Nebraska Supreme Court Refuses to Compel Arbitration in Nursing Home Case

The present case comes as the U.S. Congress considers the Fairness in Nursing Home Arbitration Act of 2009. This Act would render pre-dispute arbitration clauses in nursing home contracts unenforceable (Senate version: S.512 and Status; House version: H.R. 1237 and Status).

In Koricic v. Beverly Enters., 278 Neb. 713 (No. S-08-1167), Frank Koricic took his elderly mother, Manda Baker, to Beverly Hallmark (now operating as Beverly Enterprises), a nursing home in Omaha, Nebraska. In 2005, upon her admission into the facility, Koricic signed several documents for his mother, including an optional arbitration agreement.

Baker died in 2007, she allegedly sustained injuries and pain and suffering because of Beverly Hallmark’s negligence. Koricic sued Beverly claiming negligence, breach of contract, and breach of fiduciary duty. Beverly moved to compel arbitration of the claims. The district court concluded that the arbitration agreement was enforceable against Baker’s estate because Koricic had actual authority to sign the arbitration agreement. Koricic now appeals.

The Nebraska Supreme Court stated that whether an agency relationship exits and the scope of that authority are questions of fact. The court found that Baker was an immigrant from Croatia and had limited ability to read, speak, or understand English. Koricic often had to explain the documents to her, but he only took action upon Baker’s direction. Also, Baker was never declared incompetent nor granted Koricic power of attorney over her affairs. When Baker was admitted into the nursing home, Koricic signed the paperwork at an office, outside of Baker’s presence and Koricic never discussed the content of the admission papers with her.

The court discussed agency law principles (actual and apparent authority) and stated that “nothing in the record suggests that a reasonable person should have expected an arbitration agreement to be included with admission documents for a nursing home.”

The court held that Koricic did not have the authority to enter into an arbitration agreement on behalf of his mother because it was not a condition of admission. Accordingly, it remanded the case for further proceedings.

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