Both types of facilities must be licensed under Residential Care Facility for the Elderly.  A 6-bed Board and Care RCFE is usually licensed to 6 residents in a residential home converted into a facility.  Most of 6-bed facilities are located in residential neighborhood and provide a more family and intimate setting. The term Assisted Living Facility (ALF) is generally relating to large commercial building with 10+ Beds, and average 50+ beds.  There are usually more recreational activities, staff, and services provided at these large Assisted Living Facilities.

Since Assisted Living Facility license falls under the RCFE section, it must comply with AB 1523 passed on July 1, 2015.  The bill requires a facility to have a liability insurance policy that maintain at least a million dollars ($1,000,000) per occurrence and three million dollars ($3,000,000) in total annual aggregate covering injury to residents and guests caused by the negligent acts or omissions to act of, or neglect by, the licensee or its employees.  In addition to AB 1523, a facility must maintain a current Workers’ Compensation insurance provide if W-2 employees are working.

Since Assisted Living Facilities are larger in size in commercial space, employees, and residents; an ALF should consider the commercial auto, commercial umbrella, employment practice liability, and employee benefits.  If your facility is transporting clients or having employees drive on the company’s behalf, a commercial auto insurance policy will protect you.  With a larger ALF business operations of 50+ beds, your exposure to claims are much higher, thus a commercial umbrella could provide additional policy limits of  $1 million to $10 million.  To help retain and reward good employees, consider provide employee benefits such as medical, dental and life insurance.  To help protect your facility from disgruntled employees consider Employer Practice Liability Insurance (EPLI).

From our experience, the common liability claims are on professional liability and abuse coverage claims.  When attorney files a claim on behalf of a family member or resident, the attorney focuses on how to get an easy settlement.  Professional liability is very difficult on defend because it is relating to negligent acts or omission of you or your caregiver which is broad in coverage.  Relating to employees, workers’ compensation claims and EPLI are common, especially, when an employee has been dismissed.

In both Commercial Liability and Workers’ Compensation Insurance, the best way to lower down your insurance cost would be preventing the loss from ever occurring in first place.  Most Commercial Liability and Workers’ Compensation claims are related to taking care of residents and injuries of employees. Proper procedures and trainings could address common liability claims and employee injuries. Besides prevent claims and minimize potential losses, the next best step would be working with a specialized broker to compare and negotiate insurance rates on your behalf.

The best insurance carrier would be an admitted insurance carrier in the state your facility is located, written on occurrence form, broad in definitions and coverages, have legal and claim expenses outside the policy limits, and have at least an “A” on A.M. Best Rating. In California, a California admitted insurance carrier will give an assurance that the California Insurance Guarantee Association (CIGA) protects policyholders or insureds if the insurer becomes insolvent or bankrupt.

An occurrence form will provide protection beyond the policy expiration date unlike the claims-made policy which ends on the policy expiration date. When a policy is broad in definitions and coverage, then you will have more liability coverage and protection.  In most cases, an admitted insurance carrier will define Professional Liability broader and usually have both Physical and Sexual Abuse Coverage with higher policy limits. Lastly, when a claim is filed and you have the legal and claim expenses are outside the policy limits, this would preserve the policy limit for a lawsuit settlement. Admitted insurance carriers, in general, will be higher in insurance premium than non-admitted insurance carrier or risk retention group policies. By having the best coverage and protection, your liability claim should be well defended and settlement should be easier.