SmithAmundsen Health Care Alert: Recent Ruling by the Illinois Supreme Court Authorizing Arbitration Clauses in Resident Contracts
This article provides an update on the recent ruling by the Illinois Supreme Court authorizing arbitration clauses in resident contracts utilized in long-term care facilities and other provider facilities to reduce personal injury liability and possibly the number of claims filed. See Carter v. SSC Odin Operating Co., LLC, 2010 Ill. LEXIS 653 (Ill. Apr. 15, 2010). Given the highly litigious climate for nursing homes in states such as Florida, Illinois has sought to follow their lead and has considered arbitration clauses as a means to avoid significant defense costs and trial risk. In arbitration, both parties sit down with an arbitrator, often attorneys or retired judges, to help resolve the dispute. An experienced mediator or a judge, well versed in the issues and realities of nursing home care, can be highly effective in helping parties evaluate damages realistically.
The Illinois Nursing Home Care Act, specifically states: “Any party to an action brought under §3-601 through 3-607 shall be entitled to a trial by jury and any waiver to the right to a trial by a jury, whether oral or in writing, prior to the commencement of an action, shall be null and void, and without legal force or effect.” [Emphasis added] 210 ILCS 45/3-3-607 (2006). Furthermore, the Appellate Court for the 5th District’s views in Carter v. SSC Odin Operating Company, LLC, 2008 Ill. App. Lexis 305, the court considered the interplay between the Federal Arbitration Act, which mandates enforcement of agreements to arbitrate disputes and the Illinois Nursing Home Care Act, which invalidates agreements, which waive rights granted by the act, including the right to a jury trial.
In Carter, the special administrator had executed two separate health care arbitration agreements on behalf of the resident, one with each of the resident’s two admissions at the beginning of the resident’s stays at the health care center. The arbitration agreement required that all disputes related to the resident’s care be submitted to binding arbitration but did not apply where the amount in controversy was less than $200,000. The resident or legal representative had the right to rescind the agreement within 30 days of signing and the agreement was not a precondition to admission to the facility. Additionally, the defendant would pay all arbitrator fees and up to $5,000 in reasonable “attorney fees and costs for the resident in any claims against the facility.”
The special administrator brought a claim against the health care center after the resident’s death and the health care center sought to compel arbitration under the agreement, which was denied by the trial court. The Appellate court affirmed the trial court and held that because §§3-601 and 3-607 of the Illinois Nursing Home Care Act concerns the validity, revocability, and enforceability of contracts generally, and did not specifically target arbitration agreements, it presents a legitimate state law contract defense of a violation of public policy to the agreements and voids them. The court reasoned that the §§3-601 and 3-607 applied equally to all contracts attempting to restrict the right of nursing home residents to “commence an action” pursuant to the Nursing Home Care Act or to waive the right to trial by a jury, regardless of whether the contract involves arbitration. Accordingly, a contract that never mentions arbitration, but requires a bench trial or some other form of alternative dispute resolution, rather than a trial by jury, would be voided by the sections to the same extent as a contract containing an arbitration agreement. Carter, at *11.
At the time of my earlier article on this subject two years ago, Madison county Judges in downstate Illinois had approved the Medical Malpractice Mandatory Mediation Program, which called for each party to sit down with a mediator present to discuss a possible resolution before going to trial in both medical malpractice cases and in nursing home litigation. The Madison county approach required that the parties sit with a mediator 90 days prior to trial in order to attempt to work out their differences, where possible, without the expense and time involved for a jury trial. While the public policy concerns are undeniable, the statutory language seems to prevent the nursing home resident’s ability to waive certain rights but not others. In my opinion, it simply made no sense that a resident is deemed competent to designate a power of attorney for health care, execute a DNR, agree to psychotropic drug administration, or designate requested health care professionals, etc. but not to an arbitration clause set forth in separate and bold print in the residency agreement. Arguably, the Illinois legislature had usurped the nursing home resident’s right to contract based merely on the resident’s choice of residency and health care arrangements rather than on the resident’s competency or other considerations.
Recently, the Illinois Supreme Court ruled that the Federal Arbitration Act, which encourages arbitrations, preempts the Illinois Nursing Home Care Act’s guarantee of a jury trial and thereby permits arbitration clauses. Interestingly, the court focused, in part, on the fact that a jury trial did not apply to all contracts generally. Moreover, the court concluded that Illinois public policy favored arbitration in general and if all arbitration agreements were found to be invalid, it would have to apply to “all contracts” to avoid Federal Arbitration Act preemption, and would conflict with and override the federal public policy requiring enforcement of arbitration agreements.
Conclusion
The Illinois Supreme Court has now cleared the way for Illinois providers to begin including binding arbitration clauses in their new resident contracts. Furthermore, there is nothing to prevent facilities from requesting such agreements with existing residents in a new contract, however, the resident should receive some consideration in return for signing a new contract with the facility. The facility could draft comprehensive arbitration clauses requiring arbitration early on to avoid significant defense costs and plaintiff’s attorney fees. Additionally, the arbitration clause could structure timelines for discovery such as when arbitration must occur, i.e. within 60 days after plaintiff’s deposition is completed, but before other depositions proceed. These types of provisions would curtail the attorney fees at an early date and would likely translate to a reduction in insurance premiums
This alert was written by Linda F. Newman.