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Expense Ratio Requirements for Nursing Facilities and Other New Jersey Regulatory Developments Banner Image

Expense Ratio Requirements for Nursing Facilities and Other New Jersey Regulatory Developments

Month: October 2021

Expense Ratio Requirements for Nursing Facilities and Other New Jersey Regulatory Developments

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Connor Breza.

Adopted New Ratio Requirements for Nursing Facilities

On September 14, 2021, the Division of Medical Assistance and Health Services adopted new rules codified under N.J.A.C. 10:49A. N.J.A.C. 10:49A applies to nursing facility patient care ratio (“PCR”) requirements and establishes the expense ratio reporting and rebate requirements for nursing facilities that service Medicaid/NJ FamilyCare beneficiaries.

Under these new rules, nursing facilities will pay a rebate to the Department of Human Services (the "DHS")

in the event that less than 90 percent of the revenue received from the DHS and its contracted managed care organizations is used for the care of the entity’s individual beneficiaries. The first reporting period to calculate the rebate will be in fiscal year 2022.

It should be noted that under this new rule, facilities must submit their PCR report by the first day of the sixth month following the end of the applicable reporting year. Individuals who own multiple facilities must submit separate reports for each facility operated during the PCR reporting year. Similarly, owners of facilities that purchase another facility or have ownership of another facility transferred to them during a PCR reporting year, are responsible for submitting the information and reports for their newly acquired facilities, including for the parts of the PCR reporting year that was prior to their acquisition of the facility.

Proposed Continuous Quality Improvement Program for Pharmacies

The New Jersey State Board of Pharmacy (the "Board") is proposing a new rule under N.J.A.C. 13:39-1.9, to require each pharmacy permit holder and registered pharmacist-in-charge to implement a continuous quality improvement program (“CQI”) with the goal of improving detection, identification, and prevention of prescription errors.

The proposed rule sets the Board’s requirement for each pharmacy permit holder and registered pharmacist-in-charge to implement the CQI, as well as requirements for the pharmacy's policies and procedures manual with respect to the CQI. This proposed rule further provides that each licensee, registrant, and permit holder has a duty to cooperate with Board inquiries, inspections, or investigations.

The comment period for the proposed rule ends on November 19, 2021.

Adopted Reciprocity Rules for the Board of Psychological Examiners

In accordance with N.J.S.A. 45:1-7.5, which govern the standards for renewal, reinstatement, and reactivation of psychology licenses, as well as the ability for the Board of Psychological Examiners to issue licenses to out-of-state practitioners, the NJ Board of Psychological Examiners adopted new rules on September 14, 2021, following a lengthy notice and comment period beginning on February 18, 2020. This recent administrative action repealed and added certain provisions under N.J.A.C. 13:42-5.3 and 10.17, and 10.18, and amended certain other provisions under N.J.A.C. 13:42-9.3, 10.4, 10.18, and 11.4.

Among other things, the new rule codified under N.J.A.C. 13:42-5.3 allows the Board of Psychological Examiners to issue a license to an applicant, if the Board determines that the state in which the applicant is licensed has standards for licensure that are substantially equivalent to its own standards and the applicant has been practicing for at least two years within the five years prior to applying for a license in New Jersey. Furthermore, the new rule provides standards for determining if a licensee is in good standing and whether an examination is substantially similar to that required by the Board.

Additionally, this new rule further repeals and replaces N.J.A.C. 13:42-10.17 to incorporate the license renewal requirements under N.J.S.A. 45:1-7.1. The new language sets the requirements for notice to inactive licensees and clarifies the process for renewal. Section 10.18 further expands on the license reactivation process, including continuing professional education requirements and the potential for an examination to ensure the practitioner’s competency and safety.

Division of HIV, STD, and TB Services

The New Jersey Department of Health (the "DOH") Division of HIV, STD, and TB Services issued a proposed rule on September 7, 2021 seeking to amend N.J.A.C. 8:57 and 8:65, which govern the reporting requirements for AIDS and HIV. The purpose of the proposed rule, in part, is to recodify the existing N.J.A.C. 8:57-2 (Reporting of Acquired Immunodeficiency Syndrome and Infection with Human Immunodeficiency Virus), as a new N.J.A.C. 8:65 (HIV Infection Reporting), to reflect the administrative relocation of provision of HIV-related services from the DOH's Division of Epidemiology, Environmental and Occupational Health, to the Division of HIV, STD, and TB Services. The DOH further proposed certain amendments, repeals, and new rules to such sections.

