Thursday, May 9, 2013

Hospital Arbitration Agreement signed by Mother is Unenforceable against Daughter

Can a mother enter into an agreement with a hospital that limits her daughter’s rights to sue the hospital for negligent care? What if the mother doesn’t have power of attorney or guardianship authority? That issue was the subject of a recently decided Pennsylvania appeals court case, Walton v. Johnson, 2013 Pa. Super. 108 (May 7, 2013).
Lakeysha Walton was comatose when she was admitted to Kindred Hospital in Philadelphia. A friend signed the original admission agreement. Two weeks later the hospital asked Lakeysha’s mother, Nancy Walton, to sign additional paperwork regarding her daughter’s admission. That added paperwork included a Voluntary Alternative Dispute Resolution Agreement (“ADR agreement”) along with various other hospital forms. 
Nancy signed the forms including the ADR agreement which required that claims against the facility be submitted to arbitration.
Lakeysha had never given her mother power of attorney or any other authority to act on her behalf.
Two years later, Lakeysha filed a court suit against Kindred Hospital. Kindred objected to the suit and claimed that the case should go to arbitration because of the ADR agreement. Kindred argued that Nancy was acting as Lakeysha’s agent when she signed the agreement to arbitrate disputes.
The trial court rejected Kindred’s objection and held that the ADR agreement was unenforceable under these facts. On appeal, the Pennsylvania Superior Court (an intermediate appellate court) agrees and affirms the trial court’s ruling.
The Ways an Agency Relationship can be Established
The Superior Court discusses four different legal grounds under which Nancy could be deemed to have been acting as agent for her daughter:
1.   Express authority exists where the principal deliberately and specifically grants authority to the agent;
2.   Implied authority exists in situations where the agent’s actions are proper, usual and necessary to carry out express agency;
3.   Apparent agency exists where the principal by word or conduct causes people with whom the alleged agent deals to believe that the principal has granted the agent authority to act;
4.   Authority by estoppel occurs when the principal fails to take reasonable steps to disavow the third party of their belief that the purported agent was authorized to act.  
The Court found that none of these grounds were present given the facts in this case. It noted that the party asserting the existence of an agency relationship bears the burden of proving it by a fair preponderance of the evidence. “The relationship of agency cannot be inferred from mere relationship or family ties unattended by conditions, acts or conduct clearly implying an agency.” Sidle v. Kaufman, 29A.2d77, 81 (Pa. 1942). Thus, the ADR agreement was unenforceable. 
Powers of Attorney and Health Care Representatives
While the patient/plaintiff prevailed on these facts, the Walton decision raises some concerns for lawyers drafting powers of attorney for clients who want to avoid arbitration agreements.
  • Many elder law attorneys include a statement in powers of attorney that the agent has no authority to enter into ADR agreements. If desired, this type of clause should probably be included in both financial and health care powers of attorney.
  • But Walton suggests that there are instances where an agent can bind a principal even though the power of attorney does not authorize the agent to do so. In cases of apparent agency and authority by estoppel a “no ADR” clause (especially one hidden away in the boilerplate) may not be sufficient to avoid arbitration.  Can the lawyer draft a “No ADR” document that limits the potential for its future negation due to the conduct of the principal?
  • The Walton opinion does not discuss the authority that resides in a health care representative. It appears this issue was not raised by the parties. But a Pennsylvania statute gives at least some authority to default health care representatives who become authorized to act for incompetent persons, like Lakeysha, who have no other decision-makers. Does this Pennsylvania statute (and similar laws in other states) give a representative the authority to enter into an ADR agreement? (See my comments below).
Implications of Health Care Agents and Representatives Act
Nancy Walton may have been the default health care representative for her daughter under the Pennsylvania Health Care Agents and Representatives Act. Section 5461 of that statute provides that a default health care representative (spouse, adult child, parent, etc.) may make health care decisions for an incompetent individual.
Did the mother have authority to enter into the ADR agreement in her capacity as her daughter’s health care representative?
Section 5461(c) of Pennsylvania’s Health Care Agents and Representatives Act provides that a representative has the same authority as an agent as set out in Section 5456.  
§5461(c) Extent of authority of health care representative.--Except as set forth in section 5462(c)(1) (relating to duties of attending physician and health care provider), the authority and the decision-making process of a health care representative shall be the same as provided for a health care agent in section 5456 (relating to authority of health care agent) and 5460(c) (relating to relation of health care agent to court-appointed guardian and other agents). 
§5456 (a) Extent of authority.--Except as expressly provided otherwise in a health care power of attorney and subject to subsection (b) and section 5460 (relating to relation of health care agent to court-appointed guardian and other agents), a health care agent shall have the authority to make any health care decision and to exercise any right and power regarding the principal's care, custody and health care treatment that the principal could have made and exercised. The health care agent's authority may extend beyond the principal's death to make anatomical gifts, dispose of the remains and consent to autopsies. [Emphasis added]
Is this authority broad enough to authorize the execution of an enforceable ADR agreement by a health care representative? It is an important question, since family members are often asked to sign such an agreement when they admit an elder to a hospital or nursing home. Given the stress of the admissions process and a flood of paperwork, it seems unrealistic to expect that they will know what they are signing. 
Are these agreements binding if the family member is health care representative for the elder? What if the family member is power of attorney for the elder but the document says nothing about ADR agreements? We will have to wait for other cases to get more answers.  
Further Information

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