Wilkes & McHugh Law Firm's Departure Highlights Fall in Nursing Home Lawsuits

by Jan Cottingham  on Monday, Jun. 9, 2014 12:00 am  

Source: Arkansas Department of Human Services

Legal Strategies

Wilkes & McHugh’s success at winning big verdicts in nursing home abuse and neglect cases was largely responsible for the spike in insurance premiums. Its biggest judgment came in 2001, $78 million in Mena in the nursing home death of a 93-year-old woman, a case that Reddick oversaw for the firm.

It was at the time the largest judgment ever awarded in Arkansas. And though the state Supreme Court reduced that verdict to $26 million (including $21 million in punitive damages), it helped spark so-called tort reform in Arkansas, the Civil Justice Reform Act of 2003. The act limited punitive damages to $1 million, but in 2011, the state Supreme Court ruled that cap unconstitutional.

David Couch was one of the Little Rock attorneys defending the nursing home in the Mena case. He went on to form his own firm, and now pursues abuse and neglect cases against nursing homes.

Couch thinks that Wilkes & McHugh, which is based in Tampa, left Arkansas primarily because nursing home owners in Arkansas are increasingly using mandatory arbitration clauses, but he agreed that the lack of liability insurance was a major factor.

The state reimburses nursing homes for their liability insurance premiums. A report from the Arkansas Department of Human Services shows that of 192 nursing homes submitting their cost reports to the agency, 21 did not submit expenses for liability insurance, indicating they didn’t have it.

The Arkansas Health Care Association, asked to respond to the issue of liability insurance, said in a statement to Arkansas Business:

“The availability of commercial professional liability insurance for nursing home operators in Arkansas is extremely limited. As a result, our members must utilize a wide variety of insurance options, each of which is determined by the business and risk management needs to the specific operator purchasing insurance.

“We commend the nursing home operators for attempting to find coverage wherever they can, if it is affordable and the cost does not negatively impact the facility’s financial ability to provide quality care.”

Couch, Buchanan, Reddick and others also point to the increasingly complex corporate structure adopted by nursing homes in Arkansas.

“A common liability avoidance strategy employed by players in the nursing home industry (in Arkansas and elsewhere) has been corporate restructuring,” said Robert B. Leflar, a health care lawyer at the University of Arkansas School of Law. “Nursing home chains often incorporate each separate facility as a limited liability corporation.”

“There will be one company that owns the real estate,” Buchanan said. “There will be one company that provides nursing consultants and related services. There will be another company that provides billing and accounting and those types of services. Basically, in the end you’re left with an entity that may have some cash, but no or very few hard assets.”



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