The changes to Chapter 8:57 and subsequent amendments made under 8:65 are substantial. The DOH likewise provides a substantial recollection of the history of the rules and the rationale for why such changes are to be made. In sum, the proposed rule provides the requirements for reporting HIV infections in terms of the individuals, entities, and locations that must report, as well as the contents of the reports and penalties for non-compliance. The proposed rule also incorporated substantial resources and texts by reference.

The comment period for the proposed rule ends on November 6, 2021.

Fifth Circuit Affirms Dismissal in Overdraft Charges Dispute

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The United States Court of Appeals for the Fifth Circuit recently affirmed a lower court’s dismissal in a suit in which a customer of a bank challenged the bank’s overdraft charge practices. See Johnson v. BOKF Nat’l Ass’n, 15 F.4th 356 (5th Cir. 2021). Plaintiff Sharonda Johnson, who holds a checking account with BOKF, National Association (the “Bank”), filed a putative class action challenging “Extended Overdraft Charges” assessed by the Bank, which were charged to her after she overdrew on her checking account in 2016. Extended Overdraft Charges are what the Bank terms the fees it charges to customers who overdraw on their checking accounts and fail to timely pay the Bank for covering the overdraft. Johnson alleges that when the Bank paid her overdraft, it extended her credit, and that the Extended Overdraft Charges the Bank assessed her when she did not reimburse the Bank timely for covering her overdraft constitute interest upon this extension of credit within the meaning of § 85 of the National Bank Act of 1864 (the “NBA”), which authorized national banks to charge “interest at the rate allowed by the law of the State . . . where the bank is located.”  The District Court dismissed the complaint, and Johnson appealed.

In its de novo review of the lower court’s dismissal, the Fifth Circuit rejected Johnson’s argument, instead deferring to the Office of the Comptroller of Currency’s (OCC) interpretation that Extended Overdraft Charges are not interest within the meaning of the NBA. In Interpretive Letter 1082, the OCC determined that the overdraft fees imposed by a bank constituted charges for non-interest deposit account services under 12 C.F.R.§ 7.4002(a).  The Fifth Circuit then looked to recent Supreme Court reaffirmation in Kisor v. Wilkie 139 S. Ct. 2400 (2019) that courts should defer to an agency’s reasonable interpretation of its own regulations when the regulation's text is “genuinely ambiguous,” and the “character and context of the agency's interpretation entitles it to controlling weight.” When applicable, this deference regime, referred to as Auer deference, dictates that an agency's interpretation is “controlling unless ‘plainly erroneous or inconsistent with the regulation.’”

To determine whether to grant Auer deference, the Fifth Circuit looked to OCC commentary that suggested that the history of § 7.4001(a) supports the conclusion that the rule is truly ambiguous as to whether excess overdraft fees like the ones Johnson challenged fell within its scope. The Court also determined that the OCC’s determination that these sorts of fees are classified as deposit account services, and not a new loan, was reasonable. Finally, the Court characterized Interpretive Letter 1082 as an “authoritative statement” drafted by a senior OCC official, fitting squarely within the agency’s expertise and strongly indicating that it represents the OCC’s official position on the matter of whether Extended Overdraft Charges should be classified as non-interest charges, thus entitling the Interpretive Letter to controlling weight on the matter. This led the court to conclude that Extended Overdraft Charges are non-interest charges, not subject to the NBA’s usury limits.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

New Jersey Appellate Division Holds Purchaser of Property in Tax Sale Foreclosure Can Intervene Before Order Setting Redemption Date

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In a decision approved for publication, New Jersey’s Appellate Division recently affirmed that a purchaser of a property in a tax sale foreclosure can move to intervene and redeem the property so long as the trial court has not entered an order setting the last date for redemption, and that a previously rejected attempt to redeem the property before intervening does not bar the right to move to intervene.  See Green Knight Capital, LLC, v. Calederon, et al., 2021 WL 4823495 (N.J. Super. Ct. App. Div. Oct. 18, 2021).  In April 2020, plaintiff initiated a tax sale foreclosure.  In September 2020, defendant purchased the property from the property owner for $100,000.  Defendant immediately sent a check to the tax collector to redeem the certificate held by plaintiff, but plaintiff told the collector to reject it because defendant had not intervened in the foreclosure action.  Plaintiff then moved for an order setting the time, place, and amount of redemption.  Two weeks later, and before the Court had addressed plaintiff’s first motion, plaintiff filed another motion seeking to bar defendant from redemption.  Defendant cross-moved to intervene and permit redemption.  The trial court ultimately ruled for defendant, and plaintiff appealed, arguing that defendant’s attempt to redeem before intervening barred its later motion to intervene and redeem under Simon v. Cronecker, 189 N.J. 304 (2007), among others.

