Victor v. State Farm Mutual Automobile Insurance Company

CourtDistrict Court, D. Arizona
DecidedOctober 23, 2024
Docket2:21-cv-01805
StatusUnknown

This text of Victor v. State Farm Mutual Automobile Insurance Company (Victor v. State Farm Mutual Automobile Insurance Company) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Victor v. State Farm Mutual Automobile Insurance Company, (D. Ariz. 2024).

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8

Darcy Victor, ) No. CV-21-01805-PHX-SPL ) 9 ) 10 Plaintiff, ) ORDER vs. ) ) 11 ) State Farm Mutual Automobile ) 12 Insurance Company, et al., ) 13 ) ) Defendants. ) 14 ) 15 Before the Court is Plaintiff’s Motion for Leave to Amend Complaint or 16 Supplemental Pleading (Doc. 94) (the “Motion”), and Defendant’s Statement of 17 Nonopposition in Response (Doc. 95). The Court now rules as follows. 18 I. INTRODUCTION 19 To sum up the relevant material facts of this case: this case was originally filed as a 20 breach-of-contract action by Kimberly Sannar against State Farm Mutual Automobile 21 Insurance Company (“State Farm”), alleging that she was owed $250,000 as the 22 beneficiary of decedent John Sannar’s insurance policy. (Doc. 1-3 at 6). However, State 23 Farm had already paid out $250,000 to Terry Sutton (“Sutton”), John Sannar’s attorney, 24 who wrongfully accepted the money as a personal injury settlement despite knowing that 25 Mr. Sannar had already passed away. (Doc. 74 at 8). In hindsight, the check never would 26 have issued but for Sutton’s deception, because under Arizona law a claim for personal 27 injury does not survive in favor of the estate after the injured party dies. (Id. at 4; Doc. 24 28 1 at 10). 2 Further complicating this case is the fact that John Sannar was a Medicare 3 beneficiary at the time of his death. (Doc. 84 at 3). The Center for Medicare & Medicaid 4 Services (“CMS”) has broad authority to seek reimbursement from the settlement proceeds 5 for benefits it provided to John Sannar following his accident (Doc. 86 at 5), and it is indeed 6 seeking $107,792.52 as such reimbursement (Doc. 24 at 8). See generally 42 C.F.R. § 7 411.22. However, Kimberly Sannar has engaged in a series of administrative appeals 8 seeking a declaration that the $250,000 tendered by State Farm to Sutton was a wrongful 9 death settlement, not a personal injury settlement, and that CMS is therefore unable to 10 obtain reimbursement from those funds. (Doc. 24 at 9). 11 Plaintiff, who represents Kimberly Sannar’s estate, is now, in essence, seeking to 12 combine the existing breach-of-contract case against State Farm with the administrative 13 case against CMS, as all administrative remedies have been exhausted and her CMS case 14 is ripe for federal district court review. See 42 C.F.R. § 405.1136. She has already joined 15 Xavier Becerra, in his official capacity as the Secretary of the Department of Health and 16 Human Services (the “Secretary”), as a necessary party under Federal Rule of Civil 17 Procedure (“Rule”) 19(a)(1), as she argued that the Court will not be able to accord 18 complete relief among the existing breach-of-contract parties (Plaintiff, State Farm, and 19 Sutton) without resolution of the affiliated CMS dispute. (Docs. 86, 87). 20 II. FACTUAL BACKGROUND 21 The pending Motion arises out of an increasingly convoluted set of facts. On 22 October 5, 2017, John Sannar became the victim of a pedestrian-vehicle accident in Casa 23 Grande, Arizona. (Doc. 62 at 3). At the time, John Sannar was insured by State Farm and 24 carried an underinsured motorist (“UIM”) policy. (Id. at 2). The policy provided $250,000 25 per person and $500,000 per accident in underinsured motorist coverage. (Id.). Shortly after 26 the accident, John Sannar retained Sutton to represent him in a personal injury claim against 27 the driver of the vehicle. (Id. at 3). Sutton then notified State Farm that he was retained by 28 John Sannar to bring a UIM claim. (Id.). 1 Unfortunately, John Sannar passed away on February 14, 2018. (Id.). His daughter, 2 Kimberly Sannar, called Sutton on February 15, 2018, to inform him of John Sannar’s 3 passing, but Sutton failed to disclose John Sannar’s death to State Farm. (Id. at 3–4). As a 4 result, State Farm contacted Sutton and offered to settle John Sannar’s UIM claim for 5 $250,000 on February 27, 2018. (Id. at 4). Sutton accepted this offer despite being aware 6 that he no longer had legal authority to act on behalf of John Sannar, and he once again did 7 not inform State Farm of John Sannar’s death. (Id.). On March 2, 2018, State Farm issued 8 a check for $250,000 to “John Sannar, Sutton Law, P.C., His Attorney & Medicare.” (Id.). 