This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, March 2011 issue,
@2011 by Steven J. Bruzonsky, Esq.
WHY SURVIVING FAMILY MEMBERS’ ARIZONA WRONGFUL DEATH SETTLEMENTS ARE NOT SUBJECT TO LIENS
Arizona Wrongful Death settlements, for surviving family members of a decedent, are not subject to liens for decedent’s medical bills. In order so you can best understand this, I will discuss the Arizona Wrongful Death and Survival statutes; the Arizona appellate cases of Barragan v. Superior Court of Pima County and Gartin v. St. Joseph’s Hospital which concern Wrongful Death and Survival actions and liens; the Medicare Secondary Payer Manual section regarding Wrongful Death settlements; the 2006 U.S. Supreme Court case of Arkansas Dept. of Health and Human Services v. Ahlborn regarding Medicaid liens; and a very recent 11th Circuit decision regarding Medicare liens of Bradley v. Sebelius.
The Arizona Wrongful Death Statute:
A.R.S. §§ 12-611 to 12-613
A.R.S. §12-612A: “An action for wrongful death shall be brought by and in the name of the surviving husband or wife, child, parent or guardian, or personal representative of the deceased person for and on behalf of the surviving husband or wife, children or parents, or if none of these survive, on behalf of the decedent's estate.”
A.R.S. §12-613: “In an action for wrongful death, the jury shall give such damages as it deems fair and just with reference to the injury resulting from the death to the surviving parties who may be entitled to recover, and also having regard to the mitigating or aggravating circumstances attending the wrongful act, neglect or default. The amount recovered in such action shall not be subject to debts or liabilities of the deceased, unless the action is brought on behalf of the decedent's estate.”
An Arizona Wrongful Death action entitles the surviving spouse, children and parents to recover damages for their own injuries, financial and personal/intangible/emotional, that they suffered due to the death of their loved one. Damages are distributed to each surviving family member in proportion to each of their damages. The amount recovered for the surviving family members is not subject to debts or liabilities of the decedent. However, if there are no surviving spouse, children or parents, then the Wrongful Death Action may be brought on behalf of the decedent’s estate, in which case damages are not subject to the decedent’s debts or liabilities, which would include medical expenses.
The Arizona Survival Statute:
A.R.S. §14-3110: “Action by or against personal representative; survival of causes of action Every cause of action, except a cause of action for damages for breach of promise to marry, seduction, libel, slander, separate maintenance, alimony, loss of consortium or invasion of the right of privacy, shall survive the death of the person entitled thereto or liable therefor, and may be asserted by or against the personal representative of such person, provided that upon the death of the person injured, damages for pain and suffering of such injured person shall not be allowed.
An Arizona Survival action entitles decedent’s estate to recover damages for decedent’s personal loss and injuries including medical expenses and loss of earning capacity, but damages for the decedent’s pain and suffering are not allowed.
Arizona Case Law:
In Barragan v. Superior Court of Pima County, 12 Ariz. App. 402, 405, 470 P.2d 722 (App. 1970), Division 2, Arizona Court of Appeals clearly stated that Arizona Wrongful Death and Survival actions are separate and distinct claims: “We hold, therefore, that a claim under the survival statute and a claim under the wrongful death statute are separate and distinct notwithstanding they originate from the same wrongful act. The former permits recovery for the wrong to the injured person and is confined to his personal loss while the latter is for the wrong to the beneficiaries, confined to their loss because of the death. The latter begins where the former ends and recovery on both is not a double recovery for a single wrong but rather separate recoveries for different wrongs.” Barragan at 725.
In Gartin v. St. Joseph’s Hospital, 156 Ariz. 32, 749 P.2d 941 (App. 1988), surviving family members settled their Wrongful Death claim for the $100,000 liability policy limits, holding $13,391.05, the balance claimed due by the hospital, in Trust. The surviving family members filed an action for declaratory relief that the hospital had no lien rights under A.R.S. §33-931, et seq. to the liability settlement proceeds. Division 1, Arizona Court of Appeals, held that the the hospital lien didn’t apply to these Wrongful Death settlement proceeds. “In the present case, there is no question but that the wrongful death proceeds were to be paid to statutory beneficiaries, the mother and minor child of the decedent, and not to the decedent's estate. Therefore, pursuant to A.R.S. § 12-613, the proceeds are not subject to the debts or liabilities of the decedent.” Gartin at 943.
