Professional liability insurers continue to confront claims alleging inadequate staffing at skilled-nursing facilities.  While some policies clearly exclude coverage, others present a much closer question, particularly when coverage is sought for class action claims. As a result, insurers with exposure for this kind of coverage tend to keep close tabs on developing issues and their resolution. For those paying attention, the decisions in two recent California cases provide some good news for insureds and their insurers. But, to adequately judge their risk, professional liability insurers must understand the current state of the law and continue to track its development.

California law

California Health & Safety Code section 1430(b) allows civil actions against skilled-nursing facilities if the licensee of a facility violates the Patients Bill of Rights or any other right provided for by federal or state law or regulation. [1] If a facility violates the Patients Bill of Rights, the facility may face:

• Liability up to $500
• An award of plaintiff’s costs and attorneys’ fees, and
• Imposition of injunctive relief

The California legislature intended section 1430(b) to create “a citation system for the imposition of prompt and effective civil sanctions against long-term health care facilities in violation of the laws and regulations of this state.”[2]

One provision of the Patients Bill of Rights requires adequate staffing at skilled-nursing facilities. When claims against them have been brought stemming from an alleged section 1430(b) violation, some of these facilities have filed professional liability insurance claims. Many insurers have disputed coverage of section 1430(b) claims, arguing that the damages are a sanction or penalty excluded from coverage. Even if section 1430(b) relief is not considered a sanction or penalty, insurers sometimes deny coverage based on provisions that exclude coverage for damages that arise when an insured gains a financial advantage to which it was not entitled or on any return or reduction of professional fees, profits, or other charges.

Two recent cases help professional liability insurers grapple with the law and resulting lawsuits. The first, MacRae v. HCR Manor Care Services, clarified the required staffing standard and limited class actions. [3] The second, Nevarrez v. San Marino Skilled Nursing & Wellness Centre, LLC, capped recoveries for claims brought under section 1430 (b). [4]

Staffing standard defined

California skilled-nursing facilities must meet a minimum-staffing requirement. In MacRae, the plaintiff brought a class action against a facility where he resided for 11 days. Although the plaintiff admitted that the facility met the minimum nursing hours per patient day (NHPPD) required under California law, he argued that the facility should be held to a more stringent standard based on a Centers for Medicare & Medicaid Services report. [5] The MacRae court determined that California Department of
Health set the applicable standard, rather than the federal report. MacRae’s clarification of the applicable staffing standard requirement will now make compliance easier.  

Class actions narrowed

The plaintiff in MacRae attempted to bring the action on behalf of current and former nursing home residents from multiple facilities. The court concluded that the plaintiff lacked standing to assert claims on behalf of other patients at the facility where he resided or at other facilities where he never resided. This portion of the MacRae decision makes class action claims against multiple or unrelated facilities more difficult.

Recovery limited

Nevarrez—another California case—severely limited a plaintiff’s potential recovery for claims based on inadequate personnel at a skilled-nursing facility. In Nevarrez, the plaintiff alleged that the facility’s staffing was inadequate in violation of section 1430(b). The jury agreed, awarding plaintiff $7,000--$500 for each of 14 violations.  

On appeal, however, the court concluded that the purpose of section 1430(b) was to encourage regulatory compliance as well as to prevent injury. The court held that the $500 maximum of section 1430(b) applied per civil action, rather than per violation. The decision reduced the total amount that a resident can recover from a facility. As a result, facilities and their insurers face much less financial exposure.

Conclusion

Professional liability insurers and their insureds often contend with claims alleging inadequate staffing at skilled-nursing facilities. Some policies exclude coverage, while others present issues still in flux. Two recent California decisions have clarified the staffing standard, limited class actions, and capped recovery, at least under that state’s laws. These developments help insurers, but more claims with other issues are sure to lie ahead.

[1] Section 72527 of Title 22 of the California Code of Regulations

[2] California Health & Safety Code § 1417.1

[3] MacRae v. HCR Manor Care Services, No. SACV 14-0715-DOC (RNBx), 2014 U.S. Dist. LEXIS 102087 (C.D. Cal. July 21, 2014)

[4] Nevarrez v. San Marino Skilled Nursing & Wellness Centre, LLC, 163 Cal. Rptr. 3d 874 (Ct. App. 2013), review denied, No. S215327, 2014 Cal. LEXIS 994 (Cal. Feb. 11, 2014)

[5] Under California law, the staffing requirement is 3.2 NHPPD, which means the number of hours of work performed per patient day by aides, nursing assistants, or orderlies, plus two times the number of hours worked per patient day by registered nurses and licensed vocational nurses.