[WSBAPT] RCW 11.40.060 - creditor claim, insurance

Fri Apr 2 12:30:10 PDT 2021

My thoughts on RCW 11.40.060<http://app.leg.wa.gov/RCW/default.aspx?cite=11.40.060>.  Claims involving liability or casualty insurance-Limitations-Exceptions to time limits.
The time limitations for presenting claims under this chapter do not accrue to the benefit of any liability or casualty insurer. Claims against the decedent or the decedent's marital community that can be fully satisfied by applicable insurance coverage or proceeds need not be presented within the time limitation of RCW 11.40.051<http://app.leg.wa.gov/RCW/default.aspx?cite=11.40.051>, but the amount of recovery cannot exceed the amount of the insurance. The claims may at any time be presented as provided in RCW 11.40.070<http://app.leg.wa.gov/RCW/default.aspx?cite=11.40.070>, subject to the otherwise relevant statutes of limitations, and do not constitute a cloud, lien, or encumbrance upon the title to the decedent's probate or nonprobate assets nor delay or prevent the conclusion of probate proceedings or the transfer or distribution of assets of the estate. This section does not serve to extend any otherwise relevant statutes of limitations.

  1.  If the decedent had insurance to pay for medical bills for treatment prior to death, the creditor takes a risk if it doesn't file a creditor's claim asserting claims against the estate assets and insurance.  Some creditors never file creditor claims but want to be paid out of settlement monies or from the decedent's insurance policy benefits.  Wrongful death monies are not part of the Estate and are to be treated as non-probate assets.  The insurance policy is an "asset" of the Estate and I have argued that by having an insurance policy to cover claims, the estate is solvent IF the only estate debt is related to the claims made under the policy.  Your situation is that there are outstanding debts of creditors who did not file creditor's claims within the 2 year period allowed.  And then, once the Estate receives a settlement for the wrongful death, the decedent and the Estate are not made whole with the monies.  I had Medicaid try this against the Estate when wrongful death monies were paid to the PR as they are the only one who is to bring the WD claims of the decedent.  I did not claim the medical bills of over $200k when I made the WD demand.  The claim was worth more than the policy limits even without the medical bills.  I ended up paying a highly reduced amount to Medicaid of $30k v. the $200k they wanted.  Look at Alhorn case if this is a Medicaid issue.

Your case seems to involved claims that cannot be satisfied with the amount of insurance and recovery "cannot exceed the amount of insurance."   The creditor is limited to making claims against the insurance monies BUT they still have to file a creditor claim within the SOL - 3 years in a tort.

  1.  Another scenario which I believe the exception applies to is more commonly is the insurance of the decedent when that person is the tortfeasor.  There is a deceased person who caused injuries to another before death.  Let's say it was a motor vehicle collision.  The injured party files a claim against the deceased person's insurance and the defendant dies before it settles.  The injured party then must name the PR of the Estate of the tortfeasor and provide for a creditor's claim against the Estate.  If it is two years after death but still within the SOL for the tort (3 years), then the claim made is against the insurance policy limits ONLY and no estate assets will be used to pay above that policy limits.

Dalynne Singleton
Gourley Law Group
Snohomish Escrow
The Exchange Connection
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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Eric Nelsen
Sent: Friday, April 2, 2021 10:37 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] RCW 11.40.060 - creditor claim, insurance

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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