“This language (A.R.S. §33-931) does not authorize a lien upon claims for damages accruing to "any person from the tort-feasor." Instead, the lien is expressly limited to claims against the tort-feasor only for damages accruing to the person receiving the hospital services or to his legal representative. Nothing in the language of the other statutory sections making up the hospital lien statutes broadens the clear language of A.R.S. § 33-931 which limits the lien to claims accruing to the person receiving hospital services or his legal representative. Statutory liens cannot be extended by the court to cases not provided for by the statute. Fishback v. Foster, 23 Ariz. 206, 209, 202 P. 806, 807 (1922).” Gartinat 944.
The Court discusses that “We do not agree that the legislative decision not to allow a hospital lien to attach to wrongful death proceeds belonging to the statutory beneficiaries necessarily prevents the hospital from recovering on its lien where the injured person dies.” The Court discusses that an A.R.S. § 14-3110 Survival action would also survive the decedent’s death, that the Survival action would include the hospital’s medical bills, and that “Barragan held that except where the wrongful death beneficiary has paid the hospital and medical expenses, these expenses are recoverable in the survival action, not the wrongful death action.” The Court goes on to hold “that the entire settlement proceedings were for a wrongful death claim and not for a survival action. For the reasons stated previously, St. Joseph’s is not entitled to relief against the wrongful death statutory beneficiaries. The trial court correctly determined that the settlement proceeds are properly payable to the decedent's mother and the conservator for his minor daughter and that they are not subject to the hospital lien.” Gartinat 945.
Gartin is clear authority that in Arizona, the surviving family members’ Wrongful Death settlement proceeds are not subject to liens for decedent’s medical expenses, even though decedent’s estate could have made a Survival claim including decedent’s medical expenses. However, if there is no surviving spouse, children or parents, and the Wrongful Death action is brought on behalf of the decedent’s estate, then the decedent’s medical expenses are damages subject to decedent’s medical bills.
The Medicare Secondary Payer Manual Concerning Wrongful Death Settlements:
The Medicare Secondary Payer Manual, Chapter 7, §18.104.22.168.1 states: “Wrongful death statutes are State laws that permit a person’s survivors to assert the claims and rights that the decedent had at the time of death. These laws may include recovering for the deceased’s medical expenses. When a liability insurance payment is made pursuant to a wrongful death action, Medicare may recover from the payment only if the State statute permits recovery of these medical expenses. [Emphasis Added] Generally, if the statute permits recovery of the deceased’s medical expenses, Medicare may pursue its payments, even if the action fails to explicitly request damages to cover medical expenses. Thus, in that event, even if the entire cause of action sets forth only the relatives and/or heirs damages and losses, then Medicare may still recover its payments. - - - - - NOTE: If a wrongful death statute does not permit recovering medical damages, Medicare has no claim to the wrongful death payments.” [Emphasis Added]
Medicare’s practice is to recognize that in states like Arizona, that Wrongful Death actions brought by survivors do not include decedent’s medical expenses, and that therefore the survivors’ Wrongful Death Settlements are not subject to a Medicare lien for the decedent’s medical expenses.
The Ahlborn AHCCCS/Medicaid Lien Case:
In Arkansas Dept. of Health and Human Services v. Ahlborn, 547 U.S 268 (2006), the U.S. Supreme Court ruled unanimously that a federal statutory anti-lien provision applies to personal injury settlements, such that state collection of the federal Medicaid lien only applied to that portion of the judgment in that case that represented payments for medical care. The federal Medicaid statutes, at 42 U.S.C. §1396(a) require that Medicaid lien collection comply with the federal statutory anti-lien provision, 42 U.S.C. §1396p(a)(1), which prohibits States from imposing liens “against the property of any individual prior to his death on account of medical assistance paid . . . on his behalf under the State plan.” The Ahlborn case was settled for approximately one-sixth ($550,000) of its stipulated full value ($3,040,708.18). The U.S. Supreme Court held that the federal statutory anti-lien provision prohibited Arkansas’ Medicaid from asserting a lien in an amount exceeding approximately one-sixth ($35,581.47) of the Medicaid total payments ($215,645.30). The Court noted that State can require an assignment of the right to receive payments for medical care and that the recipient “assign” in advance any payments that may constitute payment for medical costs [42 U.S.C. §§1396a(a)(25) and 1396k(a)] “But that does not mean that the State can force an assignment of, or place a lien on, any other portion of Ahlborn’s property.” Federal Courts have not expressly extended the reach of Ahlborn from Medicaid to other federal liens such as Medicare. For more information regarding the Ahlborn decision and its application to federal Medicaid liens, please see my June 2006 “Liens Corner” article on this subject.
