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Follow the Money Trail- Holding Corporate Owners of RCFEs Directly Liable as Licensees

By Karman Ratliff

Many Residential Care Facilities for the Elderly (RCFEs) in the State of California are small and are owned and operated by individuals or small businesses. RCFEs in California are not required to maintain liability insurance, which can cause even the best liability case to collapse because there is no one for your clients to collect from. Because of this, it is important to name the individual owners, as well as the corporation, LLC or other entity, as defendants. With ownership comes responsibility.

An RCFE’s facility license, issued by the California Department of Social Services, Community Care Licensing Division, will designate an individual or entity as the licensee of the facility. In general, where the licensee is a corporation, CCLD requires that a person or persons (often the chief executive officer, board members and/or officers of the corporation) be designated in the application as authorized to act on behalf of the corporation.

In cases against independent RCFEs or facilities owned by small chains, when the issue of inadequate coverage arises, the practitioner must follow the money trail and hold corporate owners and/or officers of RCFEs directly liable based on their duties as licensees. Title 22 of the California Code of Regulations sets forth specific obligations for licensees, and the violation of these regulations can be used to show that the licensees are liable based on a “negligence per se” theory.1

While the level of licensee’s involvement in the actual operations of the facility may vary greatly, Title 22 places obligations on the licensee which allow for liability regardless of the level of involvement. 22 C.C.R. §87205(a) requires that the licensee of a facility “shall exercise general supervision over the affairs of the licensed facility and establish policies concerning its operation in conformance with these regulations and the welfare of the individuals it serves.” Subsection (b) requires that, if the licensee is a corporation or association, “the governing body shall be active, and functioning in order to assure accountability.”

Being the licensee and/or owner of an RCFE comes with the obligation to know and understand the internal operations of the facility, the rules that the facility must abide by, and the qualifications of the administration and staff that they put into place to provide care to elderly and demented residents.

Under Title 22, the owners of a licensee corporation are directly responsible for what goes on at the facility, as they make decisions regarding who to put in charge at the facility, make decisions regarding marketing strategies, and make decisions regarding the allocation of the facility’s financial resources.

Code of Regulations Sections 87456 and 87457 require that the licensee of an RCFE is also responsible for assessing a resident to determine his or her needs by conducting a pre-admission appraisal which assesses the resident’s individual service needs and includes “at a minimum, an evaluation of the prospective resident’s functional capabilities, mental condition…” The licensee is also responsible for communicating those care needs to the staff in writing. This requirement is mandated because this is the only way for the staff that are responsible for providing the care to know exactly what type of care each resident needs. Title 22 puts the onus on the licensee of the facility to complete the appraisal, and though the actual task of conducting the appraisal may be delegated to the Administrator, the responsibility for ensuring the appraisal is done cannot be delegated.

Section 87405 of Title 22 requires that the Administrator of an RCFE meet certain requirements, including having knowledge of applicable laws, rules and regulations, and that the Administrator is responsible for operating the facility in accordance with the regulations, policies and procedures and the budget. Under this provision, the Administrator must also report to the licensee and ensure the provision of services to residents as determined necessary in the pre-admission appraisal.

Title 22 provides that individuals or small corporations that are the licensees of RCFEs in California cannot claim ignorance as an excuse for not knowing, or not following, the law. Being a licensee comes with the obligation that they know what was required at the facility, and the obligation to make sure that the requirements of Title 22 are carried out.

1See California Code of Regulations, Title 22, Div. 6, Chapter 8 for regulations governing RCFEs.