What happens to insurance at a senior care change of ownership?

Care delivered before closing can produce a lawsuit filed years after it. The seller claims-made policy stops responding when it expires. The buyer new policy has a retroactive date, and if that date is the closing date, it does not reach back.

So unless something is done deliberately, there is a period of operations, sometimes years of it, that no policy answers for. Whether the buyer or the seller ends up carrying that is a deal term, and the party that has not read this clause tends to lose that negotiation.

The seller buys tail coverage, formally an extended reporting period, on their expiring program. This is the cleanest solution. Read the tail provision on the seller policy for its length, the premium multiplier, and whether the purchase right survives the transaction.

The buyer takes prior acts coverage, with a retroactive date matched to the seller first continuous coverage. This puts the historic exposure on the buyer program and needs to be priced accordingly.

The parties agree an indemnity with an escrow behind it. This is the weakest of the three, because it depends on the seller solvency and cooperation years later, and it does not provide a defense.

Five years of loss runs, and read the development rather than the totals. Copies of the actual policies, not certificates, for the same period, so you can see the retroactive dates, the abuse sublimits, and whether defense was inside the limit.

The survey history and any open plans of correction, since those predict both regulatory and litigation exposure and are read by underwriters. Any open claims and their current reserves. And the seller current insurance exhibit obligations under any lease or loan being assumed.

A change of ownership is a licensure event. The buyer needs its own license or an approved transfer, and the licensing agency will require evidence of insurance in the buyer name before or at the change.

The timing problem is that insurance markets want to know the license is coming and the licensing agency wants to know the insurance is in place. Start both processes early and keep them talking to each other, because a closing that slips because a certificate could not be issued in the right entity name is an avoidable and expensive delay.

The same applies to lender and landlord consents: an assumption of a HUD-insured loan or a REIT lease brings its own insurance requirement schedule that the buyer program has to satisfy from day one.

Confirm every acquired entity and building is actually named on the policy and on any per location aggregate endorsement, rather than assumed to be covered because the deal closed. Confirm the additional insured and waiver endorsements required by any assumed lease or loan are attached in the correct entity names.

And re-verify the retroactive date on the new program against what was agreed in the purchase documents. The gap between what the deal contemplated and what the policy says is discovered most cheaply in the first quarter, not at the first claim.