A now-closed assisted living community’s insurance provider must defend the community in a class action lawsuit brought by former residents, an appeals court has ruled, upholding a lower court’s ruling.
Residents of Lake Pointe Assisted Living in Lake Waccamaw, NC, filed a class action suit against the community and two of its administrators in November 2018, shortly after the state closed the community and relocated residents. The suit alleged breach of contract, negligence and violation of the North Carolina Unfair Trade Practices Act.
Wisconsin-based Church Mutual, which issued primary and umbrella policies for Lake Pointe, sued the community and its owner / operators, Tony and Edith Bigler, and residents in a class action suit in U.S. District Court in Greenville, NC, in 2020. The insurer sought a declaratory judgment against defending or indemnifying the community or its officers.
The district court ruled against the insurer. Tuesday, the 4th U.S. Circuit Court of Appeals in Richmond, VA, upheld that ruling.
The appellate court found that Lake Point’s failure to comply with resident rights requirements under state or federal law was a “professional healthcare incident” that triggered coverage.
The court also concluded that state law “regulates the quality of food adult care homes serve and the amount of activities they provide,” which the panel considered a “professional healthcare incident” for which Church Mutual had a duty to provide a defense.
License suspended in 2018
The North Carolina Division of Health Service Regulation, a division of the state Department of Health and Human Services, summarily suspended the license of the community in October 2018 after an investigation found “evidence of neglect and failure to protect residents from potential harm that presents an imminent danger to the health and welfare of residents in the home,” according to WECT News 6.
The suspension was based on violations related to fire alarm systems, training on care of residents living with diabetes, personal care and supervision, healthcare, resident rights, medication administration, controlled substances, infection prevention requirements, and medication aide training and competency.
According to the division, Lake Pointe was fined $17,800 in 2019 for failing to ensure that the floors in the community hallways, activity room, dining room and resident rooms were kept safe and free of hazards. The community was fined an additional $7,000 for failing to ensure that the healthcare needs of residents were met.
The residents’ class action suit alleged that the community was understaffed, did not serve nutritious meals, did not provide activities, and generally failed to comply with laws governing the operating of a licensed adult care home or an assisted living residence. The lawsuit also alleged that the community made false representations in marketing brochures and contracts “knowing they could not fulfill their promises to residents and that these actions were driven by greed to increase profit margins.”
An attorney for Lake Pointe did not respond to requests for comment from McKnight’s Senior Living by the production deadline.
Springpoint Senior Living also recently filed a lawsuit against its insurance companies for reversing course on a previous decision to pay the provider’s defense claims in a class action suit.
