Wrongful Death Proceeds

Posted by Matthew Garretson

Question:
Matt,
An associate suggested I give you a call. I have a proposed limits offer from the client's UM carrier that is far less than the liens from Medicare and Aultcare. I can show that the client was not conscious after the accident although she did not die immediately, hence the high treatment costs and the resulting lien. My understanding was always that wrongful death benefits cannot be touched by creditors. The probate court would probably characterize the proceeds that way, and the insurance company may also be willing to put language in the release that they are paying the limits to the wrongful death beneficiaries for the wrongful death. Is that enough? What is the best way to approach Medicare and Aultcare? No action has been filed. Husband was driving and caused the accident that injured the wife. Two adult surviving children. Any thoughts?

-Ohio Attorney

Answer:
We would be happy to assist. Here are some thoughts - The allocation should work for Medicare, but I doubt it will work for Aultcare (we would need to review the policy language and we are happy to do so). With respect to Medicare, it can only recover from the survivorship portion. With respect to allocation, however, Medicare is not bound by an allocation that has not been designated by a court on the merits of the case. “The only situation in which Medicare recognizes allocations of liability payments to non-medical losses is when payment is based on a court order on the merits of the case. If the court or other adjudicator of the merits specifically designates amounts that are for payment of pain and suffering or other amounts not related to medical services, Medicare will accept the Court's designation.” Medicare Intermediary Manual, § 3418.7. Thus, Medicare will not be bound by the terms of a private settlement agreement, and may still seek recovery from such a settlement, regardless of its terms.

The rules as I know them are as follows:

(1) Recovery Limited to state created rights. Medicare Secondary Payor rules (42 USC § 1395y(b)(2), 42 CFR §§ 411.24, 28) limit recovery to medical expenses incurred by the decedent. Medicare recovery does not extend to state-created rights for the decedent’s family to recover for his or her wrongful death, unless the Ohio statutes provide that medical expenses are recoverable by the beneficiaries as part of their claims under Ohio’ wrongful death statute.

(2) Ohio’s Wrongful Death Act. Ohio provides a cause of action whenever the death of a person is caused by wrongful act, neglect or default, and the act, neglect or default would have entitled the injured party (had he or she not died) to maintain an action for damages against the liable party. ORC § 2125.01.

(3) From Which Claim Are Past Meds Recoverable? Under Ohio law, medical expenses paid by Medicare (on a conditional basis) are not recoverable from the wrongful death “estate”. Instead, a wrongful death action may be brought for the “exclusive benefit” of the decedent’s heirs. Recovery for wrongful death extends only to compensatory damages which include: loss of support; loss of services; loss of society; loss of prospective inheritance, and; mental anguish. ORC § 2125.02(B). No provision is made for recovery of the decedent’s medical expenses.

(4) Ohio Survival Act. Recovery of a decedent’s medical expenses must be pursued through a separate action on behalf of the decedent’s estate. Compensatory damages which include past medical expenses (paid by Medicare) are recoverable under Ohio’s Survival Act. ORC § 2305.21. Actions which survive death include actions for “injuries to the person.”
a. Survival action allows for recovery of damages for injuries sustained by deceased up to time of death. Jones v. Wittenberg University, 534 F.2d 1203 (6th Cir. 1976) (Applying Ohio law; reversed on other grounds)
b. In contrast with wrongful death actions, survival actions are not concerned with the wrong to the beneficiaries, but rather the wrong to the decedent. Jones v. Wittenberg University, 534 F.2d 1203 (Applying Ohio law; reversed on other grounds)

(5) Is there any authority for this Medicare lien recovery position? Yes.
a. In United States Fidelity & Guaranty Co. v. Decker, 122 Ohio St. 285 (Ohio 1930), the Ohio Supreme Court ruled that assets gained through a wrongful death action are not the assets of the estate. “It is not property which belonged to the decedent in his lifetime, and the claim did not come into existence until his death.” As such, the proceeds do not belong to the estate, but must be distributed to the beneficiaries.
b. In Fogt v. United Ohio Ins. Co., 76 Ohio App. 3d 24 (Ohio App. 1991), the Ohio Appellate Court held that, as wrongful death proceeds are not considered full assets of the estate, they “may not be used…to satisfy the decedent’s general or contracted debts.” See also State ex rel. Goldberg v. Mahoning County Probate Court, 93 Ohio St. 3d 160 (Ohio 2001).

(7) What do we learn from these cases? Decker and Fogt demonstrate that, in Ohio, recovery from a third party liability settlement (or award) under the Wrongful Death Act is:
-received by individuals to whom Medicare gave no benefit and not intended to reimburse for past medical expenses paid by Medicare;-not fully considered to be a part of the estate, and may not be used to satisfy the debts of the estate.

Proceeds allocated to or resulting from an action under the Survival Act include: -compensatory damages such as past medical expenses, which are allocated to the decedent’s estate, under which Medicare stands in the same shoes as that of any other general creditor.

AND… while Medicare does not expressly limit its right of recovery to exclude wrongful death portions of an award, Medicare is only recovering for medical expenses paid. To that extent, Medicare’s recovery right will follow the estate within which those same medical expenses are claimed as a measure of damages. To the extent that Ohio statutes provide for the measure of damages in both a survival action and a wrongful death action, Medicare will follow Ohio law.

Mary Skinner, our Manager of Medicare Services, can probably answer a host of questions for you on this. We would be happy to resolve both the Medicare and Aultcare issue for you.