Liability Insurance Revisited (AB 1523-Atkins)
AB 1523 (Atkins) was CARR's first piece of enacted legislation.
Drafted and sponsored by CARR during the 2013-2014 Legislative
session, it was an important consumer protection bill
that closed a long-standing regulatory gap.
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5 Years Later: How is Liability Insurance
IN RCFEs Working?
Chris Murphy, MS-Gerontology
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California’s Health & Safety Code (H&SC) Section 1569.605 requires RCFEs to maintain liability insurance in minimum amounts of $1,000,000 per occurrence, and $3,000,000 in the aggregate. The law has been in effect for five years, since July 2015.
Initially, and following passage of the bill, RCFEs licensed for <6 beds (approximately 80% of the state’s RCFE inventory) could purchase the statutorily-required minimum liability insurance for between $1,800 and $2,500 annually from among 6 or 8 carriers. However in 2020, there are fewer carriers, and insurance premiums have grown to between $5,000 and $10,000/ year, depending on the specifics of the facility.
DSS/CCLD licenses many RCFEs to accept up to 100% of their licensed capacity in high-acuity medically needy residents, i.e. bedridden, hospice, and total care residents. These high-needs residents push the envelope of the ‘care and supervision’ non-medical model.
Caring for medically-needy residents in a
non-medical
care setting has led to care failures resulting in facilities receiving enhanced civil penalties for neglect, failing to obtain timely medical care for residents, and inadequate supervision for residents at risk of falls. Facilities cited for neglect or other forms of bodily harm experience premium increases between 200% and 600% at renewal. If a facility has had a claim, the renewal rates can be even higher.
RCFEs find themselves caught between high and unaffordable insurance premiums on one side, and state law on the other. Confronted with high renewal premiums reflecting either a facility’s compliance history, a carrier’s negative risk assessment, or a major claim against a facility, insurance brokers familiar with the RCFE insurance market report that increasing numbers of facilities
are going without
the required liability insurance, waiting for discovery by the regulatory agency.
Despite CARR’s best intentions, the law appears not to be working the way we intended. With 85% of our sample’s RCFEs being cited for failure to have current policies as reported in Rebecca’s article below, residents and consumers do not have the protection we intended for them to have.
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Look Both Ways, Turn Right, And… CRASH!
Rebecca Ruiz, Research & Data Analyst
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Liability insurance for assisted living facilities is similar to drivers needing car insurance – both are state laws. Drivers are encouraged to drive defensively and stay aware of their surroundings, much like we advise seniors and their families when considering assisted living. But what happens when an accident occurs? Even the best drivers, or facility operators, make mistakes and insurance protects them from having to pay out-of-pocket damages – preventing a serious dent to the wallet. Insurance is also designed to cover not-so-safe actions or omissions to act that may result in people being seriously hurt – like neglect for instance. In the case of RCFEs, a facility’s liability insurance carrier may compensate families, seniors, or employees for harm caused by bad care or unsafe conditions.
Most responsible businesses of any type carry liability insurance – it protects their business assets against judgments that result from lawsuits alleging negligence, wrongdoing or accidents. Large assisted living facilities operating multiple care homes most likely already had some form of liability insurance before AB 1523 required it. But for the small 6-bed facilities that focus on family and a home-like setting, liability insurance probably wasn’t a priority. With furnishing a new facility, hiring and training staff members, and advertising to new residents taking priority, these facilities may not consider liability insurance to be at the top of their to-do-list. Or at the top of their list of business expenses.
Regardless of how much facilities claim that staff and residents are family and that the facility is a home, assisted living is still an industry. Owners are not caring for residents only out of the goodness of their heart, they have to make a profit. Now this isn't a bad thing; most of the world works that way. And for RCFE licensees as business owners, liability insurance is absolutely necessary to protect their investment, and it’s an essential protection for consumers as well.
Consumers should always ask for proof of an RCFE’s
current
professional liability policy.
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The Data Says: RCFEs are Doing Without
Rebecca Ruiz, Research & Data Analyst
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CARR collected data from CCLD’s comprehensive facility review reports given to us by a concerned individual. After analyzing the data we found some interesting patterns. Out of 68 facility reports:
- 85% of facilities were given citations for lack of having current liability insurance.
- With only one exception, 100% of citations given were Type B citations. (Type B’s are issued when the deficiency is not considered to be an immediate threat to resident health and safety.)
- Lack of liability insurance was mentioned and/or cited on Annual Random reports 54% of the time.
The facility review reports make clear that Community Care Licensing does not uniformly apply its Implementation Plan for 1569.605; facilities are sometimes given time to obtain liability insurance without any penalties, or are given citations and time to correct the issue before additional penalties apply. The state inspectors offer licensees a lot of latitude in the time they allow for correction of the failure to have liability insurance. The most common time periods we found were 7, 14, and 30 days, but an LPA can give a licensee any time between 0 to 30 days, and we found some with no due dates.
In many reports we reviewed, the expired liability insurance policy is often mentioned alongside outdated employee logs and the emergency evacuation plans. While all documents are important and should be updated regularly, employee logs and evacuation plans aren’t as critical as an expired liability insurance policy. It is null immediately on expiration. If the liability insurance policy isn’t in effect on the day the resident falls due to the negligence of the licensee, the resident or her family won’t have the protections offered by an in-effect liability policy, and depending on the amount of the claim, the licensee may be at risk of losing her business.
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