By Christine Shasteen

The decision to go without insurance is, unfortunately, not unusual among skilled nursing facilities (SNFs), many of which are privately owned and individually operated. It’s a big risk, but when budgets are tight and margins thin, insurance can fall by the wayside. That’s especially true in today’s environment when insurance companies are pulling back on limits and increasing premiums as well as retentions.

But the cost of going unprotected can be steep.

Of particular importance are three specific policies in the “management liability package:”

  • Directors & Officers (D&O) liability insurance provides protection for the facility’s directors, officers and staff against claims by shareholders, creditors, residents and families for not running the facility as promised. Guilty or not, allegations of misdeeds can run up expenses on defence. Without it, the personal assets of such key executives can become fair game.
  • Employment Practices Liability (EPL) protects the organization as well as its directors, officers and staff against allegations of wrongful termination, discrimination, sexual harassment or similar claims of employee “damage.” Higher salaries paid to nurses or medical directors of SNFs pose the risk of higher settlements.
  • Cyber Liability insurance has become increasingly important as medical records have become more valuable to hackers than credit card data. Small organizations, particularly those with only one to three SNF locations, are a bigger risk because their cyber protections may not be as robust as larger, more technically advanced organizations.

These policies become critical protections in situations where settlements may lead to financial issues and more. For example, consider one SNF that ran into financial difficulties and was sued by creditors who alleged that poor marketing decisions kept it from meeting required occupancy levels. The allegations of the creditors triggered D&O coverage and, ultimately, led the facility to filing bankruptcy. Had employees been laid off, or a new owner been found that made changes employees didn’t like, claims for damages could trigger the EPL policy as well.

What you need to know about the coverage

Getting educated about the policies is just as important as retaining them. Make sure each coverage is negotiated by your broker on behalf of the specific SNF, including coverage limits and exclusions. Here’s what you need to know.

  • D&O: A D&O policy protects SNF directors and officers from claims based on the decisions they make on behalf of the company, and their role in the business. A robust policy can help you attract the right directors and officers for your organization.
  • EPL: An SNF’s hiring and firing practices and procedures should be clear and consistent, presented to employees during onboarding. Whether or not an EPL complaint leads to a full claim or settlement, an EPL policy will cover the cost of legal services to defend a complaint.
  • Cyber: Ransomware, malware and denial of service are among the top threats to medical records. In addition to instituting risk management best practices within your organization, cyber insurance will provide critical response resources, should there be a breach of your network.

Senior care facilities play an increasingly important role in the fast-aging Canadian society but also face unrelenting pressures on the financial, legal and employment fronts. To go up against them unprotected might save some money now, but it can have painful consequences long term.

Contact your HUB Senior Care and Management Liability expert for more information on right-sizing SNF insurance.