Your building is priced by its courthouse

An operator with four buildings in one metropolitan area receives one rate and reads it as a judgment on the operation. Frequently it is mostly a judgment on geography, and specifically on which courthouse each building sits in.

The mechanism, which is not mysterious

Claim value in senior care is set by three things: the injury, the quality of the documentary record, and the venue. The first two are familiar. The third does most of the work that surprises people.

Venue operates through mechanisms rather than atmosphere, and the mechanisms are readable.

A state with a fee-shifting resident rights statute makes claims economical to bring that would be declined elsewhere. That produces frequency, which shows up as a longer list of moderate claims and which consumes annual aggregates rather than per-occurrence limits.

A state with no statutory ceiling on noneconomic damages leaves the top of the distribution open. That produces severity, which is what excess towers are for.

A state that places nursing home claims inside its medical malpractice framework brings procedural gates and damage limits with it, and the fight becomes about characterization rather than about the facts.

A pre-suit process or a review panel front-loads defense spend by months or years, which on a policy where defense erodes the limit consumes the limit before any settlement conversation begins.

Then county-level factors sit on top of state law: an active complex litigation docket that holds trial dates, a local plaintiff bar that does nothing else, venue rules that determine whether a suburban facility can be tried in a city.

What this means for a portfolio

Two consequences, and operators usually notice neither.

The first is that a portfolio spanning several venues is priced against the worst of them, because the underwriter is pricing the tail and the tail lives in one or two buildings. The good buildings subsidize the difficult ones. That is not unfair, but it is worth knowing, because it means the rate is not feedback on the whole operation.

The second is that a portfolio spanning a state line is two portfolios. The clearest example is a metropolitan market with a border running through it, where an operator can hold four communities under two entirely different bodies of law, competing for the same residents and the same staff. A program built as though it is one market will be wrong on one side of the line, and the usual error is a tower set years ago under a damages cap that no longer applies.

What to do with the information

Present the portfolio by venue, not by market. An underwriter shown four communities in one metro area without a state and county breakdown will price all of them at the more severe assumption. Break them out and let the better buildings be better buildings.

Set the limit against the worst venue you operate in, not against your own settlement history. Settlement history is a lagging measure that reflects only the claims that resolved, and in venues where values have moved it is systematically low.

Push the abuse and neglect sublimit hardest in the states where the statutory route is the default. In a fee-shifting state the statutory claim is what gets pleaded, and if your policy treats statutory neglect as an abuse endorsement matter, that sublimit is the real limit for the claim type you will actually see.

Buy per-location aggregates in frequency venues. A shared annual aggregate across several buildings means one building can consume the protection for all of them, and in a high-frequency county that is the most likely way a portfolio runs out of limit.

Retain defense counsel who try cases in that specific courthouse. Where you control counsel inside the retention, this is your decision, and venue-specific experience is worth more here than firm size.

The uncomfortable part

Almost none of this is within an operator control. You cannot move a building, and the statute is the statute.

What is within your control is the structure you buy against it, and the documentary record you build for it. Those two variables decide where you sit relative to other operators in the same courthouse, and over three or four renewals that difference compounds.

The operators who do worst are not the ones in difficult venues. They are the ones in difficult venues carrying a program designed for an easy one, usually because nobody ever told them the distinction existed.