Fight Beyond the Grave Saves Estate $1.48 Million

Mark Knauerhaze lost about half of his hearing in his left ear due to otosclerosis, a condition where a bone in the middle ear becomes stiff and stops vibrating. He sought treatment from Dr. George W. Allen, who recommended a surgery whereby part of this bone would be removed and replaced by a prosthesis.

During the surgery, Dr. Allen attempted the procedure several times unsuccessfully, and the patient began bleeding in the ear. The surgeon decided not to complete the procedure, and Knauerhaze became totally deaf in the ear.

As a result, Knauerhaze suffers imbalance to the point where he can no longer drive or perform his job. The 42-year-old man can’t even walk with ease due to the disequilibrium.

He filed a lawsuit against the doctor. While the lawsuit was pending, Dr. Allen died.

The Illinois Code of Civil Procedure 735 ILCS 5/2-1008(b) provides for the survival of actions. The case can continue in one of two ways: The plaintiff can petition the court to open a probate estate and substitute an executor as the defendant (Sect. 2-1008(b)(1))); or he can ask the trial judge for the appointment of a special representative of the estate (Sect. 2-1008(b)(2)).

The plaintiff opted for the latter procedure. In doing so, he avoided the formalities of opening a probate estate, but the trial court found his actions were subject to the statute’s provision that, "the recovery shall be limited to the procedures of any liability insurance protecting the estate and shall not bar the estate from enforcing any claims that might have been available to it as counterclaims," 735 ILCS 5/2-1008(b)(2).

At trial, a jury returned a verdict for $2.485 million. In a case of first impression, 1^st District Appellate Court Justice Joseph Gordon, in speaking for a unanimous court, found that the plaintiff’s failure to open an estate and petition for probate of Allen’s will limited his recovery to the insurance coverage of $1 million under Section 2-1008(b)(2). Knauerhaze v. Nelson, 836 N.E.2d 640, 663-64, 296 Ill.Dec. 889 (1^st Dist.2005).

The plaintiff argued that the Probate Code, not the Code of Civil Procedure, governed the claim against Dr. Allen’s estate, and his actions did not prohibit him from making a subsequent claim against the decedent’s probate estate for the remainder of the judgment. Knauerhaze contended that the court’s interpretation of Sec. 2/1008 amounted to an unconstitutional legislative remittitur. Id.

But Justice Gordon wrote that the plain language of Sect. 2/1008 is clear, and the court invoked a plain meaning of the statute. "We presume that if the legislature had intended to qualify the limitation of this section in such respects it simply would have put in language making such qualifications." Id., at 664. The court found that the plaintiff’s initial decision to proceed with his claim without opening a probate estate did not "invok[e] the protection and supervision of the probate court and Probate Act." Id., at 664.

"However, correspondingly, in allowing a plaintiff to proceed against a special representative, Section 2-1008(b) limits the amount recoverable to the amount of liability insurance protecting the estate so as not to allow, under those circumstances, the financial depletion of the estate itself." Id.

The court, in other words, made it very clear that a special representative under Section 2-1008(b)(1) is not the same as under the administrator of a probate estate under Section 2-1008(b)(2) for purposes of their duties involving a survival action.

Knauerhaze argued that Section 2-1008(a) of the Rules provided for "Change of Interest or Liability," and, in particular, allows persons to substitute a party where "any other event" results in a change of interest and it becomes "necessary or desirable" that the substitution take place. Id., at 665. The statute provides that "the action does not abate, but on motion and order may be entered that the proper parties be substituted or added, and that the cause or proceeding be carried on with the remaining parties and new parties, with or without a change in the title of the cause."

The court, however, was not persuaded and read Section 2-1008(b)(2) strictly to find that it restores potential liability only to the extent of the liability insurance. The court reasoned that with the substituted special representative, "Dr. Allen’s estate had no opportunity to defend its interests during trial." Id.

Although the court found that there is a strong presumption that legislative enactments are constitutional, in this case it appears that perhaps the legislature, in creating both the right and the remedy, simply did not consider that such a situation would amount to an unconstitutional taking after a jury has spoken.

In any event, the lesson for Knauerhaze is a hard one: If the judgment is expected to be beyond the insurance coverage for the decedent, plaintiff should petition the court to open a probate estate and ask for an executor, because a special administrator under Section 2-1008(b)(2) can not distribute assets of the decedent’s estate to satisfy a judgment against a defendant. The statutory power of a special administrator, according to the Knauerhaze case, is limited strictly to defending the action against the decedent to the extent of the insurance coverage.

Although the probate process may take more time and mor paperwork, it may well b worth it to protect the judgment.

Perhaps the legislature will want to give the laws a second look to see if such a harsh result was intended, particularly when it denies a plaintiff a recovery that a jury found was due.