Publications: Legal Matters – Make Arbitration Pacts Valid the Right Way

Question -

What decisions do we need to make before trying to make mandatory arbitration agreements part of our admission contracts?

Answer -

To avoid the unpredictability of jury trials in malpractice and negligence actions and reduce liability exposure, nursing home (and other) providers have turned to mandatory arbitration agreements in admission contracts. Generally, arbitration agreements in long-term care contracts have been upheld as enforceable. As long as an arbitration agreement involves interstate commerce, federal law will uphold it.

The extent to which it will be enforced, however, varies from state to state. In determining whether to enforce an arbitration agreement, state courts are free to invalidate an arbitration agreement on any state law ground that exists for the revocation of a contract. In determining whether an arbitration agreement will be enforced, courts generally determine not whether the contract as a whole is valid and enforceable, but whether the arbitration clause itself is valid.

Before a provider uses a mandatory arbitration agreement in its admission contracts, it must make a number of decisions and faces a number of issues, such as: the terms of the agreement (to comply with state law and avoid a valid defense against it); how the agreement is presented to the resident (to avoid defenses of unconscionability or duress by, for example, incorporating a period in which the resident can revoke the agreement); who other than the resident should sign the agreement if resident does not have capacity; whether the agreement should apply to all disputes as opposed to just malpractice or negligence actions (to be enforceable, the agreement should be fair); and whether a provider’s insurance carrier would cover separate litigation over the enforceability of the agreement itself.

Reproduced with permission from McKnight's Long-Term Care News

To contact the author, please click .