On appeal, the Appellate Division affirmed.  The Court found that defendant filed its motion to intervene before the trial court had entered an order setting the last date for redemption.  Accordingly, the motion was timely filed, regardless of the fact that defendant had attempted to redeem before it moved to intervene.  Further, the Court found that the cases cited by plaintiff involved parties attempting to intervene after the court had set the last date for redemption, which were distinguishable from this situation and did not apply.  “We hold that when an investor has an interest in the property in foreclosure, is prepared to redeem the tax sale certificate, and files a motion to intervene in the foreclosure action before the entry of an order setting the last date for redemption, the investor is permitted to intervene and redeem the tax certificate.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

What Can A Medical Assistant Do and Not Do?

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Connor Breza.

In the consolidated appeal of State v. Jeannotte-Rodriguez, A-4361-19; A-4371-19; A-4374-19, the Superior Court of New Jersey, Appellate Division, addressed the State’s failure to sufficiently demonstrate that a medical assistant’s scope of performed services encroached upon the licensed practice of medicine.

In 2018, a grand jury returned an indictment against three defendants -- a doctor, medical assistant and office manager who all worked together in the same medical practice. The State averred that the medical assistant practiced medicine without a license and that the supervising doctor and office manager conspired to fraudulently bill for the assistant's services.

Following a defense motion to dismiss the indictment, the trial court subsequently dismissed the case, finding the indictment “palpably deficient.” The State then re-presented the case to the grand jury, providing additional evidence, including patient testimony and testimony from an insurance fraud investigator. Based in part on speculative testimony provided by the insurance fraud investigator, a grand jury returned a superseding indictment and the case once again landed before the trial court.

Again, however, the trial court dismissed the indictment, concluding that the prosecutor failed to adequately and accurately instruct the grand jury about what a medical assistant could do without encroaching on the licensed practice of medicine. The trial court concluded that, because New Jersey law does not clearly draw a line around a medical assistant's permissible activities, prosecuting someone for crossing that line violated the right to fair warning.

While this reality posed an obstacle to effectively prosecuting the case, it also presents unique questions for the healthcare industry as a whole. What services exactly can a medical assistant perform under the supervision of a licensed physician without encroaching upon the practice of medicine? Unfortunately, the Appellate Division did not spell out those services in detail in its opinion. However, in affirming the trial court’s decision, the Appellate Division emphasized the requirement for a prosecutor to articulate specific instances of conduct – without speculation -- that would constitute a violation under the statute.

A copy of the Appellate Division’s opinion can be found here.

Confused About New Jersey and Federal COVID-19 Vaccine Mandates?

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Connor Breza.

New Jersey Vaccine Mandate for healthcare Workers 

New Jersey’s Executive Order 252 took effect on September 7, 2021. This Executive Order mandates that all workers in certain State and private healthcare facilities and high-risk congregate settings be fully vaccinated against COVID-19 or be subject to COVID-19 testing at minimum one to two times per week. The Order applies to the following facilities and individuals:

Covered Facilities include:

  • Acute, pediatric, inpatient rehabilitation, and psychiatric hospitals, including specialty hospitals, and ambulatory surgical centers
  • Long-term care facilities, including the State Veterans Homes
  • Intermediate care facilities, including the State developmental centers
  • Residential detox, short term and long term residential substance abuse disorder treatment facilities
  • Clinic-based settings like ambulatory care, urgent care clinics, dialysis centers, Federally Qualified Health Centers, family planning sites, and Opioid Treatment Programs
  • Community-based healthcare settings including Program of All-inclusive Care for the Elderly, and pediatric and adult medical day care programs
  • Licensed home health agencies and registered healthcare service firms operating within the state
  • State and county correctional facilities
  • Secure care facilities operated by the Juvenile Justice Commission
  • Licensed community residences for individuals with intellectual and developmental disabilities (IDD) and traumatic brain injury (TBI)
  • Licensed community residences for adults with mental illness
  • Certified day programs for individuals with IDD and TBI