9 Sutton wrote John Sannar’s name on the endorsement line and deposited the entire amount 10 into his client trust account on March 13, 2018. (Doc. 68 at 6; Doc. 24 at 8). On April 20, 11 2018, Sutton disbursed $83,250 to Sutton Law, P.C. as a fee. (Doc. 62 at 5). Kimberly 12 Sannar subsequently obtained outside counsel and demanded that Sutton disgorge the 13 entire $250,000. (Id.). Sutton sent Kimberly Sannar’s attorneys $181,750, which consisted 14 of $166,750 of State Farm funds and $15,000 received from the at-fault driver, but he 15 retained the $83,250 “fee.” (Id.). As of May 29, 2024, the entire $181,750 remains in Gage 16 Mathers Law Group’s IOLTA trust account, pending further decisions in this case. (Doc. 17 85 at 2). 18 On August 13, 2018, the Medicare Benefit Coordination and Recovery Contractor 19 (“BCRC”) informed John Sannar’s Estate that the Estate was responsible to repay the 20 Center for Medicare & Medicaid Services (“CMS”) $107,792.52 for the medical bills 21 associated with the treatment of John Sannar for his injuries relating to the October 5, 2017 22 accident (the “Medicare Lien”). (Doc. 24 at 8). Thereafter, Kimberly Sannar sought an 23 administrative decision by CMS that its Medicare Lien cannot be enforced against the 24 $250,000 UIM settlement tendered by State Farm, because the settlement should have been 25 the settlement of a wrongful death claim, not a personal injury claim, from which CMS 26 would not be able to recover. (Id. at 9). On January 13, 2020, the Recovery Contractor 27 issued an unfavorable decision to Kimberly Sannar, finding that the settlement was for 28 John Sannar’s personal injury claim, not a wrongful death claim, and it was therefore 1 subject to the Medicare Lien. (Id.). On August 17, 2020, a Qualified Independent 2 Contractor also issued an unfavorable reconsideration of the Recovery Contractor’s 3 determination in favor of CMS. (Id.). On December 21, 2020, the Office of Medicare 4 Hearings and Appeals (“OMHA”) also denied Kimberly Sannar’s reclassification request. 5 (Id.). 6 Kimberly Sannar initiated the current action against State Farm in Arizona state 7 court, seeking to enforce her father’s policy for $250,000. (Doc. 1-3 at 6). State Farm 8 removed the case to this Court on October 26, 2021. (Doc. 1). On June 6, 2022, State Farm 9 filed a third-party complaint and crossclaim seeking relief from Sutton for deceptively 10 accepting a settlement payment from State Farm after John Sannar’s death. (Doc. 24). On 11 March 31, 2023, State Farm moved for partial summary judgment on its claims for 12 declaratory relief and constructive trust. (Doc. 61 at 2). On October 18, 2023, this Court 13 granted the motion for partial summary judgment, ordering that the $83,250 held by Sutton 14 Law P.C. should be placed in constructive trust, with Sutton appointed as trustee with the 15 sole duty of turning over the entirety of the funds to Kimberly Sannar’s attorney. (Doc. 74 16 at 9). As of October 25, 2023, Sutton claims that he is unable to perform his duty as 17 constructive trustee, as “there is no monies in the Sutton Law P.C. trust account . . . as they 18 have been expended prior to the lawsuit being filed.” (Doc. 75 at 2). 19 On November 7, 2023, counsel for Plaintiff Kimberly Sannar advised the Court that 20 Ms. Sannar had unfortunately passed away. (Doc. 76 at 3).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Foman v. Davis
371 U.S. 178 (Supreme Court, 1962)
United Mine Workers of America v. Gibbs
383 U.S. 715 (Supreme Court, 1966)
Steckman v. Hart Brewing, Inc.
143 F.3d 1293 (Ninth Circuit, 1998)
ASARCO, LLC v. Union Pacific Railroad
765 F.3d 999 (Ninth Circuit, 2014)
Jackson v. Bank of Hawaii
902 F.2d 1385 (Ninth Circuit, 1990)

Cite This Page — Counsel Stack

Bluebook (online)
Victor v. State Farm Mutual Automobile Insurance Company, Counsel Stack Legal Research, https://law.counselstack.com/opinion/victor-v-state-farm-mutual-automobile-insurance-company-azd-2024.