This article is a companion piece to this video.
In this episode of Rathbone Group’s educational video series on subrogation rights and process, attorney Kim Rathbone discusses a topic submitted by one of our viewers: how to proceed when a tortfeasor dies in the midst of a subrogation suit.
Who Should a Subrogation Team Pursue if the Tortfeasor Dies?
Once a tortfeasor dies, the proper party in the subrogation matter is the tortfeasor’s estate. Substitution of the Estate in lieu of the deceased is accepted practice because it is simplest procedurally. In subrogation lawsuits, the major factor in pursuit is pursuing the appropriate defendant. When a tortfeasor dies, the appropriate defendant automatically becomes the Estate.
Additionally, death does not void the tortfeasor’s carrier from being pursued via subrogation involving any insurance coverage the tortfeasor had. This means you can still approach the carrier for recovery. However, the opposing insurer still has the right to argue liability and/or try to negotiate the amount down.
If the deceased tortfeasor’s carrier refuses to pay on the subrogation claim, the lawsuit becomes against the Estate via probate court – often unfamiliar territory for an attorney working in insurance subrogation.
The reason a subrogation claim like this is relegated to probate court is because that is where a person’s assets are processed when they die. Everything they had is inventoried and quantified, and then assets are paid out for outstanding debts, unresolved tort claims, and any other owed expenses that person had. After that process has been completed, the remainder is distributed to the Estate’s beneficiaries.
While this means that a subrogating carrier is among the “first in line” if a tortfeasor dies, the procedure and likely multiple parties with claims on Estate assets are just a couple of many obstacles brought by a now non-existent defendant.
Pursuing Subrogation Recovery Against an Estate in Probate Court
There is a host of evidentiary issues that come with a tortfeasor being unable to testify in a subrogation case. Many subrogation companies, like ours, use skip trace vendors to confirm the tortfeasor’s identity and date of death. Kim cautions that, while skip tracing is not 100% accurate, the more identifiers you have, the more accurate it is. Regardless, it is an extremely helpful tool in finding subrogation potential in cases where the tortfeasor has died.
Once you verify who the tortfeasor is, look for an estate. Sources Rathbone Group recommends include:
- PeopleMap on Westlaw
- Accurint
- Online searches
- Courts of the county last known address
If the tortfeasor has an estate, then a subrogation claim can be filed against it. The statutes of limitations for this type of subrogation process, though laws vary by state, are short. If a subrogation professional does not know about the death, misses the deadlines and the Estate gets resolved, it is too late to have your subrogation claim paid through the Estate.
Estate Payouts: Do Subrogation Claims get Priority?
The appointed Trustee of the Estate is the person with the authority to resolve any subrogation actions. The good news, Kim explains, is that creditors are paid before any will beneficiaries. The bad news: other creditors may have priority over insurance subrogation cases. Examples of this are burial/funeral costs and any end-of-life/hospice medical bills.
In analysis of the Estate’s assets, a subrogation attorney should consider that certain types of property will not go through the probate court, meaning your subrogation recovery may not come from these assets:
- Jointly owned property, such as homes and bank accounts, automatically go to the joint owner.
- Payable Upon Death accounts
- Retirement accounts
- Some states have homestead exemptions that default any real estate to the will beneficiary.
The Subrogating Side can Open an Estate When there Isn’t One
In cases where there is no estate, depending on the state’s insurance laws and the amount of money you are owed, a subrogating party can open an estate. However, there are mitigating factors to consider first:
- Court costs: Considering the other parties with claims and the labor involved, is pursuing recovery this way worth the time, fees, and competition?
- Compassion: It is likely a hard time for the tortfeasor’s family; establishing an estate with the purpose of pursuing it for subrogation recovery might create contention.
- Estate Fees: There are legal and Trustee fees associated with this subrogation process, on top of those standard court costs.
- Uncertain course: You have no control over how costs will continue to accrue; cost is a big question mark when opening an estate. At what point is subrogation pursuit through this framework diminishing returns?
- Logistical difficulties: Establishing what is in effect a “ghost” estate is procedurally difficult without sufficient information about the tortfeasor. And we must remember that many carriers and attorneys will be litigating in unfamiliar territory – it’s not every day a tortfeasor croaks in the middle of a subrogation case.
- Potential recovery vs net profit: There is also net subrogation recovery to consider: after the costs of opening an estate, will the recovery outweigh those costs? Auto and property insurance claims, for instance, are not usually large balances so may not be worth pursuing.
Estate Subrogation: Different estates Have Different Rules
There are also different types of estates. For instance, an Estate may or may not even have a will. There are also small estates, called summary release from administration, which are typically worth less than $100,000, though thresholds vary by state.
The main concern here is, according to Kim, as a subrogating attorney, you do not want to open the wrong type of estate – this ties back to needing to pursue the appropriate defendant. But sometimes there is not enough information about the tortfeasor to know what type of estate is appropriate to pursue for subrogation recovery.
Rathbone Group is a subrogation-focused law firm invested in educating subrogation professionals on the nuanced and sometimes tricky processes of insurance and subrogation law. If you have other questions, feel free to submit them to the Rathbone Group subrogation team, and check out our podcasts and YouTube videos for more educational discussions about all things subrogation.