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Arbitration Agreements: Key Takeaways from M3’s Defense Symposium

Healthcare, Property & Casualty, Senior Living & Social Services

M3 hosted a four-part symposium dedicated to the most pressing issues senior living, social services, and healthcare organizations are facing today. In our final session, titled, “Benefits and Strategies for Arbitration Agreements,” Donna Fudge broke down the key information that providers and healthcare leaders need to know around arbitration agreements. We found the information so impactful for our clients and prospects that we wanted to be sure everyone had access to it – even those who could not attend the live session. Below, you will find highlights from Donna’s presentation.

Why Arbitration?

“Runaway” jury verdicts in which plaintiffs walk away with exorbitant awards are becoming increasingly common in healthcare. Implementing sound arbitration agreements into your organizational practices is a key tool in providers’ tool belts to significantly decrease the likelihood of expensive jury trials. Arbitration, when executed properly, is a cost-effective and time saving method to resolve disputes without involving courts. Donna Fudge of Fudge Broadwater P.A. stated the following statistics:

  • They have experienced average awards through mediation of $38,900 per case as compared to 23% of jury verdicts being awarded over $500,000.
  • They have experienced a “win” rate of 85% for defense arbitration awardsvs.the “win” rate for nursing home jury verdicts and settlements at 25%.

Benefits of Arbitration vs. Jury Trial

  • It is easier to convince a sole arbitrator of the case you are making versus a panel of jurors.
  • Arbitration helps to avoid the “sideshow” from plaintiff attorneys that cause runaway jury verdict awards. Arbitration agreements control the sideshow that adds costs and wastes time.
  • Arbitrators focus on facts, while jurors focused on sensationalism.
  • Arbitrators are more in tune to facility staffing realities. Plaintiff attorneys often use lack of staffing/supervision to their advantage in a jury trial.
  • Most jury trials last 1-3 weeks, whereas arbitration typically lasts 1-5 days. Arbitration saves time and money.
  • Even if arbitration is “lost”, the award to the plaintiff is likely much less than an award through a jury verdict.

Strategies to get Arbitration Agreements Enforced

  • Have an attorney experienced in arbitration draft your arbitration agreement.
  • Ensure your arbitration agreement contains a delegation clause.
    • Delegates the determination of enforceability of the contract to the arbitrator versus the courts
    • Streamlines process to get agreement enforced
    • The clause itself is a written agreement to arbitrate

Example of Direct Delegation Clause:

_________________________

Example of Indirect Delegation Clause that incorporates rules of the American Arbitration Association (AAA):

  • For assisted living settings only, it is allowed to make arbitration a mandatory term of the admission contract.
  • CMS rules prohibit mandatory arbitration in nursing homes, so agreements must be voluntary in this setting.
  • Adopt the Federal Arbitration Act (FAA) into your arbitration agreement.
    • Allows nursing homes to have arbitration agreements despite state law that say they cannot have arbitration agreements (federal law preempts state law)
    • Must show that FAA is adopted

80% of unenforced arbitration agreements are due to execution errors.

  • The person signing the arbitration agreement must be legally allowed to do so, otherwise the enforceability of the agreement may be called into question.
    • Who can sign:
      • Competent resident
      • Resident’s durable Power of Attorney
      • Resident’s agent. You must have an agency agreement signed by competent resident and agent that states the resident is appointing someone else to sign for them
    • Who cannot sign:
      • An incompetent resident signing for themselves
      • A family member or friend of the resident lacking legal right to sign
  • Signature locations:
    • For assisted living facilities, the arbitration clause is recommended to be in the body of the admission contract in addition to a separate “Exhibit”. The signature line is recommended to be only on the final signature page of the admission contract, not on the exhibit.
    • For nursing homes, the signature must be on the separate arbitration agreement.
  • Do not use “Initial here” boxes. Missing initial opens argue for unenforceability.

Add this clause to your contract: 

Arbitration Agreement Clause
  • Include in your agreement that “the arbitration award shall be delivered to the parties no later than two working days following the conclusion of oral closing arguments and the Arbitration hearing.”
  • Forbid post-closing arguments “briefing”- add costs, wastes time, and gives plaintiffs another shot at their case.
  • Provide training for anyone (admission staff) who presents arbitration agreements to residents/representatives to assist with effective presentation of the agreement and obtaining legally binding signatures.
  • Scan and retain electronic copies of signed arbitration agreements, and give a copy to the resident and person who signed for the resident.
  • Have an attorney experienced in arbitration review your agreement every 1-2 years to ensure it keeps pace with changing laws and legal trends

Please reach out to your M3 account executive with any questions you may have about arbitration agreements.

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