FEW RISKS are tougher to insure than nursing homes. Indeed, here in Arkansas, just about all standard insurers have retreated from this niche, leaving it almost entirely in the hands of E&S markets. But for me, arranging insurance for nursing homes is practically a mission. By taking care of loved ones when no one in a family is able to do so, nursing homes provide an extremely important service to their communities. I've experienced this need in my own family, which is one reason I feel highly motivated to help these facilities.

I began working with nursing homes about eight years ago at an independent agency in Little Rock, which was later purchased by Brown & Brown. There, I worked with an elderly agent who had developed a book of such business. When he was no longer able to continuing serving that book, I ended up with it. Today, an account manager and I staff the nursing home department at Brown & Brown's Little Rock office. We have about 65 nursing-home clients. Nearly all of the facilities are in Arkansas, although my territory also includes Texas and Louisiana. Occasionally, I also broker business from local agents looking for an experienced agent to work with on a client submission.

Prospecting

One way we promote ourselves is through our participation in the Arkansas Health Care Association, which represents perhaps 200 of the 240 or so nursing homes in the state. While we have not sought the association's endorsement–which could lead to expectations that we would arrange coverage for facilities regardless of their underwriting merits–our office is a member of the association, and we exhibit at its annual convention. Right now, many nursing homes in Arkansas are changing hands, which can present sales opportunities. My contacts at the association often can help me get me the names and phone numbers of the new owners.

For prospecting and other purposes, I frequently consult a nursing home directory published annually by the state Department of Human Services' Office of Long Term Care. It lists all nursing and intermediate-care facilities in the state. Among other information, it contains the names, addresses and often the phone numbers of the owners, as well as their percentage of ownership. Of course, it also contains contact information for the facilities themselves. Periodically, I go through the directory to determine which facilities have changed hands. Then I send the new owners a letter in which I set forth my credentials, mention our involvement in the Arkansas Health Care Association and ask for the opportunity to quote their insurance.

In the course of prospecting for business and qualifying accounts, I've also consulted a free Medicare Web site that can be used to compare individual nursing homes (www.medicare. gov/NHCompare/Home/asp). Another useful, nongovernmental site is www.Healthgrades.com. It costs $9.95 to buy a report from this online service. Additional reports ordered during the same Internet session are $2.95 each. Therefore, when I use the site to order a report on a prospect, I try at the same time to pick up reports for any renewals I have coming up.

Submissions

Every liability carrier has its own nursing-home application. A few give indications from other insurers' apps but require their own to be completed prior to binding. Among other things, the apps request information about the ratio of patients to nurses and other staff on each shift. Any losses larger than $10,000 must be explained in detail.

For submissions, underwriters want to see a facility's operating license, current financial statements and at least five years of currently valued loss runs; loss runs older than 90 days will not be accepted. An underwriter also usually wants a copy of a prospective insured's state survey. In Arkansas and other states, regulators inspect nursing homes annually, as well as after any complaint. A nursing home can be written up for a host of deficiencies, including backup generators that fail to start within 10 seconds and even loose floor tiles or a lack of fresh paint. Consequently, underwriters can get a lot of information about housekeeping and general maintenance from the surveys. Of course, the report also contains information about serious patient-care issues. The reports can be obtained from the nursing homes themselves, since they are required to post the survey reports where the public can view them–if not, the state will write them up for that as well.

Another important document is the plan of correction (POC). If the state survey uncovers problems, the nursing home has 30 days to submit a POC covering anything found to be out of compliance. If the state approves it, it will send the nursing home a compliance letter informing the facility that its plan has been accepted. Typically, both the POC and the compliance letter go into the submission.

Some underwriters also ask for a facility's Quality Indicator Profile, which is a report prepared by the U.S. Department of Health & Human Service's Health Care Financing Administration. (Any nursing home should be able to furnish its QIP to an agent upon request.) A QIP lists different incidents of concern, like falls and cases of decubitus (bed sores). The reports have five columns for each condition tracked. If there is a concern about a particular item, a flag will appear in the last column. This can make things a little too easy for some underwriters. Rather than really read and evaluate the report, they'll just count the flags. But the way the reports are structured, the same deficiency may, in essence, be flagged several times. When we see that's the case, we make sure the underwriter really understands what's in the profile–and is not just counting flags.

