage decision, the burden must be shifted to the plaintiff to prove, later in court, that the presumption was incorrect. However, based on the unchanged statutory language since 2005 and, in light of the Supreme Court holding in Warfel, this holding will likely apply to current version of § 627.7073. It appears that the responsibility now reverts back to the Florida Legislature to propose and pass amendments that properly shift the burden of proof in sinkhole cases so that the insurance carriers are afforded some protection at the time that they make their claim decision.

Authors: Judd Goodall and Christopher Borzell
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[FN1] See Fla Stat. §§ 627.707, 627.7072, 627.7073 (2011).

[FN2] Notably, these professional sign and seal their conclusions within reasonable professional probability and pursuant to all other obligations of their professional licenses. See Fla. Stat. § 627.7073(1).

[FN3] 2012 WL 224104 (Fla. Jan. 26, 2012).

[FN4] Fla. Stat. 90.301 – 90.304

[FN5] 2012 WL 224104.

[FN6] The closing argument of the Insurer’s counsel was worded more strongly than the jury instruction, potentially leading a juror to believe no other determination could be made but to find for the insurer.

[FN7] 90.303 – Presumption affecting the burden of producing evidence defined.–In a civil action or proceeding, unless otherwise provided by statute, a presumption established primarily to facilitate the determination of the particular action in which the presumption is applied, rather than to implement public policy, is a presumption affecting the burden of producing evidence.
90.304 – Presumption affecting the burden of proof defined.–In civil actions, all rebuttable presumptions which are not defined in s. 90.303 are presumptions affecting the burden of proof.

[FN8] S.B. 408, 2011 Leg. Session (Jan 12, 2011). This language was removed from SB 408 prior to being signed into law.

Previously published in the 2012 First Quarter edition of The Benchmark

Putting Some Teeth into the Corporate Negligence Doctrine: Pennsylvania Considers Whether Dental Services Organizations can be Found Liability Under the Corporate Negligence Doctrine

In Thompson v. Nason Hospital, 527 Pa. 330, 591 A.2d 703 (1991), the Supreme Court of Pennsylvania held that hospitals could be found liable under the then emerging theory of corporate negligence. The corporate negligence doctrine recognizes four non-delegable duties that a hospital owes directly to the patient. The four duties include the following:

• a duty to use reasonable care in the maintenance of safe and adequate facilities and equipment;
• a duty to select and retain only competent physicians;
• a duty to oversee all persons who practice medicine within its walls as to patient care; and
• a duty to formulate, adopt and enforce adequate rules and policies to ensure quality care for the patients.

Id. at 707. The basis for adopting these new standards was the “corporate hospital’s role in the total health care of its patients.” Id. at 708.

The dissent in Thompson felt that the majority was instituting a “deep pocket theory of liability, placing financial burdens upon hospitals for the actions of their own employees.” Id. at 709. The dissent also predicted that corporate negligence liability would not be constrained to hospitals alone. So far that prediction has held true.

When a court is asked to permit liability for corporate negligence against a new type of entity, the court conducts an analysis of whether the entity provides comprehensive care to its patients. A series of precedents has eroded the meaning of comprehensive care and has permitted corporate negligence to apply to entities that provide something less than total care. For example, the Superior Court extended corporate negligence to Health Maintenance Organizations (HMO) despite the fact that HMO’s do not practice medicine. See Shannon v. McNulty, 718 A.2d 828 (Pa.Super, 1998). In Scampone v. Grane Healthcare, Co., 11 A.3d 967 (Pa. Super., 2010), allocatur granted, 15 A.3d 427 (Pa., 2011), the Superior Court applied corporate negligence to nursing facilities and their management companies despite the fact that those entities did not have staff physicians. See id. at 976.

The Lackawanna Court of Common Pleas recently considered whether a self-described Dental Service Organization provides comprehensive health care and therefore may be held liable under the corporate negligence doctrine. In Farrell v. Aspen Dental, No. 2010 CV 7333 (Lackawanna County, 2012), Patricia Farrell alleges that Aspen Dental “engaged in a comprehensive pattern of shoddy dental work, removal of both healthy and unhealthy teeth and excessive jaw bone in a corporate atmosphere that preyed on people of limited means . . .” Aspen Dental alleged that they were not a comprehensive health care provider and filed a demurrer as to Plaintiff’s claim of corporate negligence.

In order to show that Aspen Dental was a comprehensive provider, Ms. Farrell alleged that “Aspen Dental has in a sense created a comprehensive and total dental healthcare system providing total patient dental care and providing comprehensive treatment planning and the use of a whole network of general dentists, endodontists, orthodontists and oral surgeons.” At this early stage of the proceedings, the Court found that this was adequate to survive the pleading stage. The Court noted that the results of discovery will dictate whether the issue of corporate liability would be revisited at the summary judgment stage.

