Who Has the Authority to Sign Arbitration Agreements on Behalf of a Resident at a Residential Care Facility for the Elderly?

Robin Hutcheson v. Eskaton FountainWood Lodge, et al., 2017 WL 5712590 holds that a resident at a residential care facility for the elderly which provides care beyond that of personal care cannot be bound by an arbitration agreement executed at the time of admission by the resident’s power of attorney (“POA”) for personal care. Thus, notwithstanding a personal care POA’s general authority to make decisions regarding a principal’s “personal care” or “claims and litigation,” including the authority to submit claims to arbitration, only a health care POA has the authority to admit and bind an elderly principal to arbitration with a residential care facility that is expected to provide “health care” to the principal.

In Hutcheson, the decedent, Barbara Lovenstein, executed two POAs: (1) a healthcare POA in 2006 naming Plaintiff Robin Hutcheson and (2) a personal care POA in 2010 naming Plaintiff Jean Charles. The personal care POA was executed using the form set forth in Probate Code sections 4000, et seq. (“Power of Attorney Law” or “PAL”) and granted Charles the authority to act in matters relating to “personal and family maintenance” and “claims and litigation,” but expressly excluded “medical and other health-care decisions.” Hutcheson’s authority, on the other hand, included the power to authorize Lovenstein’s admission to “any hospital, hospice, nursing home, adult home, or other medical care facility” and the authority to consent to the provision, withholding, or withdrawal of health care.

In 2012, Charles voluntarily admitted Lovenstein to Eskaton FountainWood Lodge (“FountainWood”), a licensed “residential care facility for the elderly” and executed a binding arbitration agreement during the admission process. Around this same time, FountainWood inquired as to who was assigned to make health care decisions on behalf of Lovenstein. In response, Hutcheson and Charles provided FountainWood with Lovenstein’s health care POA naming Hutcheson as the person responsible for Lovenstein’s heath care.

When Loventstein choked on her lunch and subsequently died at a hospital, Hutcheson and Charles filed suit against FountainWood for elder abuse, fraud, and negligent infliction of emotional distress. The trial court denied FountainWood’s petition to compel arbitration finding it invalid, and the Court of Appeal decision affirming the lower court’s order was re-affirmed on rehearing this month.

The Court of Appeal noted that while residential care facilities are not primarily medically oriented or expected to provide care beyond personal care (something within the purview of a personal care POA), a residential care facility for the elderly may provide health care that would fall under a “health care decision” for which only a health care POA may bind a principal. As a result, the Court of Appeal held that FountainWood was obligated to seek Hutcheson’s, as opposed to Charles’, consent to arbitrate before it could rely upon the arbitration agreement relating to health care related matters.

Although FountainWood argued that it was unfair to treat the facility as a “health care institution” under the Health Care Decisions Law (Prob. Code, § 2600, et seq.) and at the same time exclude it from MICRA’s cap on noneconomic damages because it is not a “health facility” or a “health care provider,” the Court of Appeal stated:

While we understand FountainWood’s concern, we must leave it to the Legislature to address that issue. In the meantime, residential care facilities for the elderly can protect themselves against unlimited liability by ensuring its health care agreements containing arbitration clauses are executed by persons having legal authority to do so. Charles was not such a person in this case.

The Legislature intended that a decision to admit someone to a residential care facility for the elderly for the provision of health care is a health care decision under the HCDL, and it required that such a health care decision, if made pursuant to a power of attorney, be made pursuant to a health care POA. A personal care POA under the PAL does not authorize the attorney-in-fact to make a health care decision.

The Court of Appeal further found that FountainWood could not rely upon the ostensible authority of Charles to execute the arbitration agreement because there was no evidence to establish that Lovenstein engaged in conduct or words with Charles to cause FountainWood to believe that Charles was Lovenstein’s agent for purposes of executing health care agreements containing an arbitration provision.

The holding of Hutchenson serves as a warning to residential care facilities for the elderly who may offer care beyond those identified as personal care. The burden is placed on the residential care facility to determine who has the appropriate authority to admit residents and/or execute arbitration provisions relating to health care, in addition to personal care services, provided at the facility.

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December 4, 2017