1. Nursing Home Professional Liability Insurance Crisis - An Update Ruth Kilduff CAS Annual Meeting November 9, 2002

2. State of the Market 1 or 2 insurers willing to quote all 50 states Rigorous underwriting Retentions 25K to 2MM no aggs Rate increases 100 to 1000% Claims Made Exclusions punitive damages, physical and sexual abuse State and financial covenant requirements for coverage

3. What Keeps Me Up at Night? Many Drug Errors at Nursing Homes Dosing mistakes are biggest concern, researchers say... Reuters BOSTON, Aug. 10 — An estimated 350,000 medication errors happen in U.S. nursing homes each year and more than half of them can be prevented, according to a study released on Thursday.

4. The Climate Graying of America Value on elders Fragmentation of families Insurers missed the boat Reimbursement ($4.25 hr) Least costly site of service Redefinition of the continuum

5. Independent Living Ranch style (single level) or condo style apartments Residents pay entrance fee Residents pay monthly rent Communal meals and activities Medical outpatient “wellness” services on premises No clinical or regulatory oversight No required or benchmark resident to FTE ratio

6. Assisted Living Studio or 1 bedroom without cooking facilities Resident needs assistance with 1 or more ADL’s (bathing, dressing, etc.) Resident pays monthly rent ($2,000 to 4,500) plus additional for level of care 1 RN oversight non licensed 24 x 7 Little, if any, regulation Generally 7 resident to 1 FTE ratio

7. Skilled Nursing Home 1, 2 or 3 beds per room 24 x 7 RN supervision Dependent on most ADL’s Private pay $5,000 to 7,200 month Medicaid rate $4.25/hr Second in regulation only to nuclear power. Annual turnover rate of staff 102% 1:1 resident to FTE ratio

8. Let’s compare our priorities Hyatt Wichita, KS - 303 rooms 300 employees Hyatt Coconut Point, FL - 456 rooms 600 employees Ritz, Boston - 193 rooms 300 employees How many ADL’s do you need help with?

9. Priorities Average Medicaid payment per hour for skilled nursing care - $4.25 Average payment per hour for dog walker - $22.50 ($7.50 per dog per 20 minute walk)

10. Very Large ALF Fla and Tx Exp PL GL 2nd yr CM 1.4MM Renewal 3.0MM Retentions from 250K aos 500K Fla Tx to 500K all states XS 10MM premium from 770K to 1.99MM

11. 50 SNF 5 ALF Pacific north with 10% California 1/3/15 claims made 1MM deposit 1.05% conversion factor LOC to the agg max premium on retro 15MM

12. Recent Renewal SNF 49 locations Some Fla exposure 2MM retention no aggregate Claims made 25MM limit Deposit premium 3.5MM Each loss above 2MM and 3.5MM paid $ for $ plus 4% to max of 22.5MM

13. Underwriters are looking at:  5 year loss history  Admission agreements  Staffing ratios  Discharge protocols  Cognitive assessments/ elopement prevention  Risk management programs