Coverage particulars

Most liability policies for nursing homes exclude coverage for punitive damages. Many also bar coverage for sexual abuse and molestation, or cover such exposures with a sublimit. Some markets have a buy-back option, where you can have the sexual abuse or molestation exclusion removed for, say, an additional 10% of the premium per exclusion.

Agents selling liability policies to nursing homes should check trigger provisions carefully. Some policies can be triggered by incidents. Thus, if an event that could lead to a loss is reported, any eventual claim will be covered, even if it doesn't arise for several years. Other policies may be triggered only by an actual demand for money or a trial.

It's also important to check a policy's definition of an incident, since wording in E&S policies can vary significantly. For example, a family's request for a patient's medical records, a possible signal of a future lawsuit, may or may not be considered an incident.

Some liability policies for nursing homes have deductibles, and others have self-insured retentions. It's important that a nursing home knows the difference, because with an SIR it's going to start receiving bills from the insurer the minute it spends a nickel on defense and until the SIR is satisfied. With a deductible, on the other hand, the carrier pays defense and judgment/settlement costs as they are incurred and takes out the deductible at the end of the process.

Of course, not all nursing homes buy liability insurance. While some states require facilities to carry general and professional liability insurance–even if only with a $25,000 limit or some other relatively low amount–Arkansas does not. Other than for workers compensation insurance, nursing homes in the state can go bare, and some do–even if they can qualify for coverage. Occasionally individually owned facilities, perhaps lacking in insurance and risk management sophistication, take that tack and decide to skip insurance for a year–sometimes with disastrous results.

Other nursing homes are just uninsurable. About four years ago in a facility that was my account, someone gave a resident a cigarette lighter. Using it, he caught himself on fire and died in his wheelchair. For the next three years, no market would touch that account, although lately an underwriter has expressed some interest in considering it, since the account took steps to prevent the recurrence of such incidents and has been claim-free since.

Because of adverse claims experience, all agents can offer some facilities is some sort of retrospective coverage, where they essentially post their own coverage limits with a carrier and get perhaps 10% of it back six months after the end of the policy period, if there have been no claims, and another 10% back after 18 months. Rarely, however, do nursing homes pursue such options, unless they're located in a state where coverage is mandated.

Occasionally nursing homes that can't–or won't–buy professional liability insurance still need premises liability coverage, generally to meet a mortgage or lease requirement. For such clients, we have access to a couple of markets that will write premises-only coverage. It will respond to such losses as slip-and-fall claims filed by nursing home visitors. Such coverage is expensive, reflecting the fact that many visitors are as elderly as the residents they come to see.

Risk management

I probably can count on one hand the nursing homes in Arkansas that haven't been sued. For such a litigation-prone class of business, risk management is essential. Many insurers build risk management right into their policies' premium. Part of what the insured buys, in essence, is an onsite risk management audit arranged by the insurer. If the insured does not comply with any recommendations the auditor makes, the insurer can cancel or nonrenew coverage.

Recently, as a strategy for getting underwriters to look at nursing homes that have problematic loss histories, I've asked the facilities to pay for risk-management surveys upfront. The fact that a nursing home has paid for a survey itself can indicate to an underwriter that the facility has a commitment to risk management.

What sort of problems might a risk management survey turn up? Here are a few examples I've seen:

• No credentialing program for physicians; i.e. the facility is not obtaining documentation that physicians visiting the premises to treat their patients have their own liability insurance.
• Elopement-risk assessments not completed on admissions. (At the time they are admitted, all nursing-home residents should be evaluated for their potential to wander away from the premises.)
• Lack of elopement drills, which are needed so everyone on the facility's staff will know what to do in event of an elopement.
• Lack of arbitration or mediation clauses in the admission agreement.
• Failure to assess all residents on a quarterly basis for their potential for falls, bed sores and restraint elimination. Falls are a huge source of claims in nursing homes. Plaintiffs attorneys also can make restraints look bad in a lawsuit. But often restraints are needed to prevent a resident from falling or otherwise being injured. In these cases, documentation of the necessity for restraints is critical.

Sound hiring procedures are another fundamental risk-management tool. State law requires a federal criminal background check for all employees–even the cooks. Employees who have not been a resident of the state for at least five years must have FBI checks as well. Of course, the facility must maintain records documenting these checks.

Market conditions