Aspen Dental is certainly a large sophisticated company, offering a network of dental care providers with more than 280 offices in 21 states. Furthermore, Aspen Dental’s website certainly stresses a “promise to give you comprehensive care in a judgment-free environment.” Further, as a patient “[y]ou’ll hear the term ‘comprehensive care’ often at Aspen Dental. It means that our doctor will examine your entire mouth to determine your overall oral health, and recommend treatment for long-lasting good health, rather than just fixing your immediate problem.”

However, the doctrine of corporate negligence has not been limited to a provider who only focuses on a single area of the body. It is a stretch to say that a dental organization oversees the “total healthcare of its patient.” If the comprehensiveness requirement is reduced to comprehensiveness as to a single body part, other practice areas like podiatry are likely to fall under the umbrella of the corporate negligence doctrine. It will be interesting to monitor this case to see if the Court reconsiders whether an organization which provides care for a single body part may be held liable under a corporate negligence theory.

Author: Marc L. Penchansky

The Fine Print and The Costa Concordia Disaster

Some Americans take for granted legal protections our court system provides. This may especially be apparent to those American victims of the Costa Concordia accident off the coast of Italy. Many reported accounts say the cause of the accident was human error when the ship was steered off its plotted course and ran aground causing it to sink killing at least 16 passengers and injuring scores of others.

Americans who were on this cruise signed a contract with Costa agreeing that any legal action must take place in Genoa, Italy where Costa’s corporate offices are. And while Costa is owned by Carnival Cruise Lines, an American corporation based out of Miami, the contract passengers have is with Costa Cruises.

It is all but certain that an attorney will file a claim against Costa, and perhaps Carnival here in the U.S., but the odds of claim succeeding in an American court are slim. U.S. Courts have previously upheld forum clauses such as the one in the Costa Concordia ticket unless plaintiff makes a “strong showing that enforcement would be unfair and unreasonable under the circumstances.”

The test on whether the choice of forum would be “unfair and unreasonable” is if (1) its formation was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy or (4) the enforcement would contravene public policy.

It will be very challenging for the American citizens who were aboard the Concordia to invalidate the venue provision of their cruise contract. Their strongest argument would be that they may be deprived of their “day in court” because of the unfairness of bringing the claim in Italy. Apparently a Plaintiff in Italy must post a bond of 10% of their expected damage award to simply file a lawsuit. This cost would certainly be a bar to most people trying to bring a suit. The legal battle though to bring the claim here in the U.S. will also undoubtedly be costly, time consuming and subject to appeals as Costa and other cruise lines would likely vigorously fight a challenge to the venue clause.

While no one likes to contemplate potential disaster in advance of a vacation, the lesson here is that when traveling abroad it is important to review your travel documents to see what limitations on venue and damages are stated. This is especially true if your trip has segments that do not originate and terminate outside the U.S. If there are limits which would not cover you for what you may lose if you were to lose your possessions or be injured, you may want to consider purchasing travel insurance when planning your trip, as you may not be able to count on the American legal system to protect your rights.

Author: Mark B. Hartig

Medical Malpractice Relief: Sovereign Immunity Sought for Emergency Room Physicians

Once again, legislation has been proposed in the Florida House and Senate to extend sovereign immunity coverage to physicians providing care in emergency rooms. The proposed legislation would make the physicians agents of the State and limit their liability to $200,000 per claim.

Critics of the bill maintain that emergency room physicians already enjoy sufficient protection with statutory caps to medical malpractice claims and argue that additional protection will remove physician accountability, potentially decreasing the quality of care.

However, what the critics of the proposed legislation fail to appreciate is that providing this type of care presents a high risk situation that demands high medical malpractice insurance premiums and frequently exposes emergency room physicians to lawsuits, regardless of whether or not they are responsible for a bad medical outcome. Further, despite the risks, state and federal law require emergency room physicians to provide emergency care regardless of a patient’s ability to pay or the type of their injury or illness, without providing these physicians any protection from liability exposure.

While it is hard to quantify how many specialists have left the state and/or stopped providing care in emergency rooms due to the liability exposure and its associated costs, it is clear that the State must provide physicians an incentive to continue to provide these essential public services if it wants to avoid a future shortage of emergency room physicians.

Please visit the links below to view H.B. 385 and H.B. 614:
http://www.flsenate.gov/Session/Bill/2012/0385/BillText/Filed/PDF
http://www.flsenate.gov/Session/Bill/2012/0614/BillText/Filed/PDF

Author: Albert M. Rodriguez

Do the Changes to Florida’s Mediation Procedures Rules Really Help?

Florida’s Supreme Court amended Florida Rule of Civil Procedure 1.720, governing mediation procedures with the changes effective as of January 1 of this year. Substantively, the court added a definition of “party representative having full authority to settle” and a requirement that the party certify to the court the identity of that representative and that he or she actually have the required authority to settle before the mediation conference takes place.

