Jake from State Farm…you might see an increase in business very soon.

For the third consecutive year, Missouri’s legislature has a bill in committee about nursing home patient abuse, neglect, and wrongful death.  Similar to those proposed in prior years, the 2026 version (SB 910) includes additional communication and reporting requirements of the state’s Department of Health and Senior Services, and a reclassification of patient abuse from a class A misdemeanor to class E felony.

These features shouldn’t get people worked up.  It’s not OK to hurt an old, disabled, or vulnerable person.

SB 910, however, would require nursing homes to carry a minimum of $1 million in liability insurance coverage for the acts committed against their patients. 

This wrinkle has nursing home people in a twist.  Industry talking heads claim that mandatory liability insurance coverage would cause premiums to “skyrocket” and hurt “family-owned operators.”  Are these remarks code for, “OMG, we don’t carry this insurance today!”?

While it’s common knowledge that auto, home, health, and homeowner mortgage (aka – PMI) insurance is almost universally required by law, or condition, most states do not require nursing home licensees (or operators) to carry professional liability insurance.

Right…do not.  And after hours of due diligence before writing this sentence, I can attest with best effort provided that a Medicare provider agreement does not hold a licensee to this requirement, and with certainty that proof of coverage was neither requested nor reviewed in the context of meeting state and federal survey requirements.

The latter was a true “never” event.  For me, and many of my colleagues.

You’d think that professional and general liability coverage would be required of every licensee operating a nursing home in order to participate in the Medicare and Medicaid programs, right?

Nope.

If a newly-licensed sixteen year-old kid buys a car with money saved from shagging golf balls or babysitting has to buy insurance for their newly-acquired wheels, how is it that the federal and state programs that certify, license, regulate, and pay nursing homes don’t require this of those responsible for providing care for those unable to care for themselves?

It’s Ripley’s.  Believe it or Not!

Maybe you’d prefer insurance matters to rest with the nursing home’s licensee and their landlord?  OK, I’ll share a consulting experience which involved reviewing two leases, between one property company (PropCo) and two different licensees.

The first lease, between the PropCo and their own operating company (OpCo), required the licensee (OpCo) provide insurance coverage for fire, casualty (with extended coverage for malicious mischief and vandalism on real and personal property), public liability, and boiler explosion.

Another requirement of this lease was the OpCo carry business interruption insurance, in an amount equal to the sum of twelve (12) months base rent, taxes and assessments, and insurance premiums.  Any proceeds from claims filed for business interruption would be applied to rent, first, followed by taxes and assessments, and any repairing, rebuilding, restoring, or replacing required for the nursing home thereafter.

Here’s the part I liked best:

“If required by the Mortgagee, professional malpractice insurance in the amount reasonably (emphasis provided) established by the Lessee, but not less than $500,000 (or such greater amount required by the holder of any Mortgage)in the operations of its business.”

Translation: OpCo gets to decide what insurance coverage they should have based on the acts of its employees unless the lender specifies.  At a minimum, however, coverage should be at least $500,000.  No distinction between per occurrence and in the aggregate.

Hang on to the word “reasonably,” please.

The lease specified that required coverages could be secured from “a responsible company or companies approved by the Lessor, which approval will not be reasonably withheld.”

There it is again…reasonably.  Whatever that means.

Several years later, after the OpCo cratered operationally and financially, stiffing patients and their families from any chance of recovery due to patient care and leadership misfires, this same PropCo leased this same nursing home to an unrelated third-party licensee.  Coverage requirements were repeated for fire, casualty, public liability, boiler explosion, and business interruption insurance.

This time, however, the lease specified that all insurance be issued by a company with a B++ or higher rating from A.M. Best Company.

A little different than buying from Cousin Eddie…I mean, “a responsible company or companies approved by the Lessor.”

For professional malpractice insurance, this lease – for the same nursing home – was remarkably different, now with coverage limits not less than $1,000,000 per each occurrence, and $3,000,000 in the aggregate or any greater amount required by the lender.

This change from reasonably to a higher standard wasn’t driven by an awakening of the PropCo lessor.  Instead, it was driven by standards required by U.S. Department of Housing and Urban Development (HUD), which agreed to insure the mortgage on this home two years prior to execution of the second lease. 

In return for their financial commitment, HUD required that the definition of reasonable – the sweetheart deal-type language in the first lease – be changed to the $1,000,000/$3,000,000 requirement in the second.

Why?  It’s one of HUD’s rules.

In its Section II Production, Appendix 14.1, Professional Liability Insurance, (www.hud.gov) HUD requires it of “the legal entity that holds the license from the state permitting it to operate…and/or the entity responsible for the day-to-day operation of the facility and hands-on resident care (Operator).”

Under II (A) entitled, Who Requires PLI, this requirement further defines the Operator as:

“2.  The entity holds the provider agreements with third party payors (Medicare, Medicaid or private pay)”

Now, if Sherlock Holmes were sitting beside me, he wouldn’t have to spark up his pipe to deduce that HUD would only find this requirement necessary because others won’t.

If the agencies involved in issuing Medicare/Medicaid agreements and licenses to nursing homes and their operators were serious, they would adopt these same requirements, consistent with an existing standard created by another federal agency and holding nursing homes to an expectation – in principle – similar to that which applies to people who drive a car, truck or motorcycle, own a home, or breathe in oxygen. 

Today, all outward appearances indicate that this responsibility – at least for nursing homes not participating in HUD financing and mortgage insurance with their lenders – is left to the lenders themselves.

The terms of the first lease, shared earlier, would seem to validate this.

It’s worth noting that when things get tough in the world of OpCos, management companies or licensees, when the insurance market “goes hard,” resulting in higher premiums paid by nursing homes, or the losses associated with patient litigation is just too damn high, the age-old option bandied about to sustain financial performance – or sustain existence – is to operate without professional liability insurance coverage.

The industrial term is “Going Bare.”  And in the context of the first lease shared above, that was as close to going bare as I’ve seen in writing…unless the lender indicated otherwise.  And, candidly, I don’t know what the lender required of the mortgagee.

If Medicare and Medicaid provider agreements, and licensee qualifications, were revised to mirror HUD’s language on this item, everyone would know.  And any related shenanigans in motion, or contemplated, would cease.

Arguably, application of this standard would place limits on persons applying for or interested in becoming a licensee of a nursing home.  As a taxpaying baby boomer and industrial alumnus, I’d argue that if raising this standard disqualified people whose experience, history, liquidity, and creditworthiness, was on the fringe, it should be viewed as a good thing.

Missouri’s 2026 regular legislative session has the nursing home industry’s attention.  Mine, too.