What’s Happening with Senior Living Liability Insurance?
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What’s Happening with Senior Living Liability Insurance? Moderator: Rodger Lederer, ARM, AINS Vice President, Risk Specialties Willis Towers Watson
Stacey Meyer Senior Corporate Counsel Brookdale
Frank Russo, MBA, CHC SVP, Risk & Legal Affairs Silverado 2
What’s Happening with Senior Living Liability Insurance? Agenda • General and professional liability market update • Claims trends and market drivers in senior living • How to prepare for a changing market • Let’s talk….
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General and Professional Liability Market Update
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What’s Happening with Senior Living Liability Insurance?
The marketplace has “hardened” as claim frequency and severity increases have led to pressure on insurer profitability.
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What’s Happening with Senior Living Liability Insurance? General and Professional Liability Overview Market Update • Market conditions have changed over the last 18-24 months and dramatically over the last 6 months • Claims severity is increasing 7%-10% annually ( frequency has begun to trend up as well) • Limited ROI due to historically low prices in previous years • Significant emergence of claims development from 2015-16 years • Tough legal venues are driving underwriting– CA, FL, IL (Cook County), KY, NJ, TN, and WV- Carriers using data to drive venue performance down to zip codes • Many insurers seeking rate stabilization and tightening terms/conditions on LTC Senior Living business (Think higher retentions) • Higher per-claim/occurrence retentions, increasing/eliminating aggregate deductibles • Coverage retrenching-MVF, Class Action, Sublimit for Abuse and Molestation……… • Excess capacity management • LTC market landscape is shifting: • Exits: GuideOne, Hiscox London, AIG, One Beacon, Markel US (Thomco) RLI • Rate Action &/or Restructuring/T&C Changes: OneBeacon, CNA, Sapphire Blue/London, Church Mutual • Bermuda Markets- Excess and limited primary capacity • Entrants/expansions: SwissRe, MMIC • Consolidations: ACE/Chubb, Ironshore/Liberty Mutual, XL Catlin, Sompo/Endurance • Hard markets attract new capital, but when?? • Natural disasters, including wildfires, catastrophic storms causing underwriters to focus on operator disaster preparedness
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What’s Happening with Senior Living Liability Insurance? General and Professional Liability Overview Market Update • Heavily scrutinized M&A activity • Underwriters demanding prior loss information • Credit concern of “tail” policies with retention • Underwriter overload creating delays • Insurers submission up 100% or more • No significant additions to underwriting or actuarial teams • Flight to quality • Back-to-basics approach • Detailed submissions • Face to face meetings with key stakeholders from leadership, clinical and operations Rate Impact: • Flat to +5% ( Best Accounts-Favorable Venues Only) • 20%+ (difficult venues, adverse loss history, carrier profitability) • Rate increases in addition to any claims made to occurrence steps
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Claim trends & market drivers in senior living
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What’s Happening with Senior Living Liability Insurance? Emerging Issues – Litigation Trends GL/PL Claims Trends • Increasing claim frequency and severity trends are putting pressure on the underwriting community, driving rate, increasing retentions and adding scrutiny to the overall underwriting process. • Key Statistics found in the 10th edition of CNA Aging Services Claim report: • Resident Falls continue to be a leading risk exposure in aging services settings accounting for 40.5% of all claims in this report and 49.4% of all AL claims - 66% of falls are unwitnessed - 64 % of claimants are repeaters • Pressure ulcers accounted for 18.6% of all claims • Assisted Living fall related claims are more costly, on average then fall-related claims in other segments (AL $224,000 vs Skilled $187,774) • Highest severity claims are elopements • Nearly 2/3 of fall related claims assert failure to monitor • Death is the outcome in nearly half of fall related claims • Dementia is a factor in 62.8% of all fall related claims • Of the 15 most costly claims, 14 occurred in for profit communities
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What’s Happening with Senior Living Liability Insurance? Average Cost Per Claim
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What’s Happening with Senior Living Liability Insurance? Highest Average Total Paid Closed Claims
Elopement
$325,561
Failure to follow physician order
$323,325
Delay in seeking medical treatment
$245,783
Pressure ulcers
$232,398
Failure to inform physician
$231,321
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What’s Happening with Senior Living Liability Insurance? Resident Falls – Frequency by Allegation (Percentage of 1, 117 Closed Claims)
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What’s Happening with Senior Living Liability Insurance? Resident Falls – Frequency by Outcome of Injury (Percentage 601 Closed Claims)
Death is the most common outcome for fall-related claims. 13
What’s Happening with Senior Living Liability Insurance? Emerging Issues – Litigation Trends Class Action Lawsuits
• Five class action lawsuits have been filed against assisted living providers in California and Florida since 2013; two cases have settled for approximately $20 Million • Common causes of action have been plead in the five actions: • Violation of the Consumer's Legal Remedies Act (CA Civil Code §1750 et seq.) • Elder Financial Abuse (CA Welfare & Institutions Code §15610.30) • Unlawful, Unfair and Fraudulent Business Practices (CA Business & Professions Code §§ 17200 et seq.); Florida Deceptive and Unfair Trade Practices Act (Sections 501.201 et seq., Florida Statutes) • Unruh Civil Rights Act (CA Civil Code § 51 et seq.) • Common factual allegations: • Defendant AL provider has engaged in a scheme to defraud residents and family members by falsely representing in its admission contract and marketing materials that: - Each resident will be provided the care services that the resident needs as determined by the resident assessment conducted by the AL provider - The amount of care needed by a resident will be translated into a specific number of care points for which the resident will be charged on a monthly basis - The budget for staffing at the community is related to the aggregated care points generated by the resident assessment and the AL provider will ensure that the community has at all times sufficient numbers of trained staff to deliver the amount and type of resident care identified in the assessment • Defendant AL provider actually conceals and fails to disclose that as a matter of corporate policy, facility staffing per shift is set based on pre-determined labor budgets calculated to return desired profit margins and does not alter the number of staff or hours per community or shift regardless of changes in occupancy or resident needs as determined by assessments 14
