Ark. Court Rules Wrongful-Death Settlement Trumps Competing Claims

An uncharacteristically divided state Court of Appeals in Arkansas affirmed a wrongful-death lawsuit settlement that allocated nothing to medical providers who tried to save the victim’s life, according to Associated Press.

In a 5-4 decision, the court ruled that a Ouachita County circuit judge did not err in approving a $50,000 settlement that compensated the victim’s family for mental anguish but ignored debts for services rendered to aid the victim.

Dissenters admonished the court’s majority for passing on what they viewed as an opportunity to ease conflicts between Arkansas probate laws and the state’s wrongful-death act.

Litigation followed the 2000 death of Shanna Harris in an automobile accident. Her mother, Francis McCoy, was appointed administratrix of Harris’ estate and filed the wrongful-death suit against the drivers of two vehicles involved in the collision.

Insurance companies for the two defendants offered the policy limits of $50,000 to settle the action.

Mid-South Adjustment Co. also filed a claim against the estate for $7,425 on behalf of two medical providers who had provided medical services to Harris just before she died.

Circuit Judge Hamilton J. Singleton approved the settlement offer and, without notice to Mid-South, entered an order for distribution of the settlement proceeds.

The company later petitioned the court to reopen the case, contending it had not been notified of the settlement hearing and should have been allowed to participate in the distribution of funds.

Singleton concluded that the company had no standing to participate in the proceeds.

In Mid-South’s appeal, the appeals court cited a portion of the state’s wrongful-death statute, which provides that no part of any recovery shall be subject to the debts of the deceased person or become, in any way, a part of the assets of the estate of the deceased person.

The company noted that a part of McCoy’s wrongful-death complaint sought to recover compensatory damages for medical expenses incurred by her daughter prior to her death.

It contended that those damages were sought under another portion of the law that allows the decedent’s estate to recover for loss of life separately, and that those amounts were part of the estate and subject to creditors’ claims.

But the appeals court noted that Singleton, in his order approving the settlement, repeatedly referred to the agreement as a wrongful death settlement.

Judge Robert J. Gladden wrote the majority opinion and was joined by Chief Judge John F. Stroud and Judges Wendell Griffen, Terry Crabtree and Andre Layton Roaf.

In a dissenting opinion, Judge John Robbins said the majority opinion brought into focus the “tensions” between the state’s probate laws and the wrongful death act.

Though under the wrongful-death law damages do not become part of the decedent’s estate, Robbins wrote, the personal representative of the estate has a financial duty to pursue claims held against the estate for the benefit of heirs and creditors of the estate.

“It was a violation of this duty for the personal representative to seek a settlement that allocated all of the recovery to the statutory beneficiaries – including … herself – for their mental anguish, and nothing to the estate for payment of medical services rendered in an effort to save the decedent’s life,” Robbins wrote.

He added that while the conflicts in the law could best be corrected by the Legislature, “we could alleviate some of the appearance of self-dealing and violation of a personal representative’s fiduciary duty” by requiring the trial court to at least have the administratrix give notice to all parties.

Judges Josephine L. Hart, Sam Bird and Larry D. Vaught joined in the dissent.

Three-judge panels usually decide court of appeals cases unanimously, and three additional judges are assigned when the original three can’t agree. If the six judges are evenly split, three more judges are assigned, making possible a majority vote as in the Mid-South case.