SIDEBAR: Illinois Appellate Court, Fourth District, Issues Highly Favorable Decision For Insurance And Defense Industry Regarding The Enforcement Of Arbitration Provisions

By Melinda S. Kollross

The recent published decision in Mason v. St. Vincent’s Home, Inc., 2022 IL App (4th) 210458, 2022 Ill. App. LEXIS 43, provides mandatory precedent in Illinois and persuasive precedent elsewhere for the insurance and defense industry to enforce arbitration provisions, especially in a nursing home or long-term care facility context.

Facts

Plaintiff sought to have the decedent admitted to defendants’ nursing home on December 11, 2018, and in connection with having her admitted, plaintiff signed numerous documents including an admissions agreement, which listed 12 required documents. Those documents included a contract for services and a power of attorney addendum. The contract for services provided that in the event of the decedent’s death, the contract terminated automatically. The contract for services also contained an arbitration clause governed by the Federal Arbitration Act and covered any claim related to the quality of the healthcare services existing or arising between the decedent and defendants. Plaintiff also signed a power of attorney addendum on December 11, 2018, that he had the power of attorney for his mother for healthcare. Decedent was a resident from December 12, 2018, thru the date of her death on October 3, 2019.

Plaintiff brought a wrongful death, negligence, and Nursing Home Care Act (Care Act) action for injuries the decedent allegedly suffered while in the care of defendants at the nursing home. Defendants moved to compel arbitration. The trial court separated the claims, staying proceedings on the wrongful death claim and compelling arbitration on the negligence and Care Act claims.

Plaintiff appealed raising a variety of arguments to invalidate the arbitration clause, but the Appellate Court rejected each one of plaintiff’s contentions.

Analysis

Standard of Review

Plaintiff initially argued that the entire trial court decision was subject to de novo review, meaning the appellate court could substitute its judgment for the trial court. The Appellate Court rejected that contention, holding that a de novo standard of review applied only to contract construction and whether the arbitration provision was unconscionable; the rest of the trial court’s decision to compel arbitration could only be reviewed for an abuse of discretion because the trial court came to its conclusion upon a review of evidentiary materials which led it to make certain fact findings supporting arbitration.

Unconscionability

Plaintiff began his assault on the arbitration clause by claiming it was procedurally and substantively unconscionable. The Appellate Court rejected those claims, first finding that the clause was not procedurally unconscionable because it was in its own section of the contract and clearly labeled “ARBITRATION;” it was not hidden in the contract and used straightforward language that the parties waived the right to a jury trial; and the circumstances of the signing did not suggest coercion or deception. As to substantive unconscionability, the Court found that the clause applied to a whole gamut of claims, such that it could not be considered narrow in scope as plaintiff contended. According to the Court, the only claims exempted from the arbitration provision were ones subject to administrative agency proceedings, so that the provision was not one sided as plaintiff claimed.

Authority to Execute

Plaintiff also, rather desperately, attacked his own authority to execute the contract for his mother, claiming he did not have a power of attorney at the time of execution. But the Appellate Court found that there was sufficient evidence in the record showing that plaintiff did have a valid power of attorney, such that the trial court could not be said to have abused its discretion in holding that plaintiff had the requisite authority to execute the contract containing the arbitration provision.

Contract Termination Upon Death

Plaintiff also sought to invalidate the arbitration clause by arguing that the nursing home contract, which included the arbitration clause, terminated by its own terms upon decedent’s death. Plaintiff asserted this had to be the case absent any “survival” language in the contract holding that the arbitration provision remained in effect and applied to claims that had accrued before decedent’s death in an action brought after death. The Appellate Court was not impressed with plaintiff’s argument. The Court found that Carter v. SSC Odin Operating Co., 2012 IL 113204, 976 N.E.2d 344, was instructive on this point because there, the Illinois Supreme Court explained that a Care Act claim that had accrued prior to a decedent’s death and was brought in a Survival action after death was subject to arbitration. While the facts in Carter did not suggest the arbitration agreement was part of another contract with a termination upon death clause like the one in this case, the Appellate Court did not find that controlling. Instead, the Court found it significant that, even with a termination upon death clause, the contract including the arbitration provision would still have been valid when the cause of action accrued, and further, that the language of the arbitration clause did not suggest it was inapplicable to claims that accrued before the decedent’s death but were brought after death. Thus, plaintiff here was bound to arbitrate the claims brought pursuant to the Survival Act.

Learning Points: Clausen Miller partner Kathleen Klein and associate Vanessa Mannings won the order compelling arbitration in the trial court. I briefed and argued Mason to the Illinois Appellate Court. We are pleased to deliver this important decision to our friends in the insurance and defense industry.

These are my three “takeaways” on Mason’s precedential importance:

1.   Mason directly holds that an arbitration provision in a nursing home contract containing a termination upon death clause requires arbitration of claims brought against the nursing home pursuant to the Survival Act. This answer had been suggested in Carter, 2012 IL 113204, 976 N.E.2d 344, but not directly answered. The Mason decision now provides that direct answer in favor of arbitration.

2.   Mason contains an extensive discussion and analysis concerning alleged procedural and substantive unconscionability regarding an arbitration provision in a nursing home admittance/residency contract. The opinion explains and clarifies Illinois law defining acceptable content and procedure for achieving enforceable arbitration provisions, and thus will be useful to those drafting, executing, evaluating, and litigating arbitration provisions in Illinois.

3.   Mason explains the law concerning the proper standard of review where a trial court makes factual findings in granting a motion to compel arbitration. Mason makes clear that where the trial court has considered supporting materials and made factual determinations in granting the motion to compel arbitration, a reviewing court should only review the decision to compel arbitration for an abuse of discretion.