It is clear from the committee notes on the amended rule that the purpose for the new definition is to create an “objective standard” by which the court, without input from a mediator who is bound by confidentiality requirements, can measure the authority of a party representative to settle the dispute. So, too, the certification is a “direct representation to the court” that can be verified “upon motion by a party or inquiry by the court without involvement of the mediator and would not require disclosure of confidential mediation communications.” We must not forget that rule 1.720 contains a sanctions provision for failure to appear at the mediation conference.

So, is the amendment a cure for something that is broken? Will there be more settlements coming out of court-ordered mediations as a result? Those we have spoken to are doubtful.

Let’s first look at the purpose for mediation. Mediation is a process that has been formally incorporated into the litigation system to facilitate dispute resolution. It was added with the idea that mediation will save parties time and money while enabling them to come to a mutually-acceptable resolution.

What element of involving the court further in the mediation process as an enforcer, not of the agreement but of the process itself, will decrease the cost and time spent? Cost and time will not be saved by additional motions filed by parties when, for instance, the individual certified to attend has a sudden emergency? Nor is cost and time saved by motions to dispense with mediation altogether because the only nationally-based corporate officer with the actual ability to authorize millions of dollars of settlement is unable to attend a court-ordered mediation over a local dispute with which he or she is unfamiliar. Similarly, cost and time will not be saved by post-mediation motions for sanctions—and the discovery or hearings they will generate—based on the perceived failure to attend the conference in strict compliance with the rule.

Courts have, for years, recognized the benefits of permitting persons to appear by telephone. Telephonic hearings permit the case to move along where individuals necessary for the hearing would otherwise be unable to attend due to location, time, or cost constraints. Although the new amendments don’t change the requirements that those authorized to settle the case appear personally, they do take it a step further from having the ability to confer with corporate superiors if necessary. This may ultimately increase the cost of mediation and decrease the possibility of settlement—or at least slow the process down—as often local representatives familiar with the case will not have the authority to settle without the need to seek further approval and those who must attend are fewer in number, possibly much further away and without intimate knowledge of the case that would assist in a mediated settlement.

And what about that representative who is the “final decision maker with respect to all issues presented by the case who has the legal capacity to execute a binding settlement agreement”? In the context of large corporations involved in considerable amounts of litigation, such as insurance companies and banks, who will be tending the daily operations and financial management of the corporation if the final decision maker—often asked to be able to commit the corporation to a settlement of hundreds of thousands, if not millions of dollars, is out attending mediations most of the time? If a corporation must attend several mediation conferences within short time periods the logistics and cost of travel for this executive certainly would frustrate the purpose of reducing time and money spent on litigation. Alternatively, how many representatives could a company afford to provide full financial authority to at any given time period? And if the mediation happens to require decisions on something other than a dollar amount—such as changes in company policy, waiver of rights between the parties, or other business decisions, a whole new set of questions arise as to how many representatives—each one able to address a specific issue—a corporation must have personally attending. If mediation becomes a process that makes it difficult for these types of corporations to adequately monitor their own operations, it may discourage them from doing business in Florida in the first place.

There is no doubt that at times mediation conferences have not been attended with a good faith attempt to settle. Rule 1.720 provides for the parties to stipulate alternative procedures and alternative requirements for attendance. In all respects, to the extent that the parties work with each other, mediation will a successful means of resolving disputes. To the extent, however, that mediation makes it more difficult for a party to participate in the resolution process, it will work only to delay and increase the cost and complexity of litigation as a whole.

Author: Amy L. Miles

Bill Proposes New Strict Regulations on ALFs in Florida

Fresh out of a Florida Senate subcommittee, Senate Bill 658, proposed by Senator Wise looks to significantly impact regulations in Assisted Living Facilities. As reported in the Tampa Bay Times, pressure to move these bills to a vote this year may be spurred on by a series of news media reports about alleged abuse and neglect in Assisted Living Facilities.

One of the biggest changes would be regarding the educational requirements to be an administrator at an assisted living facility. The bill states an administrator would have to have a 4 year college degree or 5 years of experience as an administrator. Currently a person with a high school diploma could be licensed as an administrator by completing ALF core training and passing a core competency exam.

Other changes proposed in the bill would raise fines and penalties that can be imposed by the state regulators who monitor ALFs, allow the state to strip the license of an ALF where a resident dies from abuse and impose criminal penalties on persons who falsify ALF records.

It would appear the regulation changing the educational requirements for an administrator of an ALF could impact small “mom and pop” ALFs. These are the facilities that are typically run out of someone’s home. While greater oversight to protect residents is a positive goal, it must not drive out operators who fill the void between a resident’s own home and skilled nursing facilities. We’ll be watching this legislation closely and update our readers on its progress.

Author: Mark B. Hartig