Skilled Healthcare Faces $671 Million Judgment

Skilled Healthcare Group, Inc. (NYSE: SKH) reported that a jury in Humboldt County, California, returned a verdict against the company for a complaint filed more than four years ago.  The case, previously disclosed in SKH’s regulatory filings, is expected to be finalized in the coming weeks as the jury awarded the plaintiffs $613 million in statutory damages and $58 million in restitution. The jury is continuing deliberations to determine the punitive damages of the case. 

The jury assessed the maximum amount of damages allowed by California statute that mandates that nursing homes maintain 3.2 nursing hours per-patient per-day. The total damages were assessed at a rate of $500 per-patient per-day that the 22 nursing facilities involved in the suit were in violation of the law.


"We are deeply disappointed in the verdict, and continue to firmly believe that our facilities are appropriately staffed and that our caregivers work hard every day to provide the care and services our residents need and deserve," said Boyd Hendrickson, Chairman and Chief Executive Officer of Skilled Healthcare Group, Inc. "We strongly disagree with the outcome of this legal matter, and we intend to vigorously challenge it."

SKH plans to pursue various post-trial motion and possibly appeal the verdict.  In order to satisfy bonding requirements for a appealing a judgment, SKH would need to post 150% of the final judgment amount.  Skilled Healthcare announced that it has $94 million of borrowing capacity under its $100 million revolving credit facility. However, the Company’s ability to draw on its credit facility is limited by the covenants of that facility.  SKH also stated in the press release announcing the verdict that it’s primary professional liability insurance coverage has been exhausted for the policy year applicable to this case and that the excess insurance carrier issued its reservation of rights to preserve an assertion of non-coverage for this case due to the lack of any allegation of injury or harm to the plaintiffs.