Arbitration Agreements In The Setting Of Long-Term Care In Florida: Enforceable Or Unconscionable?

Florida – Long-Term Care

Key Points:

• Provisions in an arbitration agreement which serve to limit the liability of the long-term care provider should be avoided since they typically will not be upheld in Florida courts.
• Arbitration agreements precluding the recovery of punitive damages by a claimant, capping non-economic damages or containing any other remedial limitation are against public policy and void.
• Arbitration agreements must permit relief equivalent to court remedies.

It is no secret that the state of Florida has become a hotbed of litigation in the area of long-term care. In the last 15 years, the number of nursing home lawsuits commenced in Florida has grown exponentially to become one of the most lucrative areas of practice in the state. Not surprisingly, many long-term care facilities have responded to the litigation frenzy by implementing practices designed to create efficiency and decrease expense associated with the litigation process. Specifically, many long-term care facilities now include a provision for binding arbitration within the admission paperwork signed by new residents. The effect of the arbitration agreement is to funnel claims against the facility to a final arbitration hearing, as opposed to a lengthy and expensive trial.

Florida courts have recognized that public policy favors arbitration. See e.g. Midwest Mut. Ins. Co. v. Santiesteban, 287 So.2d 665, 667 (Fla. 1973); Bland v. Health Care and Retirement Corporation of America, 927 So.2d 252 (Fla. 2d DCA 2006). While arbitration agreements are commonly upheld in long-term care cases, each decision has turned upon the contents of the agreement at issue. The most significant dispute concerning enforceability of arbitration agreements in the setting of long-term care has focused on the conscionability of the terms to the agreement. Specifically, Florida courts may decline to enforce an arbitration agreement if it is found to be both procedurally and substantively unconscionable. Powertel, Inc. v. Bexley, 743 So.2d 570, 574 (Fla. 1st DCA 1999)

Most recently, the Florida Supreme Court has issued two new rulings which speak to this very subject. On November 23, 2011, the Florida Supreme Court struck down arbitration agreements in two long-term care cases, finding that each agreement was unenforceable due to provisions contained therein limiting the nursing home's liability to the claimant. See Gessa v. Manor Care of Fla., Inc., 2011 Fla. LEXIS 2765, 36 Fla. L. Weekly S 676 (Fla. Sup. Ct. Nov. 23, 2011); Shotts v. OP Winter Haven, Inc., 2011 Fla. LEXIS 2764, 36 Fla. L. Weekly S 665 (Fla. Sup. Ct. Nov. 23, 2011).

In Gessa, a nursing home resident filed suit against Manor Care of Florida for nursing home negligence and a violation of her resident's rights under Chapter 400, Florida Statutes. Pursuant to an arbitration agreement signed by the parties, Manor Care of Florida moved to compel arbitration, which was granted by the trial court and affirmed by the Second District Court of Appeal. On appeal to the Florida Supreme Court, Ms. Gessa asserted that the arbitration agreement in question was unconscionable and a violation of public policy due to provisions contained therein limiting Manor Care of Florida's liability for its actions. Specifically, the arbitration agreement capped non-economic damages and waived Ms. Gessa's right to assert a claim for punitive damages. The Florida Supreme Court found that the limitation of liability provisions were unconscionable, holding that any arbitration agreement that substantially diminishes or attempts to circumvent the statutory remedies afforded to a nursing home resident is unenforceable as against public policy and cannot be severed to uphold the remainder of the agreement.

Similarly, in Shotts, the niece of Edward Clark filed suit against OP Winter Haven alleging negligence and breach of fiduciary duties in connection with her uncle's residency. At the time of admission, Gayle Shotts executed an arbitration agreement which contained the following provisions: "(i) that the arbitration will be conducted in accordance with the rules of the American Health Lawyers Association; and (ii) that the arbitrators will have no authority to award punitive damages at the final arbitration hearing." OP Winter Haven moved to compel arbitration in accordance with the terms of the arbitration agreement. Ms. Shotts contested the enforceability of the agreement on the basis that it was unconscionable and violated public policy because its terms served to limit the liability of OP Winter Haven. The trial court granted the motion to compel arbitration, and the Second District Court of Appeal affirmed. However, the Florida Supreme Court held that the remedial limitations contained within the agreement were violative of public policy because they directly undermined the statutory remedies created by the Legislature in Chapter 400, Florida Statutes. The Court further held that provisions of the agreement which go to the very essence of its terms cannot be severed and, thus, struck down the agreement in its entirety.

It is clear that arbitration agreements which contain limitations of liability or otherwise limit the relief afforded to a claimant will not be upheld in Florida. Such agreements are substantively unconscionable and contrary to public policy. Thus, long-term care providers should take caution when drafting such agreements to ensure that the resident is afforded the same statutory remedies as those set forth in Chapter 400, Florida Statutes.

*Chanel is an associate in our Orlando, Florida, office and can be reached at 407.420.4415 or camosley@mdwcg.com.

Defense Digest, Vol. 18, No. 2, June 2012