Arbitration Provisions Held Unenforceable Against Nursing Home Residents

It is common for nursing homes to have admission contracts which require nursing home residents to be bound by arbitration clauses – which many think is more advantageous to the nursing home than the risk of a lawsuit against the facility. Thus, even if the nursing home resident lacks capacity, the nursing home often has a family member sign (as a responsible party or as legal representative) an admission contract to bind the nursing home resident to arbitration in the event of a lawsuit.

In two recent cases, residents of nursing homes (through their representatives) brought negligence actions against nursing homes. In both cases, the nursing homes moved to compel arbitration. A family member signed the nursing home admission contract (which required arbitration) for the nursing home resident in both cases since the nursing home resident was incompetent. However, in both cases, the family member did not have a power of attorney from the nursing home resident. The courts ruled that since the nursing home resident lacked capacity to empower an agent there was no authority of the family member to bind the nursing home resident to arbitration. Since a valid contract did not exist, the arbitration clause could not be enforced or compelled.

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