Judge: Mark H. Epstein, Case: SC127208, Date: 2024-11-22 Tentative Ruling
Case Number: SC127208 Hearing Date: November 22, 2024 Dept: I
This is a case about allocating settlement proceeds. The case was originally brought by Miriam
Sharkh (the court will use first names throughout due to similar last names; no
disrespect is intended) against defendant, an insurer who Miriam alleged cut
off her health care coverage for improper reasons at a time when she had
significant medical needs and expenses, including one covered child, Liam, who
had a life threatening illness, and her other child, Levi. After some number of years, Liam succumbed to
the illness and has passed away. Miriam
sued on her own behalf as well as on behalf of Liam and Levi. Liam’s and Levi’s father is Benjamin
Holfeld. Benjamin and Miriam are not
married or together at present. At one
point, defendant expressed a concern that Miriam could not enter into
settlement discussions because of a potential conflict of interest between her
and Liam’s interest and Levi’s interest.
Specifically, there was a concern that defendant would settle but Levi
or someone representing Liam’s interest might later sue and claim that the
settlement was no bar. Following a
series of hearings, the court found enough of an issue to allow Benjamin, who
had custody of Levi, to represent Levi’s interests as well as those of
Liam. (The court wants to thank again
minor’s counsel, Arthur Lin, who aided the court in those matters even though
minor’s counsel was not compensated for that effort.) The parties eventually agreed that the
plaintiffs (all of them) could settle with the defendant for a sum certain and
the court would approve the amount as sufficient, thereby allowing the
defendant to buy peace. However, Miriam,
Levi, and Liam (through Benjamin) could not agree on how the sum would be
divided. To move things forward, all
parties agreed that if the court found the total to be sufficient, the court
could approve the settlement and release the defendant. The court examined the settlement and
concluded that the total sum was sufficient.
The court warned all of the parties, though, that although the total was
sufficient, it was possible that all or almost all of the sum could be awarded
to Levi or Liam or Miriam leaving little
for Miriam or the other child or both.
Everyone agreed to that.
The court was hopeful that the parties would be able to work
among themselves to achieve a fair and equitable division of the total amount
available. Alas, such was not to be the
case. Miriam believes that she should
receive 95% of the recovery, with 5% going to Levi and nothing to Liam. Benjamin, on the other hand, believes that
90% should go to Levi, 5% to Liam, and 5% to Miriam. A sad pattern has developed.
The court has read the papers in the case. The court is not, at this juncture, going to
make specific awards. But what the court
will do is set forth its thinking as to the priorities of recovery. Preliminarily, there is a question of
Miriam’s standing. The court finds that
she does have standing. For the reasons
set forth below, she has claims that it is proper for her to bring. While she is not able to assert Liam’s claim
or Levi’s claim now that Benjamin has been designated the GAL, she can still assert
her own claims. She was a named insured
under the policy, and both Liam and Levi were minors under her care during the
relevant time. That is more than enough
for her to seek a recovery for her own injuries as well as to seek a bad faith
recovery against the defendant. (Hatchwell
v. Blue shield of California (1988) 198 Cal.App.3d 1027.)
The court believes that the plainest and clearest damages or
recovery, and therefore the first priority, would be medical expenses that
ought to have been covered for Liam or Levi but were not, and for which Miriam
paid out of pocket for treatment for Liam or Levi. That sum will bear interest from the date it
was actually paid until now. Of equal
rank will be any sums that ought to have been covered and for which Miriam or
Benjamin remain liable. In other words,
if there is a hospital bill for $5000 and it has not been paid but Miriam or
Benjamin can be sued, that also ought to have first call on the proceeds. Of course, any such sum will not bear
interest and will be paid directly to the creditor.
The next priority would go to medical bills that ought to
have been covered for Miriam but for which Miriam had to pay out of
pocket. This is NOT for medical bills
that Miriam incurred because she had to undergo the difficulty of dealing with
Liam’s illness or the like. It is a
direct bill for a service that was in fact covered and for which she was in
fact billed and that she did in fact pay.
That sum will bear interest from the date of payment.
Next would be for medical bills that ought to have been
covered for Miriam and that Miriam did not pay but for which she is still
liable as a legal matter. Those sums do
not bear interest and would be paid directly to the medical creditor.
The court believes that this ought to cover any outstanding
medical bills that were directly incurred and for which there was or must be a
payment.
The next priority will go to medical expenses that have been
or will be incurred for Levi or Miriam directly caused by defendant’s failure
to pay at an earlier date. An example
might be a situation where minor covered surgery could have corrected a problem
and Miriam was set to have the surgery but had to cancel it due to a lack of
funds. By the time Miriam had the funds,
hypothetically, minor surgery was no longer an option and major surgery was
required and Miriam had to go out of pocket to have the surgery. The same is true of Levi. The court is not sure that there actually are
any expenses that fit within this category, but to the extent that there are,
they would be next. The party claiming
this recovery would have the burden of proving the causation.
The next priority would be therapy, if any, that can be tied
directly to additional emotional trauma that Miriam or Levi had to go through
due to the failure to pay insurance proceeds.