Covered Individuals include:

  • Full and part-time employees
  • Contractors
  • Other individuals working in the covered setting, including individuals providing operational, custodial, or administrative support

Following September 7, 2021, healthcare facilities and other settings covered by the requirement must be in compliance with the Order, and if a worker fails to be vaccinated, the worker will be required to submit to a minimum once to twice weekly testing. Healthcare facilities may, but are not required to, administer the COVID-19 test on site or alternatively require the employee to submit proof of the COVID-19 test. Regardless of whether the covered setting is providing workers with on-site access to testing or requiring workers to submit proof of a COVID-19 test, both antigen and molecular tests will be acceptable to fulfill the requirements of the Order.

Keep in mind that in 2020, New Jersey mandated certain healthcare workers to take the influenza vaccine with N.J.S.A. 26:2H-18.79.

Pending Federal Vaccine Mandate for healthcare Workers

Though not yet in effect, the federal government will begin requiring COVID-19 vaccination of staff within all Medicare and Medicaid-certified facilities. On September 9th, the Biden administration released a plan which includes requiring healthcare workers in the following facilities (among others) to be vaccinated:

  • hospitals
  • dialysis facilities
  • ambulatory surgical settings
  • home health agencies

More information about the federal mandate will most likely be released over the next few weeks, with an anticipated release sometime in October 2021.

Illinois Federal Court Dismisses Plaintiffs’ Aiding and Abetting and Negligence Claims Against Title Insurer After Plaintiffs Claim Fraud in Property Sale

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The United States District Court for the Northern District of Illinois recently granted a title insurance company’s motion to dismiss claims for aiding and abetting fraud, negligent misrepresentation, and negligence, finding that the plaintiffs had not alleged sufficient facts to sustain any of their claims. See Amran Prop. Invs., LLC v. Fid. Nat’l Title Grp., Inc., 2021 WL 3883087 (N.D. Ill. Aug. 31, 2021). In the case, plaintiffs purchased 20 properties from Chicago P.C., which had purchased those same properties from third parties using plaintiffs’ funds with the assistance of an attorney before reselling to plaintiffs. The defendant served as the escrow and closing agent and provided title insurance for each of these transactions. One salesperson of the defendant worked on all 20 sales, and wrote a letter on October 11, 2019, affirming that the defendant had a long-standing relationship with Chicago P.C. After all transactions closed, Chicago P.C. informed plaintiffs that it would guarantee the properties’ rent payments for the first year as well as manage the properties, but shortly after the closings, rent payments stopped and plaintiffs discovered that the properties were “in disrepair, mostly uninhabitable, and in violation of city building codes.” Plaintiffs received estimates that it would cost over $1.1 million to make the properties habitable and rentable. Plaintiffs brought an action against the defendant seeking to recover their entire property investment amount, among other damages, amounting to $1,314,000.00, claiming that the defendant is liable for aiding and abetting Chicago P.C. and the attorney’s fraudulent investment scheme, that the defendant negligently misrepresented information to plaintiffs by relying on the attorney’s purported authority to act on plaintiffs’ behalf based on forged powers of attorney documents, and that the defendant was negligent in failing to ensure that plaintiffs’ funds were not misused.  The defendant moved to dismiss.

The Court granted the motion.  Regarding the aiding and abetting claims, the Court held that plaintiffs had not met the heightened pleading standard for fraud claims which requires that a complaint include the “who, what, when, where, and how” of the fraud. The Court held that plaintiffs’ complaint lacked specifics about the investors behind or members of the plaintiff LLCs and particular of the promises made to them, lacked particulars as to whom promises were made, the time, place, and other circumstances, and lacked allegations that the defendant was aware that Chicago P.C. would make promises regarding the properties after the closing.

As to the tort claims for negligent misrepresentation and negligence, the Court rejected plaintiffs’ contention that several alleged misrepresentations were made by the defendant, holding that none of the statements were false statements of material fact to sustain the misrepresentation or negligence claims. The Court further held that the defendant, as an escrow agent, did not have a tort duty under Illinois law to the buyer and seller, and that plaintiffs had not connected their damages to the defendant’s alleged negligence and misrepresentation. The Court dismissed the aiding and abetting claims without prejudice, and the remaining clams with prejudice.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

CMS Proposes Rule to Rescind Coverage of “Breakthrough” Medical Technologies

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Connor Breza.

