Specialized knowledge is a requirement for handling the risks associated with nursing homes, according to industry experts.
Rob Jurgel, the underwriting president at Mass.-based SCI Underwriting Management, a managing insurance agency with a focus on the aging service industry, said their focus is mostly on skilled nursing professional and general liability.
“We tend to target the tougher to place nursing homes. Nursing homes overall are a pretty hazardous risk to begin with,” said Jurgel.
He said that skilled nursing is a highly regulated business – the second most highly regulated industry behind nuclear power.
“There’s a ton of regulation and these homes are inspected every year. There’s about 400 different data points they look at and there’s three different types of inspections, and without getting into the nitty gritty details of each there’s a lot of inspections and a lot of oversight, and attached to that comes a lot of liability because all of this is public information,” Jurgel said.
The oversight is federally funded through Medicare and Medicaid and the funding is pushed down to the state level where inspections are completed.
Types of Nursing Home Risks
Steve O’Neill, a partner at the Calif.-based law firm of Tarkington, O’Neill, Barrack & Chong, is typically retained by elderly clients or by a surviving child who have seen their parent’s condition deteriorate due to neglect caused by a residential care or assisted living facility.
“Many of our people who come to us are the sons or daughters of these people because there’s a dementia that prevents them from knowing what’s going on,” he said.
O’Neill said the most common types of claims he sees are pressure ulcers, a broken hip, a subdural hematoma or a brain injury caused by a fall.
“Sometimes we see cases where they have not been provided sufficient nutrition or hydration so they develop urinary tract infections. We also see cases where they may have had a sustained weight loss, much more than one would expect to see,” O’Neill added. “Because they’re either not eating or they’re not being provided with sufficient food service. Sometimes they’re not capable of eating. We see cases where people who are being given food are being given the wrong kind of food and they aspirate the food and either die, or they get an aspiration pneumonia where they inhale their food into their lungs and then have difficulty with that.”
The plaintiff attorney said that falls can result in death because patients become even more immobilized than they were before they fell. He said the immobilization leads to pneumonia and then to sepsis.
Jurgel confirmed that the typical claims scenarios are falls that lead to broken hips or broken bones, where the people don’t get up to walk around a lot and they develop ulcers. The ulcers get infected and will progress to sepsis which is often deadly.
These types of claims tend to lead to high dollar settlements.
“The average claim nationally is $250,000. That will vary quite a bit by venue. The rates, just to give you an indication, the rates that are charged will vary dramatically depending on what state you reside in and/or what county within the state even,” said Jurgel. “They can be as dramatic as 10 to 1. You take a very low risk state, you can be charged a dollar versus a high risk state, you could be charged as much as $10. It’s that dramatic.”
He said carriers need to stay on top of these types of claims because of their high dollar value and the venue where cases may be tried.
“There’s a number of counties which are considered very hazardous. If you don’t stay on top of those you’re going to be out of business pretty quickly. There’s been 13 companies that have exited the market just in the past 18 months. There’s always new people coming in thinking that they know what they’re doing. They usually get a pretty quick education,” Jurgel said.
The SCI underwriting president said that carriers entering this market need specialized claim handlers.
“We outsource ours [claims] to a third party administrator that handles more of this business than anybody else. We rely on their expertise on the claim handling side. I don’t think we could hire somebody of equal talent at a reasonable cost, so we outsource it,” he said.
Jurgel said the plaintiff’s bar in this area is very specialized.
“The plaintiff’s bar, they’ve always seemed to have a leg up on the regular, run of the mill claim examiners. I believe they’re at a disadvantage. If they’re not equally specialized and focused on this it makes it tough on them,” said Jurgel.
O’Neill couldn’t comment directly on company claims handlers he has dealt with.
“We don’t have contact with the adjusters. Our custom when we get these cases is to file suit. Our contact is always with defense firms, firms that are doing this kind of work,” O’Neill said.
O’Neill’s contact with claims typically happens at mediation.
“Usually, there’s someone, who by that time, knows the ins and outs of the special kind of work and deals with it fairly adeptly,” he said.
In most instances the Calif.-based attorney files suit immediately because his clients are typically elderly and don’t have the time to go through negotiations with an insurer.
Insurers Test the Waters
As the nation’s elderly demographic continues to expand, the segment is expected to grow.
“I think a lot of companies get into this space because they see the demographics and they think it’s a good business opportunity. But, if they don’t have the expertise, they can easily lose a lot of money,” Jurgel said.
According to the underwriting president, when a line like this goes bad a carrier could be looking at a thousand percent loss ratio.
“We see that on individual accounts all the time. When books of business blow up, usually because they’re writing a three, four hundred or higher percent loss ratio,” Jurgel said.
According to Jurgel, there are approximately 40 companies that operate in the market.
“The reality of it is there’s really, I’d say, 10 or so facilities that are credible and there’s a handful that have any longevity to them. It’s a pretty hazardous space to operate in,” he said.
O’Neill recommended that carriers entering the market, as well as claims adjusters and attorneys, understand the basic rules of the road in terms of what the law provides and what the standard of proof is.
“If you don’t know how to do it, you don’t want to be doing it,” the California attorney said.
“If you don’t know the law on this particular area, there are many, many pitfalls in handling the defense or the plaintiff side with either of these cases. It is a specialty.”
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