What’s Happening with Senior Living Liability Insurance? Emerging Issues – Litigation Trends Class Action Lawsuits
• American with Disability Act • Drive-by or Google lawsuits • Website ADA compliance class actions • Relates to interfacing with screen and audio for those with disabilities • 2016 had 240 filed lawsuits • 2017 increased to 800 • Several courts have determined website are place of accommodation and fall within scope of ADA • Permissibility of charging community fee’s • 2017 three assisted living providers in Massachusetts sued around community fee’s • California SNF operator sued for improper notification of discharge • Class looks to include all SNF residents in state •
Negligent Evacuation
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What’s Happening with Senior Living Liability Insurance? Emerging Issues – Litigation Trends Class Action Lawsuits
Coverage Considerations • Not a clear insurance recovery path • Multiple policies could apply, or none at all • Coverages to notice • D&O or Management Liability policies • Employment Practices Liability policies • Real Estate Errors and Omissions policies • General or Professional Liability policies • Trigger defense when possible • Cases do not have bodily injury or property damage allegations • May have multiple retentions- if allocations or coverage exist under multiple policies • Problematic exclusions starting to emerge • Class actions are considered one claim under the policy’s “related claim” clause; • Anti-stacking provisions can prevent policies insuring multiple facilities from applying to claims so only one limit is available. (even if multiple facilities are named in the complaint) ; • Depending on the type of relief sought, often insurers will argue the complaint seeks uncovered restitution or penalties, not damages.
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How to prepare for a changing market
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What’s Happening with Senior Living Liability Insurance? What should we be focused on as we navigate through this market? • Becoming aware of current risk exposures is the necessary first step in reducing potential liabilities • Positive staffing practices and consequent low turnover are critical factors in reducing risk, but are often undervalued in the risk mitigation • Resident falls and pressure injuries can be substantially reduced by enhancing staffing practices, creating a positive work environment and ensuring that clinical protocols support resident safety and satisfaction • Follow the data- incident and claims in high risk areas- falls, elopements, med errors, and natural disasters • Business analytics • Risk dashboard/metrics • Claims and incident trending • Drive the claims process • Early intervention/resolution strategies • Defense counsel management • Claims adjusters-don’t accept path of least resistance attitude
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What’s Happening with Senior Living Liability Insurance? What should we be focused on as we navigate through this market? • Negotiated Risk and Arbitration agreements • Compliance • Training • Keep investing if risk and clinical risk management human capital and technology-time to double down • Communication with internal and external stakeholder • Finance, Clinical, Operations, Sales all need visibility and must engage • Asset management looking at M&A activity • Senior Management and Equity • Build/Develop market relationships • Incumbent and potential competitive options • Leverage insurers clinical risk consulting services
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What’s Happening with Senior Living Liability Insurance? How do we differentiate ourselves? Know what is important to the insurer/underwriter… • • • • • • • • • • • • • • • • •
Underwriting discipline is paramount-they will put capital where they can achieve ROC Risk selection fosters profitability Venue Levels of care and services provided Total exposures (number of beds) Acquisition /Divestiture strategy Loss history Ownership structure and support Reputation in the community Financial stability Stable and high performing leadership team Vision, mission and culture Retention of employees and staffing related to resident acuity Quality outcomes Litigation management strategies Risk, quality and compliance programs Reasons for marketing insurance program
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What’s Happening with Senior Living Liability Insurance? Presenting you best corporate self... Submission Materials • • • • • • • •
Quality of submission information Website consistent with submission information Quality outcomes Loss history Employee retention and staffing ratios Composition of leadership team Analytics and trends in high risk areas Utilization of client-specific data builds trust and supports underwriting determinations
Meeting with Organization’s Leadership Team • • • • • • • •
Mission of organization Knowledge of senior living industry and operations Investment in well-being of the residents Understanding the importance of balancing operations with concern for residents and employees Transparency of successes and challenges Expectations of insurance company Building and maintaining relationships are integral to managing market cycles. Early discussions regarding renewal actions prepare all parties for mutually beneficial outcomes. 21
What’s Happening with Senior Living Liability Insurance?
Let’s talk……
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