In re Estate of Arroyo v. Infinity Indemnity Insurance Company, — So.3d —-, 2017 WL 192019 (Fla. 3d DCA January 18, 2017)

stop-goFlorida’s survival statute (F.S. 46.021) tells us that “[n]o cause of action dies with the person. All causes of action survive and may be commenced, prosecuted, and defended [against the decedent’s estate].” However, how you go about prosecuting a case changes dramatically after someone dies.

Before someone dies you usually only have to sue them in one courtroom. After they’ve died you’ll usually have to sue them in two separate court proceedings, often before two separate judges:

  1. First, you’ll need to litigate the merits of your case in the court in which you file your lawsuit (in post-death litigation this is where you establish the decedent’s liability; this case is considered an “independent action” and in larger circuits (like Miami) that have separate court divisions this part of your case usually plays out in the Civil Division, see here).
  2. Second, you’ll need to litigate your collection rights in the probate proceeding administering the defendant’s estate (in larger circuits having separate divisions this part of your case happens in the Probate Division). This is where you stake your claim to a piece of the probate “pot”.

Trap for the unwary:

The two-pronged process for litigating claims post death is a huge trap for the unwary. Why? Because you can spend years (and a fortune) litigating the merits of your independent action in the Civil Division and never be the wiser to the fact that you’ve forfeited your ability to collect on your judgment in the Probate Division because you’ve blown past F.S. 733.702‘s statute of limitations for probate claims and/or F.S. 733.710‘s 2-year “statute of repose” for probate claims; which means no matter how spectacular your win might be at trial, you’ll never see a dime because you can’t enforce your judgment in probate. Does this nightmare scenario ever actually happen? YES! see here, here.

One way to get around the ultra-short probate claims periods is to target non-probate assets. A life insurance policy, annuity contract or individual retirement account that is payable to a specific beneficiary is NOT a probate asset (the transfer’s self-effectuating, there’s nothing for a probate judge to do). The probate-avoidance strategy is most commonly used in cases where the plaintiff is going after the decedent’s insurance policy (a non-probate asset) instead of the assets of the decedent’s probate estate. Sounds good in theory, but does it work in real life? That’s the question answered by the 3d DCA in this case.

Case Study:

The backstory to this case involves a “Coblentz agreement, which is a type of settlement deal that lets you settle someone’s lawsuit against you while simultaneously throwing your own insurance company under the bus for refusing coverage and leaving you to fend for yourself. Here’s how this part of the story was summarized by the 3d DCA:

On February 11, 2011, Reyes filed a personal injury negligence lawsuit (“the negligence lawsuit”) in the circuit court against the Estate, but never filed a written claim in the probate court. Although the Estate tendered the defense of the negligence claim to Infinity, Infinity declined to defend the claim. In January 2013, the Estate settled the negligence lawsuit by entering into a Coblentz agreement with Reyes, in which Reyes and the Estate agreed to the entry of a consent judgment, Reyes agreed not to execute the judgment against the Estate, and the Estate assigned any rights it had against Infinity to Reyes. After Reyes and the Estate entered into the Coblentz agreement and obtained the consent judgment, Reyes sued Infinity in circuit court pursuant to the assignment of rights provision in the Coblentz agreement, alleging in part that Infinity had demonstrated bad faith by failing to defend the Estate in the negligence lawsuit (“the bad-faith lawsuit”).

Can I sue a decedent’s insurance company if my probate creditor claims are time barred? YES

The decedent died in 2009. The negligence lawsuit against his estate wasn’t filed until 2011, and the plaintiff never filed a creditor claim with the probate court. In short, the plaintiff’s claim against the estate was time barred. So does this mean the claim is dead? NO. Why? Because the plaintiff’s going after the decedent’s insurance coverage — which is a non-probate asset — which means the probate creditor-claim deadlines don’t apply. Bottom line, the lawsuit against the insurance company (Infinity) survives, so saith the 3d DCA:

We conclude that although . . . Reyes did not file a claim against the Estate in the probate court within the two-year limitations period, [his judgment] is enforceable against Infinity if coverage is established and there was no fraud or collusion. Our conclusion is fully supported by not only footnote 12 in May, but also by the Fourth District Court of Appeal’s decision in Pezzi v. Brown, 697 So.2d 883 (Fla. 4th DCA 1997).

In Pezzi, the Fourth District held that the plaintiff’s failure to comply with sections 733.702 and 733.710 did not place limitations on the plaintiff’s ability to recover against the decedent’s insurer. Id. at 886. Specifically, the Fourth District held that the jurisdictional limitation under section 733.710 “is specific to the decedent’s estate, the personal representative, and the beneficiaries; the limitation does not extend to the decedent’s insurance policy.” Id. at 885 (emphasis added).

In reaching this conclusion, the Fourth District was “guided by the principle that statutes restricting access to the courts must be narrowly construed in a manner favoring access.” Id. at 886 (citations omitted). Thus, the court held that while:

Section 733.10 represents a decision by the legislature that 2 years from the date of death is the outside limit to which a decedent’s estate in Florida should be exposed by claims on the decedent’s assets … [t]here is no indication that section 733.10 represented a legislative decision to undermine the rights of plaintiffs to recover under tortfeasors’ insurance policies.

Id. at 886 (quotations, citations, and emphasis omitted). . . .

In conclusion, the Fourth District in Pezzi held that, because the plaintiff was not seeking recovery from the estate’s assets, the personal representative individually, or the beneficiaries, “[n]either section 733.702 nor section 733.710 precludes plaintiffs from bringing this cause of action and recovering to the extent that [the deceased tortfeasor] was covered by liability insurance.” Pezzi, 697 So.2d at 886.