In Estate of Novosett v. Arc Villages IL, LLC, 2016 Fla. App. LEXIS 3726 (Fla. 5th DCA 2016), the Fifth DCA addressed the enforceability of an arbitration agreement in a dispute between nursing home owner/operators and the estate of a deceased resident of the nursing home. The Court found that because the agreement contained an unenforceable cap on damages which went to the “financial heart” of the agreement, the entire agreement was unenforceable.
On this point, the Court cited Gessa v. Manor Care of Fla., 86 So. 3d 484, 490-91 (Fla. 2011) which held that limitation of liability provisions in arbitration agreement included in nursing home’s admissions documents violated public policy and were not severable because they constituted financial heart of arbitration agreement. The Court noted that the arbitration contract in the subject case contained a limitation of liability provision, purporting to place a cap on non-economic damages and preclude the availability of punitive damages. The Court noted that the lower court correctly held that this provision is against public policy and void, pursuant to Gessa v. Manor Care of Fla. However, it still mandated arbitration because the contract contained a severability clause.
The Court concluded that Gessa is controlling, despite the fact that the arbitration clause in Gessa did not contain a severability clause. The existence of a severability clause in an agreement is clearly not determinative of whether a void clause invalidates the entire contract pursuant to Shotts v. OP Winter Haven, Inc., 86 So. 3d 456, 478 (Fla. 2011). Instead, the Court found that determinative issue, as in Shotts, was whether an offending clause or clauses go to the very essence of the agreement. According to Gessa, limitation of liability provisions place a clear upper limit on noneconomic damages and foreclose the prospect of punitive damages altogether. In this regard, the limitation of liability provision constitutes the financial heart of the agreement.
Thus, the Court concluded that the clauses at issue went to the essence of the agreement, invalidating the entire agreement, regardless of the severability clause. Accordingly, the Court reversed the trial court’s order which compelled arbitration and remanded the cause for further proceedings. Interestingly though, the Court also certified the following question to the Florida Supreme Court as a matter of great public importance:
Does the Court’s holding in Gessa v. Manor Care of Florida, 86 So. 3d 484 (Fla. 2011), control where, as here, the contract contains a severability clause?
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