Limitation of liability provision in arbitration agreement is unconscionable, contrary to public policy and cannot be severed to uphold the remainder of the agreement.

The petitioner, a nursing home resident, filed suit against Manor Care for negligence and a violation of her resident's rights. Pursuant to an arbitration agreement signed by the parties, Manor Care 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, the petitioner asserted that the arbitration agreement in question was unconscionable and a violation of public policy due to provisions contained therein that limited Manor Care's liability. Specifically, the arbitration agreement capped non-economic damages and waived the petitioner'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 a violation of public policy and, therefore, cannot be severed to uphold the remainder of the agreement.

Long-term care providers should take caution in drafting arbitration agreements containing limitations of liability as these are often found to be unconscionable, contrary to public policy and typically will not be upheld in Florida courts.

Case Law Alert - 2nd Qtr 2012