The Dead Beat recently published a letter from a Missouri funeral home operator that was critical of the ‘handling of the NPS debacle’ by the Missouri State Board of Embalmers and Funeral Directors. The operator questioned how the Board could ‘allow’ his firm to sign official documents requiring that NPS contracts be honored. The official document he refers to is the “Affidavit” that the State Board requires from a licensee when it seeks to acquire the assets of a preneed seller. Through the Affidavit, Missouri’s Division of Professional Registration has sought to establish transferee liability for preneed obligations where none existed under state law. The Affidavit uses the term “obligations” to provide a broad application (presumably to catch oral agreements and non-compliant contracts), and its use was defended on rationales that included the following:
• Funeral homes should not be allowed to purchase another funeral home’s assets without also agreeing to perform its preneed contracts.
• Acquiring entities should perform the requisite due diligence before agreeing to purchase another funeral home.
• The State Board has very limited authority to audit preneed sellers and the Affidavit is a tool to protect consumers.
The letter asserts that the State Board knew of the imminent collapse of NPS, and therefore had a duty to disclose relevant information before requiring the Affidavit. While the State of Missouri will take issue with what the State Board knew about NPS in 2007, the question remains whether the requirement of the Affidavit imposes upon the State Board an obligation to disclose all information an acquiring entity could deem relevant. Prior to the passage of SB1, the question was rather academic because the State Board did not have the resources or the requisite authorities to audit preneed sellers. The Affidavit has since been revised to require a report from the seller, but it remains incumbent upon the acquiring entity to seek more information from both the seller and the State Board.
The unspoken question is whether the Affidavit can be enforced by the State Board against the acquiring entity when both fail to find hidden preneed obligations.