State Bar on Third-Party Guarantees Does Not Stop Nursing Home’s Claim Against Resident’s Daughters

A New Jersey appeals court rules that a state law preventing a nursing home from requiring a third-party guarantee of payment as a condition of admission does not bar a claim by a nursing home against the daughters of a resident who signed an admission agreement, pledging to apply for Medicaid on his behalf. Pine Brook Care Center v. D’Alessandro (N.J. Super. Ct., App. Div., Nos. A-3197-18T1, A-3271-18T1, A-3526-18T1, Nov. 23, 2020).

A court appointed Michael D'Alessandro’s three daughters as his guardians. Mr. D’Alessandro entered a nursing home, and his daughters assured the nursing home they were working on a Medicaid application. The daughters signed an admission agreement, agreeing to apply for Medicaid on his behalf and to pay for the nursing home out of Mr. D’Alessandro’s funds. Mr. D’Alessandro was approved for Medicaid benefits two years after entering the nursing home.

The nursing home sued Mr. D’Alessandro and his daughters, alleging that the daughters breached the agreement by failing to pay the nursing home from Mr. D’Alessandro’s assets and failing to apply for Medicaid benefits. The trial court granted the daughters summary judgment, holding that New Jersey law prevented the nursing home’s claims. State law prohibits a nursing home from requiring a third-party guarantee of payment to a facility as a condition of admission except when the individual has access to the resident’s income and resources. The nursing home appealed.

The New Jersey Superior Court, Appellate Division, reverses, holding that state law does not bar the nursing home’s claims. According to the court, the state law merely “prohibits a nursing home from requiring a third-party guarantee of payment—including direct agreements to pay—as a condition of a resident's admission or continued residence in a facility” and nothing else. The court rules that the law “does not prohibit a nursing home from requiring that an individual enter into an agreement other than a guarantee of payment, and the statute does not immunize individuals from personal liability based on contractual obligations undertaken that are not proscribed by [state law] or that are founded on alleged tortious conduct.” The court notes that the daughters can still assert “as a defense that one or more of [the nursing home’s] claims should fail as a matter of law because they are founded on an agreement or agreements that are unenforceable” under state law.

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