Miriam notes that Levi was very young when all of this happened,
suggesting that he has little or no trauma related directly to the insurer’s
conduct (as opposed to Liam’s underlying condition). As to trauma that Miriam has, the court views
amounts with some skepticism. The court
would want to see actual past therapy bills—not bills for therapy that is soon
to start—as well as evidence directly from the therapist that the therapy
relates to the insurer’s conduct and not underlying problems, such as losing
work, Miriam’s other medical issues, or the general trauma from Liam’s or
Levi’s condition.
That should deal with medical issues writ large. The next topic is other damages. Miriam claims damages for emotional distress
and lost income. Levi claims damages for
emotional distress. The court puts aside
for a moment punitive damages.
Miriam claims a whole lot of lost wages. The court is not fully convinced. The court agrees that Miriam likely had to
give up some work to be able to care for Liam.
The court would be inclined to award her the lost income related to
Stanford for the time that she lost the income through the time of Liam’s death
plus one year or the time she no longer had custody of him, whichever is
first. The notion of Liam’s death plus
one year is to recognize the fact that her time to work was limited due to
Liam’s condition, and that it would take some time to find new employment after
he passed. Miriam apparently continued
work at the London School of Economics.
The “extra classes” that Miriam might have taught would require more
proof than is currently before the court.
And the film income is likely speculative at best. The court has some experience in the industry,
and profits from documentaries are scarce to put it nicely. While the court recognizes that Miriam’s film
claims are not profit-related but rather go to payments that she would have
received from funders who wanted to make the film, even that is
speculative. The court does not see
strong evidence that supports her claim that she would have made $250,000
directing these works. Miriam also seeks
a significant amount of money for lost future earnings because she will never
be able to work fully again. The court
is not convinced that these future lost earnings—long past the date of Liam’s
death—can be attributable directly to the carrier’s failure to pay
benefits. The court is not saying that
were the matter to go to trial Miriam could not prove this up, but it is to say
that the proof as it stands is inadequate and the court would need to be
convinced about what appears to be speculative damages.
As to emotional distress damages (which are next in the
waterfall), the court is not overwhelmed.
Liam is not entitled to any under the law. As such, any emotional distress would be
recoverable only by Miriam and Levi. The
court agrees with Miriam that Levi was young and that the bulk of the burden
would fall on Miriam during the period in question. Thus, the court would be inclined to award
them 2:1 in favor of Miriam, but capped at an amount equal to the other
recoveries. That ratio, though, is not set
in stone. The court would need to see
and hear the expert testimony on the subject.
This is just a rough approximation given the rather thin state of the
record at the moment. It might change (a
lot) following an evidentiary hearing.
If there is any money left after that, the court would be
inclined to award it in the same ratio between Miriam and Levi.
The court would not award punitive damages here. Punitive damages are designed to punish the
wrongdoer, not compensate the injured party.
Here, the wrongdoer is gone.
Awarding or dividing punitive damages per se does nothing. Further, the court has no idea where the
punitive damages would go to the extent they went to Liam’s estate. Would they go to Miriam? Benjamin?
Levi? The court has no idea. Without such knowledge, that makes little
sense. Nor does the court believe that
awarding them to Miriam makes sense. But
it is probably of no moment. The court
suspects that there will be a shortfall somewhere, and if that is the case, the
court is inclined to view a punitive damage allocation as one that is less
important than the other recoveries. The
court would, though, be willing to at least consider a different outcome if
there turns out to be a surplus.
The foregoing
discusses the settlement proceeds, but not costs of suit or fees. Costs of suit should be paid off the
top. As to fees, it is a bit harder. Miriam’s counsel represents Miriam alone, but
for many years represented Miriam’s interest as well as the interests of Levi
and Liam. Through Miriam’s counsel’s
efforts the case was litigated through the jurisdiction phase and the FNC
phase—and successfully, too, including appellate proceedings that resulted in a
reversal of the trial court’s judgment.
The court would think that Miriam’s counsel ought to be compensated for
that effort and time, and not out of Miriam’s share alone. Rather, the court believes that because the vast
bulk of that effort occurred before others got involved, at least until the
time that defendant brought its motion concerning whether it could settle,
Miriam’s counsel ought to get at least a lodestar type of recovery and off the
top for the period up until that point.
After that, all counsel will have to fend for themselves out of the
share awarded to their respective client or clients.
The court has
deliberately not done a deep dive into the supporting papers detailing the
precise calculations. The court notes
that in many respects, if push came to shove, experts would need to be retained
as to many of the issues raised by this case, most especially things like lost
income, tracing future medical payments (if any) and tying them directly to
defendant’s conduct, and even emotional distress, and the court would likely
need to hear live testimony. The court
very strongly suspects that at some point in the future (or the past) the
parties will have come to a point of diminishing returns. The court is hoping that with the foregoing
thoughts, the parties will be able to reach an accord. The court will say right off the top that it
would be surprised if either Miriam or Levi wound up with 90% or 95% of the
income. (The court does agree that to
the extent that Levi recovers, at least much of the money ought to go into a
blocked account.) Now would be a good
moment to settle.
In the meantime,
the court will set a status conference for some months out to see if the
parties are making progress.