Nursing Home Patient Trust Bond Claims Guide

A Patient Trust Fund Bond is required of assisted living facilities, nursing homes, and other long-term care facilities that offer to manage patient or resident funds in many states. 

This type of surety bond provides a financial assurance to the state regulator (obligee) that all applicable license regulations will be upheld by the nursing home or assisted living facility (principal) when managing a patient’s or resident's funds. Should mismanagement of funds or property occur, the bond may act as a means of restitution to the damaged party. 

As a direct provider of Patient Trust Fund Bonds, Jet Insurance Company is legally obligated to pay out claims that are determined to be valid. However, one of our main goals as Jet is to protect our customers from baseless bond claims and to give them the tools they need to ensure a license violation never occurs in the first place. 

This surety bond goes by a few different names (which are listed below), but to make things easier, we will simply refer to it as the Patient Trust Fund Bond in this guide. 

• Nursing Home Patient Trust Fund Bond
• Health Facility Patient Trust Fund Bond
• Long-Term Care Facility Resident Fund Bond
• Assisted Living Facility Resident Fund Bond
• Resident’s Trust Fund Bond
• Nursing Facility Resident's Fund Bond
• Nursing Home Bond (Patient or Resident Trust Fund)

How to Steer Clear of a Claim

License obligations and regulations to uphold/follow as a nursing home or long-term care facility will depend on what state your business resides in. With this in mind, the Jet team has listed below some of the most common actions that can lead to a claim on a Patient Trust Fund Bond:

• Embezzling patient’s funds
• Using patient’s funds without consent of patient or patient’s representative
• Negligence (e.g. failing to provide reports of all activity within the resident’s account)
• Forcing a patient to deposit their personal funds/property with the facility
• Failure to credit all interest earned on a patient’s trust fund
• Disbursing funds to anyone without the consent of the resident or their representative
• Not providing the patient access to their funds or property when requested
• Commingling resident’s trust funds with any other account (an accounting system is required to ensure full and separate accounting of each resident’s personal funds)
• Failing to manage a patient’s funds as they wish

Surety Bond Claim Process

Who Can File a Claim on a Patient Trust Fund Bond?

If a patient’s funds or property are mismanaged, only the damaged resident or their representative can pursue action upon the Patient Trust Fund Bond. 

In most cases, a formal complaint would need to first be filed with the state regulator that manages the nursing home or long-term care facility’s license. If the complaint is found to be valid AND the owner of the facility refuses or is unable to resolve the problem through immediate payment, the state regulator can either file an official bond claim on behalf of the damaged party or recommend the claimant to take civil action which can result in a bond claim. 

Are There Limits to Claim Filings?

Yes, bond claims are limited in two ways: how much can be paid out by the surety provider and when a claim may actually be filed.

The amount of liability that is covered by a surety bond is represented by its limit (i.e. dollar amount). Patient Trust Fund Bonds are typically required to have a limit that is based on the trust fund amount being managed by the nursing home or long-term care facility. The state regulator will provide the license applicant with information on how to calculate the necessary bond limit within the license application or in the state statutes. 

As for when a claim may be filed upon the Patient Trust Fund Bond, this can occur at any point throughout the duration of the bond term, as well as during the cancellation period of 30 or 60 days (whatever is stated on the actual bond form). However, once the liability period officially ends, a claim may not be filed against the licensee’s bond. 

So How Would a Patient Trust Fund Bond Claim Work?

Let’s use an example:

Happy Horizons Nursing Facility is located in Dayton, Ohio, and provides its residents with trust fund management services. Sharlene has been a resident of the facility for five years now and allows the nursing facility to manage her funds and personal property. Unfortunately, Sharlene’s dementia diagnosis is progressing, so her son Andrew has decided to move her into a long-term care nursing home that is closer to his home. Acting as his mother’s representative, Andrew asks the nursing facility to transfer over Sharlene’s funds and personal property to him once she vacates the facility. 

Complaint

It has been a few months since Andrew moved Sharlene out of Happy Horizons Nursing Facility, but he has not received his mother’s funds or property, let alone word on what is going on after trying to contact the owner numerous times. Because of this, Andrew has decided to file an official complaint with the Ohio Department of Health, Bureau of Survey and Certification Complaint Unit. 

Investigation

Once the Department receives the complaint, an investigation into Andrew’s allegations and Happy Horizons Nursing Facility begins. Happy Horizons is contacted and further information and documentation regarding Sharlene’s account is requested. 

Unfortunately for the owner of the nursing facility, it has become clear that they failed to maintain a proper accounting system—Sharlene’s funds were commingled with another resident’s account which has resulted in the funds being mismanaged, and therefore, unavailable. 

The Department concludes its investigation into the complaint and orders Happy Horizons Nursing Facility to pay Andrew what is owed regarding his mother’s funds. Happy Horizons is unwilling to fulfill this request because they believe now, thanks to poor records, that no money is due to Andrew. Because of this, the Department proceeds with filing a claim on the licensee’s Nursing Facility Residents Fund Bond on behalf of Andrew and Sharlene. An official claim notice is sent to the surety provider, Jet.

As soon as Jet receives the claim notice, contact is made with the principal (owner of the nursing facility), and all available information and documentation regarding the alleged license violation are requested so that we may begin our own investigation into the matter. 

Restitution

It becomes pretty clear to the Jet team that Happy Horizons Nursing Facility has mismanaged Sharlene’s funds. The claim is deemed justified and funds from Michael’s Nursing Facility Residents Fund Bond are sent to the Ohio Department of Health and will cover what is owed to Sharlene. 

Indemnification

Once Jet has fulfilled the claim payment due to the Department, Happy Horizons is then expected to reimburse Jet Insurance Company for the bond funds that were used to cover what was rightfully owed to Sharlene (this is a common mandate as all surety companies require reimbursement from a principal for claim payouts). Surety bonds, unlike insurance, must be reimbursed as they cover acts of negligence, dishonesty and unlawfulness.

An omission of this requirement can lead to difficulties for Happy Horizons to obtain future Nursing Facility Residents Fund Bonds to manage other patients accounts, as well as general nursing facility bonds that are required for the licensure. 

It is important to note that laws vary in each state when it comes to assisted living facilities, nursing homes, and other long-term care facilities, so Jet recommends reading through the license regulations that apply to your business’s location. Take a look at the chart below for further information.