American Home Assurance Company a/s/o Wetherell v. Gaylor, 2004 WL 1418692 (Ala. June 25, 2004)

Most states have statutes of limitations for lawsuits against the estates of decedents. These often-overlooked laws, enacted to expedite the administration of estates, can act as substantial unexpected subrogation stumbling blocks unless they are recognized, then timely and properly addressed. In the American Home Assurance decision, the Alabama Supreme Court reviewed the application of such a statute in a subrogation context, and suggested practical approaches to handling claims against deceased individuals and their estates.

Alabama Code §43-2-350 provides that any claims against the estate of a deceased person must be presented within six months after the estate representative is appointed (i.e., within six months after the administrator or executor is granted “letters testamentary”). This six-month requirement supercedes the applicable statute of limitations for property damage and personal injury claims. This has the obvious and perilous potential to shorten the limitations period if a subrogation claimant/defendant dies prior to suit being filed.

The statute does provide that “readily ascertainable” creditors are entitled to receive notice from the estate’s representative of the death and that such representative has been appointed. It was the scope of this requirement placed on estates’ representatives to ascertain and notify creditors – such as subrogating carriers – that was the subject of the decision.

Plaintiff in the case was the workers compensation carrier for the employer of a truck driver who had been rear-ended by another vehicle. The accident tragically resulted in the death of the offending driver and his family, as well as injuries to the truck driver and substantial damage to the truck. After the trucker’s carrier filed its subrogation suit, the Defendant (the decedent’s estate) filed a motion for summary judgment based on the fact that suit was filed more than six months after the estate representative was appointed. The trial court granted the motion, the lawsuit was dismissed, and the Plaintiff appealed.

In reversing the trial court’s decision, the Alabama Supreme Court focused on whether the Plaintiff was “readily ascertainable” by the estate representative, and therefore entitled to receive notice (which it had not received) that the six-month period for filing claims had begun. The court found that the plaintiff was “readily ascertainable,” because the car accident giving rise to the lawsuit had resulted in substantial property damage and the deaths of several individuals, so it was foreseeable by the estate representative that the trucker might have sustained injuries that would eventually result in a claim against the estate.

Despite its reversal of the trial court’s decision, the court repeated its own cautionary comments made in Carter v. Beck, 598 So.2d 1390 (Ala. 1992), involving the same issue, stating that an estate representative is under no legal duty to give actual notice to all potential claimants, because “[i]mposition of such a broad duty of ascertaining potential claimants would create an unreasonable burden on personal representatives and, thus, would be inconsistent with the intent of the legislature in providing for the ‘speedy, safe and definitive settlement of estates.’” The clear implication of this comment is that creditors (such as subrogated insurance carriers) cannot assume that they are entitled to notice of a target’s death or the establishment of an estate. Such parties run the risk of their claim being time-barred if suit is not filed within the statutory six-month period.

PRACTICE TIPS:

1. KNOWLEDGE and AWARENESS. As noted above, many states have statutory provisions similar to Alabama’s, requiring a shorter statute of limitations or notice to the estate within a more restrictive timeframe where the claimant/defendant dies during or after the liability-producing event, but before suit is filed. See, e.g., Ohio R.C. Ann. §2117.06 (claim must be made within six months after death of decedent); Ill.Rev.Stat.1987, ch. 110 1/2, pars. 18-3 (claims may be barred if not made within six months from the date of “publication” of estate); West’s Ann. Calif. Prob. Code §§9351-53 (various procedural requirements and time limitations). Although a subrogation professional cannot be aware of all such laws in every jurisdiction, basic knowledge that such “hidden” statutes of limitations exist is important.

2. BE PROACTIVE – Immediate notice to a subrogation target places the burden back on the decedent’s estate to demonstrate that they took the proper steps to notify a party of the creation and administration of the estate, as well as of the running of an earlier deadline than the standard statute of limitations. All such initial notices should be sent in a fashion that is demonstrable later (such as certified mail, or employing a facsimile confirmation page). This is just another reason why the old methodology of waiting until a loss is fully adjusted before notifying the subrogation target and pursuing the claim is the wrong approach.

3. If a subrogation target’s death does become known, prompt transmittal of the file to qualified subrogation counsel with instructions to file suit timely in the face of such statutes is imperative.