As expected, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule, 86 FR 51326, rescinding coverage of medical technologies that the Food and Drug Administration (“FDA”) designates as “breakthrough,” as set forth in the Medicare Coverage of Innovative Technology (the “MCIT”) final rule on January 12, 2021.  The rescission is hardly surprising, given CMS’s delay of the final rule, first in March 2021, and then in May 2021.  The proposed rule cites safety concerns and availability of clinical evidence on the benefits or risks of breakthrough devices as reasons for withdrawal of the MCIT final rule.  Comments on CMS’s proposal to withdraw the MCIT final rule are due on October 15, 2021.

Connecticut Court Holds Insured Not Entitled to Defense Costs for Uncovered Claims

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The Superior Court of Connecticut, Judicial District of Stamford-Norwalk at Stamford, recently granted summary judgment in favor of a title insurer, finding that the insured was not entitled to defense costs where the underlying lawsuits did not concern matters on which the title insurer had a duty to defend. See Stewart v. Old Republic Nat'l Title Ins. Co., 2021 WL 3832354 (Conn. Super. Ct. Aug. 10, 2021). In 2013 and 2014, the plaintiffs acquired ownership of neighboring properties in Greenwich, Connecticut and obtained owner’s title insurance policies. In 2016, adjacent property owners brought an action against the plaintiffs alleging that the plaintiffs obstructed an easement by extending a lawn, installing a raised drainage system and removing a stone pillar (the “Kennedy Lawsuit”). Without notifying its title insurer, the plaintiffs engaged counsel to defend the lawsuit. Six months later, after the property owners filed a revised Complaint alleging that the plaintiffs did not have exclusive ownership of or exclusive rights to the easement, the plaintiffs notified the title insurer that the lawsuit was pending and that the plaintiffs may have a claim. The title insurer denied coverage and concluded that it had no obligation to defend the lawsuit for a number of reasons, including that the policy did not insure the plaintiffs’ exclusive rights to and ownership of the easement, the plaintiffs did not have exclusive ownership of the easement, the plaintiffs’ conduct was the cause of the lawsuit, and the events at issue occurred after the issuance of the policy.

That same year, the plaintiffs objected to the Town's acquisition of an abandoned African-American cemetery, believed to be on or adjacent to the plaintiffs’ property, and sent a notice of claim to the title insurer, which the title insurer denied. Without notifying the title insurer, the plaintiffs sued the Town seeking a declaratory judgment and to quiet title to the driveway or to acquire title thereto by prescriptive easement or adverse possession (the “Greenwich Lawsuit”). The plaintiffs made a claim to recover their litigation expenses on the Greenwich Lawsuit and the title insurer again disclaimed coverage, noting that it did not approve the expenses and attorney’s fees incurred in initiating and defending the Greenwich Lawsuit as required under the policy. The plaintiffs then brought this action against the title insurer alleging that the title insurer breached the policies by failing to fund its costs to defend the lawsuits, primarily the attorney’s fees incurred, and sought indemnification for the expenses paid in connection with the lawsuits. The title insurer subsequently moved for summary judgment.

The Court granted summary judgment in favor of the title insurer. The Court found that the title insurer properly denied defense costs on both claims.  First, the Court found that the use of the term “ownership” in the revised Complaint in the Kennedy Lawsuit did not challenge title to the property but rather the plaintiffs’ right to exclusive use of the easement, and thus, the lawsuit did not concern matters on which the title insurer had a duty to defend. Moreover, the gravamen of the Kennedy Lawsuit was the plaintiffs’ affirmative conduct that occurred after the policy was issued and was therefore excluded from coverage. With regard to the Greenwich Lawsuit, the Court noted that the plaintiffs sued the Town and thus could not be said to have expended funds to defend their title. Moreover, for the Town to acquire the portion of property that contained the cemetery and impair the plaintiffs’ use of the driveway, the Town would have to exercise its police power to take the property by eminent domain, an event that would occur after the issuance of the policy, and therefore subject to exclusions from coverage as a post-issuance event and a governmental taking. Lastly, the Court found that the plaintiffs breached the policy by depriving the title insurer of its contractual right to control the defense, including its right to authorize defense costs, and to select counsel, by the plaintiffs’ failure to provide timely notice of commencement and later settlement of the Greenwich Lawsuit.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

Broker Compensation and Monoclonal Antibodies

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For more information about this blog post, please contact Khaled J. Klele, Ryan M. Magee, Labinot Alexander Berlajolli, or Connor Breza.

