Yet Another Nursing Home Arbitration Case

Add Bockelman v. GGNSC Gallatin Brandywood LLC, No. M2014-02371-COA-R3-CV (Tenn. Ct. App. Sept. 18, 2015), to the long list of cases in which a Tennessee court affirmed an order upholding the validity of an arbitration agreement signed by the deceased’s designated health care agent.

The patient at issue here had signed a “Health Care Agent” form in December 2008, appointing her daughter as her agent. The form provided that the daughter was given “permission to make health care decisions for me if I cannot make decisions for myself, including any health care decision that I could have made for myself if able.” In January 2010, the patient’s doctor deemed her incompetent to make health care decisions, and he documented and signed such designation.

Following the incompetence designation, the patient had several other medical appointments. Some notes from these subsequent appointments indicated that she did not have any “neurological deficits,” while others referred only to a “physical incapacity.” She was treated at times based on her own preferences rather than her best interests, yet the official incompetence designation was never overturned or amended.

In May 2010, the patient was admitted to defendant nursing home. During the admission process, daughter presented the health care agent form and signed all the admission documents on patient’s behalf, although daughter later testified that patient was competent at this time. One document signed by daughter as patient’s agent was an Alternative Dispute Resolution Agreement. At the top, this form noted in bold, capital letters that it was “not a condition of admission to or continued residence in the facility.”

After the patient’s death, daughter filed suit for various causes of action including negligence. Defendant filed a motion to compel arbitration, which the trial court granted. The trial court found “clear and convincing evidence that [patient] was not competent to sign the Arbitration Agreement on May 12, 2010” and that daughter “had actual authority to execute the Arbitration Agreement…pursuant to a validly executed Appointment of Health Care Agent.” Daughter appealed this ruling on three grounds, all of which the Court of Appeals rejected, ultimately affirming the validity of the arbitration agreement.

First, daughter asked the Court to overturn the finding that patient lacked capacity at the time the arbitration agreement was signed, arguing that if patient was competent then daughter did not have authority as her health care agent. While the Court acknowledged that some parts of patient’s medical records could suggest “recovered capacity,” it ultimately held that no evidence or testimony was sufficient to “overcome the determination of [patient’s] designated physician[.]”

Next, the Court addressed daughter’s argument that, as health care agent, she did not have the authority to execute an arbitration agreement on patient’s behalf. Instead, daughter argued that the signing of the arbitration agreement was not a “health care decision” and that she thus lacked the authority to bind patient. Citing multiple Tennessee cases, the Court rejected this argument. The Court specifically relied on Owens v. Nat’l Health Corp., 263 S.W.3d 876 (Tenn. 2007), where the Supreme Court “concluded that entering into an arbitration agreement as part of nursing home admission was a health care decision.” In Owens, the Supreme Court “warned against distinguishing between health care and legal decisions in contracting for health care,” finding that such a distinction would “introduce an element of uncertainty into health care contracts signed by attorneys-in-fact[.]” Here, the Court of Appeals held that admitting patient into the nursing home fell within the scope of the agency appointment and that the arbitration agreement, though not required for admission, was part of the admission process. Accordingly, the Court “declined to draw distinctions between the ‘health care’ and ‘legal’ decisions involved in nursing home admissions,” avoiding the “untenable result that agents can make some nursing home admission decisions for their principals, but not others.”

Finally, the Court addressed daughter’s argument that the arbitration agreement was unconscionable. The Court noted that the agreement was not required, was not misrepresented to daughter, and did not unreasonably favor the nursing home. The Court thus rejected the unconscionability argument and affirmed enforcement of the arbitration agreement.

While competency and unconscionability arguments are fairly fact specific, the general lesson that can be taken from this case is that health care agents may have the authority to bind their principals to alternative dispute resolution agreements. Based on the reasoning presented here, if an arbitration agreement is signed by an agent in connection with health care being obtained for the principal, it will likely be found enforceable.