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Arkansas lacks nursing home insurance liability market

The unavailability of nursing home liability insurance in Arkansas is a critical insurance issue in this state. Long-term nursing home liability coverage has become cost prohibitive, causing some nursing homes to drop their liability insurance or cancel it in the near future. Consumers fear that lawsuits against uninsured nursing homes could easily bankrupt the businesses, forcing them to close.

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According to the state's insurance department, out of 80 insurers licensed in Arkansas to sell long-term liability coverage, only five sell nursing home liability coverage. Of those five, two companies sell virtually no policies because their eligibility requirements are so strict. One insurer has policies in force but is not renewing them, and another has policies in force but is only selectively renewing them.

Arkansas Insurance Commissioner Mike Pickens held an evidentiary hearing on Sept. 19, 2001, to gather information about the crisis from both nursing home insurers and operators. The evidence of nonexistent or inadequate long-term liability coverage was "overwhelming," according to Pickens. "Witnesses testified that numerous multimillion-dollar judgments awarded against some nursing homes and the absence of civil justice reform in the state has crippled this anemic market."

Climate of contentious litigation

To underscore just how contentious litigation against nursing homes has become, consider this: Judgments since April 2001 against Arkansas nursing homes total more than $93 million, not including settlements, according to Pickens.

Surplus lines insurers that provide liability coverage for high-risk businesses are currently selling long-term liability coverage to nursing homes in Arkansas, but these carriers do not provide the extent of coverage needed, Pickens says. These insurers typically exclude coverage for punitive damages and damages for physical and sexual abuse.

Additionally, the Arkansas Insurance Department says that a recent survey of the state's professional liability insurance market finds that the following factors have also contributed to the market's decline:

  • An increasing number of claims.
  • Difficulty in predicting the future number of claims.
  • Difficulty in pricing due to escalating court judgments and settlements.

Based on the evidence presented during the hearing, Pickens called for a study to determine if civil justice reform is necessary to correct the problem. "The overwhelming preponderance of the evidence revealed that some degree of civil justice is necessary if Arkansas's voluntary nursing home liability insurance market is to survive and serve our consumers," Pickens says.

He also asked the Arkansas House and Senate Interim Committee on Insurance and Commerce to conduct a study of the issue and to conclude whether the affordability and availability problems faced by the long-term liability market could carry over into other lines of insurance, particularly medical malpractice insurance.

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