Limited Liability for a “Responsible Party”

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The Indiana Court of Appeals (Hutchinson v. Trilogy Health Services, LLC, Case No. 30A01-1307-SC-316) recently ruled that an individual was not necessarily liable for the outstanding amount due from a nursing facility resident despite having signed an admission agreement with a responsible party/agent provision.  The Court discussed important factors affecting the use and enforceability of such provisions under Indiana law.


Patient was admitted to the Health Facility on November 11, 2011.  Upon admission, Patient’s Daughter signed the Health Facility’s Move-In Agreement (“Agreement”) as a “Responsible Party/Agent.”  The Agreement states that the resident shall provide the Health Facility with a written agreement that authorizes the Responsible Party/Agent to manage, use, control or access her income, financial accounts, etc.  The Agreement further states that the Responsible Party/Agent agrees to pay for the resident’s services and supplies provided by the Health Facility.  Further, the Responsible Party/Agent agrees to pay to the Health Facility the full amount of the resident’s income and resources that the Responsible Party/Agent controls or accesses. The Health Facility initiated a lawsuit against Patient and Daughter (collectively, “Defendants”) for payment of services rendered to Patient during her stay at the Health Facility.  During the trial, Daughter testified that she was not Patient’s power of attorney and had no authority to manage her funds.  The trial court entered judgment in favor of the Health Facility in the amount of $2,610.87, plus court costs.  Daughter  appealed the judgment to the Indiana Court of Appeals (“Court”).

Court’s Opinion
The Court acknowledged that Congress has imposed limitations on family members being financially responsible for a family member’s care, and cited federal Medicare/Medicaid regulations that prohibit a nursing facility from requiring a guaranty as a condition of admission to a nursing facility.  The Court further noted that resident rights advocates have argued that responsible party/agent provisions contradict the intent of the foregoing federal statutes and should be declared unenforceable under Indiana law.  However, the Court also noted that there are federal statutes that permit a nursing facility to “require an individual, who has legal access to a resident’s income or resources available to pay for care in the facility, to sign a contract (without incurring personal financial liability) to provide payment from the resident’s income or resources for such care.”  42 U.S.C. §§ 1395i-3(c)(5)(B)(ii), 1396r(c)(5)(B)(ii); 42 C.F.R. § 483.12(d)(2). The Court decided that it did not need to address the fundamental legality of responsible party/agent provisions.  Instead, the Court found that there was no evidence showing that Daughter had power of attorney or other authority to manage or control her mother’s assets, and the Health Facility did not have any documentation indicating that Patient had delegated such authority to her Daughter.

Considerations from Court’s Opinion
While the Court of Appeals overturned the county court’s decision on evidentiary grounds, it is noteworthy that the Court raised the issue of whether such responsible party provisions can be used in a manner comparable to a guaranty.  Further, the Court revealed an interest in scrutinizing such arrangements to make sure that the responsible party is fully informed of such potential exposure and has the requisite legal documentation to be held liable for a resident’s obligations.
If you have any questions about this recent case or its implications for your operations, please contact Stacy Long (, David Jose (, or any other member of the Krieg DeVault Healthcare Practice Group.