When The Tortfeasor Dies, Your Subrogation Claim Doesn’t Need To Die Too!
The author, Franz Kafka, known for his dark situations which many people relate to, once wrote a very short story about omnipotent power floating just beyond our reach.
You go to the city to see the law. Upon arrival outside the law building, there is a guard who says “You may not pass without permission.” You notice that the door is partially open, but not enough for you to see what is inside. You point out that you could easily enter the building if allowed to do so, and the guard agrees. However, rather than cause a problem, you decide to wait until you have permission. You wait for many years, and when you’re an old, shriveled person, you finally build up the courage to ask, “During all the years I’ve waited here, no one else has tried to get in to see the law, why is this?” The guard slowly answers, “It is true that no one else has passed through the door. That is because this door was always meant only for you. But now, it is closed forever.” He then proceeds to close the door and calmly walk away.
When a tortfeasor’s negligence causes injury or damage and, in Kafka-esque style, the tortfeasor dies as a result of the incident, many victims are left wondering if civil justice has somehow eluded them. Whether you are an injured victim or a subrogated insurance carrier thrust into the unfamiliar territory of probate court, understanding what must be done to recover when the person responsible for causing a loss dies may be the difference between a full recovery and no recovery at all.
When a person dies, including a tortfeasor, his or her estate usually passes through a legal process known as probate. In probate, a decedent’s assets are inventoried, claims are valued, creditors and estate debts are paid, and any remaining property is transferred to the beneficiaries or heirs. Tort claims against the decedent are also resolved during this process, but once a debtor dies and the personal representative publishes a notice to the creditors, the creditors have a limited amount of time (varies by state) in which to file a claim against the estate or be forever barred from proceeding against the decedent’s estate. Probate can take a month or two or drag on for years. As a victim of a fire caused by the decedent or as an insurer paying health or compensation benefits to someone injured by the decedent’s negligence, you are a creditor of the estate.
Handling creditor claims in probate court is like stumbling through a haunted house – scary, with surprises around every corner. Code sections pertaining to creditor claims are often the most confusing and misunderstood statutes in the probate process. When a plaintiff or defendant dies, whether as the result of the accident made the basis of your claim or from other causes long after suit has been filed, it is known as the “survival” of a tort action.
Probate laws have strict rules and deadlines that apply to all parts of the process, including creditor claims. The personal representative of the estate is required to notify you of the probate process if he or she is aware of it. However, it is often necessary to file the appropriate legal documents with the probate court prior to the deadline in order to protect your rights to compensation for injuries or subrogation damages. Failing to meet the probate court deadlines will often jeopardize your right to recovery. To make matters worse, a few states (e.g., Texas) have two levels of estate administrations – dependent and independent. The personal representative in a “dependent” administration can perform only a limited number of transactions without seeking a court’s permission, including paying taxes, voting stocks, insuring property, and releasing liens upon full payment. All other functions, including settlement of creditor claims, require court supervision. Independent administrations involve limited court supervision and somewhat more relaxed rules relating to the handling of creditor claims, but there are some traps for the unwary. Probate laws are specific to the state involved, so the probate laws of the state you are dealing with (could be more than one state) must be looked at carefully
Where Tortfeasor Has No / Inadequate Liability Coverage
If the decedent did not have liability insurance or if your damages exceed the amount of the decedent’s liability insurance coverage, then your claim may need to be satisfied from the general assets of the decedent’s estate and you will stand in line with all of the other creditors of the estate. In that event, the probate court will consider all of the creditors’ claims that have been filed against the estate. Some claims have a higher priority than others. For example, a secured creditor gets priority over an unsecured creditor. As a personal injury plaintiff, your claim is considered “unsecured” until a court awards you a judgment. The assets of the decedent will be used to pay claims against the estate, including your claim. In some cases, there are not enough assets to pay all of the creditors. In this case, we must fight for our fair share. If there is insurance, of course, we will learn that right away and that makes our case much easier.
Where there is no insurance, California, for example, requires that you comply with the creditor’s claim procedures prior to suing the personal representative. Cal. Code Civ. Proc. § 377.40; Cal. Prob. Code § 9351. Once the creditor’s claim is rejected or deemed rejected, the plaintiff must file suit within three (3) months of the rejection or the suit will be time barred. Cal. Prob. Code § 9352 and § 9353. These same time requirements also apply to continuing an existing suit against a decedent.