Broker and Agent Compensation Proposed Rule

The Department of Health and Human Services (“HHS”) recently issued a proposed rule, 86 FR 51730, to promote transparency in agent and broker compensation. The proposed rule seeks to require issuers offering individual health insurance coverage or short term limited duration insurance to disclose to policyholders, before finalizing plan selection and on documentation confirming the individual’s enrollment, commission rates and compensation structure for other direct and indirect compensation provided by the issuer to an agent or broker associated with enrolling the individuals. The proposed rule would also require such issuers to report to HHS the actual, total amount of direct and indirect compensation paid by the issuer to the agent and broker for the preceding year. Comments are due by October 18, 2021.

HHS Assumes Monoclonal Antibody Distribution Responsibilities

Monoclonal antibody treatments have proven to be particularly effective in combating COVID-19 when implemented at early symptomatic stages. As a result, demand for the treatment is surging. But earlier this month, HHS took control over distribution of monoclonal antibody treatments across the U.S., pairing its policy change with the purchase of 1.4 million additional doses at a cost of $2,100 per dose.

Some states allege that HHS’s involvement in the distribution process will result in a shortage of treatments to those states that need it most. For example, in recent weeks, seven states – Alabama, Florida, Texas, Mississippi, Tennessee, Georgia, and Louisiana – have been using 70% of the monoclonal antibody treatments available nationwide. HHS’s policy change aims to change that statistic with a more equitable distribution across states.

HHS has stated that it will determine the amount of medication each state and territory receives on a weekly basis after examining relevant data, including hospitalization statistics and case rates. Under this new distribution model, HHS will determine each state’s weekly amount of monoclonal antibody products based on cases and use on a week-by-week basis. Healthcare providers will be required to record their utilization of the products promptly in order to be eligible to receive additional shipments.

Ohio Court Finds Purchaser Did Not Suffer Damages Where Title Agency Failed to Include Lien on Closing Settlement Statement

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The Court of Appeals of Ohio, Second District, Montgomery County, recently affirmed summary judgment in favor of a title agency, finding that although a contract had been entered into between the plaintiffs and the title agency, the plaintiffs did not suffer any damages as a result of the title agency’s failure to include a lien on the closing settlement statement. Rassi v. Buckeye Title Agency, Inc., 2021 WL 2624660 (Ohio Ct. App. June 25, 2021). In the case, the plaintiffs entered into a contract for the purchase of a home in foreclosure. The purchase price was the “Amount of Payoff.” In connection with the purchase, the plaintiffs asked the defendant title agency “to do the necessary title work and closing.” Although the title examination for the property revealed a first mortgage and a Department of Housing and Urban Development (“HUD”) mortgage, the HUD mortgage was not accounted for on the closing settlement statement. After the plaintiffs purchased, HUD demanded that they satisfy its lien.  The plaintiffs then brought an action against the title agency for, among other things, breach of contract, asserting that the plaintiffs should not be responsible to pay the remaining lien on the property. The trial court granted summary judgment in favor of the title agency, concluding that no contract had been entered into between the plaintiffs and the title agency.

On appeal, the Court affirmed. However, the Court found that the trial court erred in concluding that there was no contract between the plaintiffs and title agency. The Court noted that the plaintiffs requested that the title agency perform the necessary title work and closing, the title agency agreed to and did perform the requested services, and the plaintiff paid the title agency for the completed services. As such, there was an offer, acceptance, and consideration. Moreover, there was no dispute concerning contractual capacity, mutual consent, or the legality of the services requested by the plaintiffs and performed by the title agency. Nonetheless, the Court found that the mistake in failing to include the HUD lien on the closing settlement statement did not cause the plaintiffs to suffer any damages. In finding so, the Court noted that the purchase contract set the purchase price for the home as the “Amount of Payoff.” Therefore, the plaintiffs were contractually obligated to pay off whatever amount was due upon the home, which included the HUD lien, and the title agency’s failure to include the HUD lien on the closing settlement statement did not alter the plaintiffs’ contractual payoff obligation. Accordingly, the Court affirmed summary judgment in favor of the title agency.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

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