Supreme Court’s Decision Could Impact Quality of Nursing Home Patient Care

September 8, 2003

A United States Supreme Court decision on whether a petitioner’s net worth could be a consideration in awarding punitive damages could have a serious impact on the nursing home profession at a time when there is growing need for health care services.

The National Association of Independent Insurers (NAII), along with the American Health Care Association and the American Association of Homes and Services for the Aging, filed an amicus brief supporting the Petition for a Writ of Certiorari to the Supreme Court of Arkansas in the case, Advocat Inc. and Diversicare Leasing, et al v. Sauer. The $21 million dollars in punitive damages awarded in the case were five time the net worth of one of the petitioners. Diversicare is worth $4.2 million. The Arkansas Supreme Court relied on business size and took comfort in the fact that the defendants oversee a major business enterprise by operating 86 facilities in the southeastern United States and Canada.

“The United States Supreme Court has not yet spoken on ‘net worth’ as a necessary consideration in drawing the line between fair and reasoned punishment versus economic forfeiture,” said Laura Kotelman, NAII counsel. “This case presents a compelling Fourteenth Amendment question not addressed in other cases such as BMW of North American v. Gore or State Farm v. Campbell. The Writ presents the U.S. Supreme Court with the opportunity to complete the task it undertook in those cases.”

“The case graphically illustrates the court’s need to consider net worth evidence in determining whether a punitive damages award is excessive and in violation of the Due Process Clause of the Fourteenth Amendment. The brief addresses punitive damages awards that have no relation to and actually exceed a defendant’s net worth. The impact on the nursing home profession could be devastating,” Kotelman said.

“The brief strongly argues that excessive punitive damage awards are crippling nursing homes and diverting scarce dollars away from patient care,” Kotelman said. “There has been a dramatic increase in nursing home litigation, including excessive punitive damages awards. Spiraling litigation costs and excessive verdicts have substantially contributed to the current cost and availability crisis in liability insurance for all nursing homes.”

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