Mandatory Liability Insurance and RCFEs

As of July 1, 2015, owners of Residential Care Facilities for the Elderly (RCFEs) in California were required to have liability insurance in the event of elder neglect and other related injuries. The new law, which went into effect just this past summer, began as AB 1523, a bill that was sponsored by the Consumer Advocates for RCFE Reform (CARR). In the minds of many elder justice advocates, mandatory liability insurance for RCFEs represents one step toward safer care options for seniors in California. If we take a closer look at the history of the bill and the implications of mandatory liability insurance in our state, we can better understand how this new law may have an effect on incidents of nursing home abuse.

Background to AB 1523 and the Requirement of RCFE Insurance

Over the last couple of years, numerous advocates have voiced concern about the state of the assisted-living industry in California. Many reports about elder abuse and neglect appeared in The San Diego Union-Tribune, emphasizing the need for reform measures throughout the state. One of those reforms includes the law requiring liability insurance for RCFEs. As CARR explains in a press release about the new law taking effect, the advocacy group conducted extensive research into the affordability of mandatory insurance. In short, CARR found that “the average monthly cost to a small, six-bed facility would amount to approximately $50 per month per resident.” According to CARR, $50 per month for each resident of an RCFE is “a reasonable amount by any standard.”

CARR looked into the costs of mandatory liability insurance after RCFEs complained about the increased price. For example, when AB 1523 was introduced, a group of RCFE providers, 6Beds, Inc., produced a report indicating that mandatory liability insurance would “force small facilities to close their doors and subsequently leave seniors with reduced care options.” In other words, RCFEs contended that California elders actually would be in a worse situation if these facilities were required by law to have liability insurance because those older adults would be left without any affordable care options.

Yet, as CARR points out, objections from facility owners do not carry significant weight. In particular, the concerns raised by 6Beds, Inc.—including the worry that “insurance companies may decide arbitrarily to cancel policies or raise premiums to unaffordable levels”—should not outweigh the value of liability insurance. For, as CARR explains, “the purpose of liability insurance is to protect both seniors and facilities in the event of loss or harm.”

Policy Coverage Amounts and Patient Risks

Under the new law, the mandatory coverage for RCFEs is as follows:

  • $1 million/occurrence; and
  • $3 million/aggregate.

This liability coverage includes general liability, professional liability, and abuse liability. If CARR is correct, most RCFEs will pay an average of $50 per month per patient. Yet if an RCFE admits patients that require additional levels of care—such as patients who are sicker than others or those who are frailer than others—the cost of coverage per month likely will rise. RCFEs should be aware that the greater the risk of injury to a resident, the higher the monthly cost of liability insurance. Yet, as we pointed out, this insurance protects the facility and the patients alike.

RCFEs should also keep in mind that they will keep premiums low by keeping patients safe. The fewer liability claims an insurer needs to pay out, the lower the monthly costs for these facilities. If RCFEs expect a rise in premiums when a patient (or her family) files an abuse liability claim, then mandatory liability insurance could end up functioning as a preventive measure for nursing home abuse and neglect.

Given that the law has only been in effect for a few months, we will need to wait a bit longer to examine its implications. In the meantime, if you have questions or concerns about elder abuse in an assisted-living facility or RCFE, you should discuss your case with an experienced San Diego nursing home abuse attorney. Contact the Walton Law Firm today.

See Related Blog Posts:

Senior Transportation and Elder Neglect Prevention

Nursing Home Cameras and Elder Abuse Prevention