Agent With Limited Power of Attorney Cannot Bind Principal to an Arbitration Agreement With Nursing Facility Unless Expressly or Apparently Authorized

In 1998 a woman signed a power of attorney naming her daughter as her agent. Upon admitting her mother to a long-term care facility in 2006, the daughter signed an arbitration agreement along with other documents as part of the admissions agreement. The mother spent the last months of her life at the long-term care facility.


The woman’s daughter, as executrix of her estate, sued the long-term care facility for negligence by the facility's staff and the facility’s management’s breach of statutes regulating the provision of nursing home services resulting in injuries to the woman and in her wrongful death. The defendants filed a motion to dismiss the complaint or to stay it pending arbitration, pursuant to the arbitration agreement.


The trial court denied the defendants’ motion because the daughter lacked the authority to bind her mother by signing the arbitration agreement and the long-term care facility had obtained the daughter’s signature on the agreement by wrongful means and without providing consideration. The plaintiffs appealed. The court of appeals reversed the trial court and held that the daughter’s signature on the arbitration agreement bound the mother.


The Supreme Court of Kentucky reversed the Court of Appeals, upheld the trial court, and remanded for further proceedings. The court explained that an agent does not have authority to bind his or her principal, as well as others, to an arbitration agreement presented with other documents upon the principal's admission to a long-term care facility. The agent in this case, the daughter, was not authorized to enter an optional arbitration agreement on the principal’s, her mother’s, behalf.


The power of attorney did not give the daughter universal authority. It was expressly limited in scope to the management of her property and financial affairs and to assuring that healthcare decisions could be made on her behalf. An optional nursing home arbitration agreement does not involve a financial decision within the authority of an agent authorized to manage his or her principal's property and finances. A court will not likely infer authority to settle claims and disputes where the power of attorney does not contain express authorization to settle claims and disputes or some such express authorization addressing dispute resolution.


The daughter did not have apparent authority to bind her mother to an arbitration agreement. Apparent authority arises from manifestations by the principal, not from the purported agent's manifestations of authority. The mother was incapacitated at the time of her admission and so could not have done anything to lead the defendants to believe that her daughter had more authority than the power of attorney said she had.


See: Ping v. Beverly Enterprises, Inc., 2012 WL 3631399 (Ky., August 23, 2012) (not designated for publication).