Giant Verdict Against Nursing Home Chain

EUREKA, Calif. (CN) - Skilled Healthcare Group, one of the largest nursing home chains in the country, has been ordered to pay $677 million for failing to keep its California nursing homes staffed adequately. And the punitive damages phase has yet to begin. The state jury verdict came after a 7-month trial, assessing the group for $619 million for Health Code violations and $58 million in restitution.

The jury levied the maximum damages under California law. The $677 million assessment many be a record for the health care industry, according to the Eureka Times-Standard.

Industry observers believe the company may be pushed into bankruptcy. The Wall Street Journal reported that the company must post 150 percent of the final judgment, pending appeal, and that Skilled Healthcare has $94 million in borrowing capacity.

Skilled Healthcare's primary coverage has been exhausted for the year, and even if it were not, the jury verdict far exceeds its policy limits, the Journal reported. It also cited analyst who predicted that the verdict could bring shareholder lawsuits.

Skilled Healthcare's stock price dropped by 75 percent this week, after the verdict, from $6.22 to $1.52 a share in a single day.

The company excess insurance carrier will not cover the award, citing "little allegation of injury or harm to the plaintiffs," according to the Eureka Times-Standard.

Humboldt County Superior Court Judge Bruce Watson is presiding over the case.

Skilled Healthcare operates 78 facilities in seven states, including 22 assisted-living facilities in California. All the California outlets are involved in the case, which involves 32,000 patients during 2003 to 2009. Five of the outlets are in Humboldt County, where the case was tried.

California law requires 3.2 nursing hours of direct patient care per day, and the jury found that Skilled Healthcare did not provide that.

The case was tried by Timothy Needham and Michael Crowley with Janssen, Malloy, Needham, Morrison, Reinholtsen & Crowley in Eureka; Michael Thamer of Callahan, Calif.; and Christopher Healey with Luce, Forward, Hamilton & Scripps of San Diego.

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