We have mentioned this previously, but it needs to be emphasized that Alabama law does not require a nursing home to maintain medical liability insurance. This means that if a nursing home is negligent in its care of a loved one, the facility may not have insurance coverage to pay a settlement or verdict. When that’s the case, the nursing home usually will be virtually “judgment proof.”
Lawyers in our firm are currently involved in ongoing litigation against a nursing home located in Montgomery. While we may not discover the availability of insurance coverage under Alabama’s outdated Medical Liability Act, the nursing home in this particular case has recently confirmed that it does not have liability insurance. The nursing home also owns no real estate. The building it operates out of is owned by another company. That company (or companies by similar names) owns the real estate of other nursing homes in Alabama.
The Montgomery nursing home has had a chain of owners with a succession of chains of owners. The prior owners sued each other and raised a variety of claims against each other, including mismanagement and embezzlement of the proceeds made off of operating the nursing homes. That litigation resulted in the sale of the nursing home, and several others in Alabama, to the new chain of owners.
The Montgomery nursing is currently owned by a limited liability company, which is owned by another limited company, which is owned by another limited liability company, which is owned by a corporation, whose stock is owned by an individual. This chain of companies, or companies in this group of companies, owns nursing homes all around the United States. All of the companies in the chain that owns the Montgomery nursing home are out-of-state companies, except one. If all of this seems confusing, it is – and I submit the confusion is intended by the nursing home owners and managers.
In Alabama, as with most states, the change of ownership and operation of nursing homes must be approved by the Alabama Department of Public Health. The Department of Public Health reviews applications and approves the changes of ownership. While they are not required to do so, the Department of Public Health can promulgate regulations regarding the ownership, management and operation of these facilities.
The Alabama Department of Public Health can provide added protection to elderly and incompetent citizens by requiring proof of medical liability insurance from these companies when they request a change of ownership. We would expect that such a regulation would be met with great resistance by the nursing home industry, but our Department of Public Health understands that it is charged with the responsibility of protecting those individuals who cannot protect themselves. Making sure that these companies are properly capitalized and insured would go a long way toward providing an added layer of protection to our loved ones in these facilities.
While there are many nursing homes that are privately owned by Alabama individuals and companies, our firm will continue to address the quagmire of ownership of these nursing homes that are owned and operated by out-of-state entities. Our Alabama Supreme Court has already recognized this stacking of ownership as a serious issue. It addressed the “common enterprise” and “alter ego” issues of a nursing home in a similar situation in Hill v. Fairfield Nursing & Rehabilitation Center, LLC, 134 So.3d 396 (Ala. 2013). We are hopeful that our legislature, governor and regulatory authorities will do likewise and will begin to scrutinize these corporate chains to ensure that our loved ones receive adequate and safe care and are properly provided for in the event of medical negligence in their health care.
We also encourage any of our readers who are faced with having to select a nursing home for a loved one, to ask important questions before admitting the family member to a facility. Likely, the clerical person or even the nursing staff at the facility will not understand who actually owns and operates the nursing home, so ask the facility’s administrator who owns it, where they are located, and whether the facility has medical liability insurance. Knowledge is power and knowing this information is essential. If you need more information on this subject, contact Ben Locklar, a lawyer in our firm who handles nursing home litigation, at 800-898-2034 or by email at Ben.Locklar@beasleyallen.com.
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