[WSBAPT] RCW 11.40.060 - creditor claim, insurance

[Eric Nelsen]

I have been talking to myself in the echo chamber for too long and need a reality check from my esteemed colleagues. All thoughts, comments, case law, good jokes appreciated.

RCW 11.40.060<https://app.leg.wa.gov/RCW/default.aspx?cite=11.40.060> allows a creditor claim to be filed late, even after the 2-year bar, if the claim against the decedent can be "fully satisfied" by applicable "insurance coverage or proceeds." As the statute puts it, the time limits "do not accrue to the benefit of any liability or casualty insurer."

The easy case, I think, is when it's (A) late-filed claim for last illness expenses, the (B) decedent has health insurance, and (C) the insurance would cover the claim. In that situation the medical provider need not file a claim within the time limit in order to access the insurance (but would to the extent the provider was demanding the Estate to pay a co-pay or some kind). In practice I think we never actually see a creditor claim for these expenses; the medical provider usually sends a bill later, for the co-pay, after insurance has paid whatever they'll pay.

Another common situation-and the one I cannot wrap my brain around today--is where decedent was injured/killed and there is disputed liability of a third party, and that third party has insurance that might pay the decedent's personal injury claim and/or the wrongful death claim.

So there is (A) a late-filed claim against decedent for last illness/injury medical expenses;
(B) a third party's insurance; and
(C) the question of whether the insurance would cover the claim is disputed.

Now what? Does the statute apply?

It gets worse. Now let's say the Estate makes a settlement for policy limits, because the insurance proceeds are inadequate to fully compensate all beneficiaries of the wrongful death claim and the decedent's personal injury claim. The PR chooses to allocate all the limited proceeds to the WD settlement, and zero dollars to the PI claim. Recall that WD damages don't include the decedent's expenses; the measure of damages is the pecuniary loss of the WD beneficiaries. So allocating all proceeds to WD means that the insurance proceeds provide zero dollars for medical expenses.

If there is no insurance money available, the late claim is not valid. If there is insurance money available, the late claim is valid. But it's the PR who chooses how the insurance proceeds are allocated. Can this be right?

The PR has fiduciary duties to both the beneficiaries and to probate administration duties (such as paying lawful debts), so arguably there's a conflict between duties here. But I think I would argue that a PR does not have an affirmative duty to allocate funds to pay a claim if the issue of allocation is within their discretion and the creditor's right to payment is not absolute. And even if the PR has a duty to pay lawful creditors, the PR should not exercise discretion in a way that increases the payable debts of the estate, and diminishes the estate that would otherwise go to beneficiaries.

I just have not found any case law that drills this deep into the issues. Anybody have some input? Many thanks in advance--

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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