April 29, 2010

A recent ruling by the Illinois Supreme Court authorizes Illinois nursing homes to include arbitration clauses in resident contracts. This decision gives facilities the chance to significantly decrease their personal injury liability and their insurance premiums.

On April 15, 2010, the state's highest court ruled that the Federal Arbitration Act, which encourages arbitrating disputes instead of litigating them in court, preempted the Illinois Nursing Home Care Act's guaranty of a jury trial. Unlike litigation in court, where juries or judges make the decisions, arbitration involves a trial decided by a private individual (usually a lawyer or a retired judge) who specializes in helping parties resolve their disputes and in deciding the cases that can't be settled more quickly. If done correctly, arbitration is often far faster and less expensive than litigation, and offers more predictability than juries.

Illinois providers should therefore begin including detailed arbitration clauses in all new resident contracts. Facilities may also ask (but not require) existing residents or their representatives to sign a new contract that includes an arbitration clause, but must give an existing resident some consideration in return.

Crafting the Right Clause

Not all arbitration clauses are created equal. For example, a one-sentence clause stating that "all disputes other than involuntary discharge proceedings shall be resolved through arbitration" will prevent a resident from suing a facility in court. Such a simple clause will not, however, allow a nursing home to realize all of the potential savings that arbitration and other alternative dispute resolution methods can offer.

A more detailed clause that (1) specifies timelines; (2) limits interrogatories, depositions and other types of discovery; and (3) provides step-by-step procedures will allow providers to maximize their savings.

Over time, professional liability insurers should see their defense and indemnity costs diminish as a result of these well-crafted arbitration clauses. Insurance premiums for nursing home facilities should, therefore, decrease as well.

In light of the recent Illinois Supreme Court ruling, Illinois nursing homes should work with legal counsel to evaluate and revise their resident contracts. Although crafting an arbitration clause that maximizes potential savings is not for amateurs, when done carefully, it can save your facility real money.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.