The 11th Circuit Bradley v. Sebelius case:
In Bradley v. Sebelius, 2010 WL 3769132 (Sept. 29, 2010), the 11th Circuit U.S. Court of Appeals appears to have applied the “pro rata” loss sharing approach used by the U.S. Supreme Court in Ahlborn, supra. A Wrongful Death case was brought under Florida law on behalf of the decedent’s estate and decedent’s surviving ten children.
Florida's Wrongful Death Act (FWDA) is codified at Fla. Stat. §§ 768.16to 768.26 (2003). Under Florida law, “[t]he action shall be brought by the decedent's personal representative, who shall recover for the benefit of the decedent's survivors and estate all damages, as specified in this act, caused by the injury resulting in death.” Fla. Stat. § 768.20. Children of a decedent may also recover for lost parental companionship, instruction, and guidance and for mental pain and suffering from the date of injury. Fla. Stat. § 768.21(3).
The case settled for the $52,500 nursing home’s liability policy limits. Medicare claimed a lien of $38,875.05 and per its regulations and manual reduced the lien by procurement costs (pro-rata attorney’s fees and costs divided by the settlement amount) to $22,480.89. The Florida Probate Court (after notice was given to Medicare but Medicare didn’t appear) found that the value of each of the ten survivors’ claims was at least $250,000 each; that Medicare’s lien was $38,875.08; that the full value of the ten survivors and decedents estate claims combined were $2,538,875.08; and that based upon “principles of equity”, that Medicare was entitled to recover $787.50 (about 2% of its original lien claim). The surviving children contended that the Florida Wrongful Death Act contemplated that damages allowed an estate are separate and distinct from damages recoverable for the deceased’ survivors, and that proceeds from a Wrongful Death action are the property of the survivors. The 11th Circuit concluded that under their de novo review, that Medicare was entitled to the sum of $787.50, as determined by the allocations of the probate court.
Although the argument can be made that the 11th Circuit applied an Ahlborn like approach, Ahlborn is not cited anywhere in the opinion or footnotes. Certainly the “equitable” logic of the Bradley caseis hopefully one more step towards federal courts someday extending Ahlborn to not only apply to Medicaid liens but also to Medicare liens. But equitable apportionment was used in this case solely due to the nature of the Florida Wrongful Death Act.
Whereas in Arizona, Wrongful Death actions by surviving family members do not include damages of decedent’s estate, such as medical bills, in Florida, Wrongful Death actions include all damages to both surviving family members and decedent’s estate, including decedent’s medical bills. Fla. Stat. §§ 768.20states that the Wrongful Death action “shall be brought by the decedent’s personal representative, who shall recover for the benefit of the decedent’s survivors and estate all damages - - - caused by the injury resulting in death.”
Even if Arizona law permitted simultaneous damage claims by the surviving family members and decedent’s estate, including decedent’s medical expenses, then per the Bradley case all of the claim values, for each surviving family member and for decedent’s estate, are used to determine the full value of the cases; and the medical lienholder is then entitled to an Ahlborn style pro-rate
percentage of the lien amount. The end result is that the medical lienholder will typically get only a few percent of the entire Wrongful Death settlement, as in the Bradley case. The medical lienholder, even if its Medicare, simply can’t assert a lien against portion of the Wrongful Death settlement which is for the damages of the surviving family members.
If a lienholder continues to improperly assert a lien against the surviving family members Arizona Wrongful Death settlement proceeds, it may be best to ensure that the case is filed, and that you give clear notice to the lienholder of the court proceedings and invite the lienholder’s appearance, as was done in Bradley (with Medicare declining to appear or participate).