Liability insurance is crucial for many businesses, and that is particularly true for those charged with caring for others. As the name implies, the insurance refers to coverage for situation where a company is found legally liable for harm to others. In the nursing home context, that usually means situations where staff members at a facility act negligently, allowing a resident to be hurt. Staff members are agents of the company, and so the company is liable for the harm caused to the resident by those employees. Depending on the situation, that injury can lead to a settlement or verdict for significant sums of money to provide redress for the harm.
That money can come from one of two places: the company can pay it from its own resources or an insurance company will pay for it if a policy is in place. Each state has various laws about where insurance is required in certain contexts. In Illinois, for example, many nursing home companies have liability policies through third-party insurance companies. However, other facilities have self-insure. That means that they set aside money on their own to cover for potential liability costs instead of paying premiums to the third-party insurer.
All of these insurance details are critical in nursing home neglect cases, because, for practical purposes, the amount of recovery that a client may receive in any setting hinges on the size of insurance coverage. For example, many of these policies have limits–meaning that the insurer will only cover up to a certain amount (i.e. $1 million). In those cases it is likely impossible for the client to realistically recover more than that–even if a verdict returns a judgment higher. Also, some policies have time limits built in, such that the longer the claim goes without being settled, the less money is available for recovery. The idea is to encourage efficient settlement that spare both parties the time and cost associated with prolonged litigation.
It is important for those families in the midst of potential legal cases agains nursing home companies to be aware of these details.
Nursing Home Business v. Liability Insurer
One recent story out of Chicago highlights the complexity within the nursing home and insurance industry on these matters. The legal case involves a dispute by a company that owns several long-term care facilities in our area and their liability insurer.
As reported recently by Chicago Healthcare Daily, the dispute stems from fees and commissions that the liability company is alleged to have taken unfairly. The story explains that the plaintiff-nursing home chain used to self-insure. The defendant company “administered” the self-insurance policy from 2003-2007. In 2007, the nursing home company switched from the self-insurance model and signed up with a more traditional insurance company–this new insurance company was founded by the same man who founded the brokerage company. However, the story indicates that the defendant-company continued administering the insurance plan for the next four years.
However, in a suit filed this year, the nursing home company claims that the defendant took nearly $700,000 in fees and commissions inappropriately. For their part, the defendant-brokerage company claims that the costs were clearly negotiated between the two businesses years ago. They suggest that the problem is rooted in recent management changes at the nursing home company. The new managers, they argue, are using this suit as a way to get out of agreements made by previous managers.
In any event, the situation is a testament to the complexity in many of these nursing home insurance agreements. It is also a reminder of the high-stakes finances invovled in insurance arrangements. These are the same insurers and affiliated-parties who are often at the root of pushes to limit the legal rights of nursing home residents and their families–either through tort reform legislation or increased use of mandatory arbitration clauses.
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