Cal. Code Civ. Proc. § 366.2 also has a one (1) year statute of limitations which prohibits any action brought against a decedent more than one year from the date of death, regardless of what the limitations period would have been had the defendant not died. Cal. Code Civ. Proc. § 366.2. Therefore, at least in California, if no one else opens a probate, you must take the initiative and open a probate as a creditor so that the plaintiff can ensure compliance with the creditor’s claim statutes as a prerequisite to bringing the lawsuit. Cal. Prob. Code § 9351. Every state is different, which makes it all the more important to get subrogation counsel involved quickly when a tortfeasor’s negligence results in your having to pay a claim for which you will want to subrogate.
Where Tortfeasor Has Adequate Liability Coverage
If the decedent was covered by adequate liability insurance, in California and in many other states, you may file suit against the estate without the need to join in the personal representative, and you do not need to file a creditor’s claim. Cal. Prob. Code § 550 and § 9390. However, the summons may need to be served either on a person designated in writing by the insurer or, if none, on the insurer itself. Cal. Prob. Code § 552. If you want to avoid serving a personal representative and filing a creditor’s claim, it is important that you investigate and determine the name of the decedent’s liability carrier and of the policy specifics prior to filing a subrogation action. The above-referenced one (1) year limitations period is applicable to all other actions against decedents’ estates, but does not apply to this type of action. In fact, here is where the death of the tortfeasor may provide you with an advantage. In California, if the limitations period otherwise applicable has not yet expired at the time of the decedent’s death, the action may be commenced within one (1) year after the expiration of the limitations period otherwise applicable had the decedent not died in the accident. Cal. Prob. Code § 551. However, if the plaintiff opts to take this route, the judgment is only enforceable against the insurer and is only enforceable for the amount of the policy. If the plaintiff seeks amounts above the policy limits, the plaintiff must comply with all procedures and time constraints that any other plaintiff must.
If you decide to file against the insurer only, your judgment will only be enforceable against the insurer (not the estate) and will be enforceable only up to the amount of the policy. Therefore, in situations where policy limits do not cover your damages, or there are multiple plaintiffs all feeding at the insurance trough, you may want to consider a claim against the estate, assuming it has assets.
Avoiding The Traps
If a subrogated carrier files suit naming the “estate” of the insured as the defendant before the estate of the deceased tortfeasor is set up, there really isn’t a legal entity to serve with the complaint, and the carrier may find itself in trouble. In many cases, you will need to petition a probate court for administration of the decedent’s estate, have a personal representative appointed, and immediately serve legal process on that representative. A particular state’s probate code may require that a “claim” against the decedent be filed in the probate court within a specified period of time after the decedent’s death. If the carrier fails to timely file a claim against the decedent’s estate in the probate court, it may not be able to use an excess judgment in a bad faith action against the decedent’s insurer, even though the liability carrier failed to settle within policy limits when demanded to do so.
Other states have jurisdictional statutes of “non-claim” which require that all claims be brought against a decedent within a specified time following the decedent’s death. This means the subrogated carrier must set up an estate (if one is not already created) and timely file a notice of claim. Non-claim statutes also define what is meant by a “claim” and usually require that a technical “Statement of Claim” be filed in the decedent’s estate. However, a decedent’s estate must be set up before a “Statement of Claim” is filed. If a decedent’s estate is not established and/or the claim is not filed within the prescribed period, then the claimant may be barred from any recovery against the decedent. Some states with non-claim statutes allow an untimely claim to be brought, but only to the extent of insurance limits.
Preserving your claim against a deceased tortfeasor by filing suit within the applicable statute of limitations requires a timely filing of a lawsuit against the appropriate defendant. Where the defendant is deceased, the “appropriate defendant” is determined by applicable state law. Where the subrogated plaintiff is interested only in pursuing the decedent’s liability insurance limits, the law of many states (e.g., California) provides that an action against a deceased person may be filed against “the Estate of [Decedent].” Summons shall then be served on the insurer, not the personal representative. This can be done in some states even if no estate was ever established because the action is pursued solely against the insurance carrier. However, where there is no available liability insurance or it is inadequate to cover all of the claims against it, things get very complicated and your rights can be lost quite easily if the applicable state’s probate laws are not closely followed. The best advice is to engage subrogation counsel whenever you have a death of a tortfeasor.
If you have any questions regarding this article or subrogation in general, please contact Gary Wickert at firstname.lastname@example.org.