Compromise Proceeding

Compromise Proceeding in Surrogate’s Court

Compromise Proceeding in Surrogate’s Court

When an individual dies due to the negligence or wrongdoing of another party, there lies a cause of action for wrongful death and/or conscious pain and suffering (personal injury). Following the appointment of an Administrator, Executor, or Limited Administrator, one can maintain a cause of action for wrongful death. In a typical case, an individual receives Limited Letters with Restrictions which require a compromise proceeding. The restrictions typically read something like:

“LIMITATIONS: These letters confer no power to take possession of or control of any property until further order of this Court, and with respect to a cause of action are limited to the power to prosecute and confer no power to compromise the action, collect any settlement, or enforce any judgment until further order of this Court, or the order of any Court of competent jurisdiction (EPTL 5-4.6”)

Restrictions such as these mean that when a settlement is reached on the underlying lawsuit, in order to receive and distribute the money, the fiduciary must return to Surrogate’s Court and file a Compromise Proceeding. 

What is a Compromise Proceeding?

EPTL 5-4.6 provides the Surrogate with the authority to approve an application for compromise proceeding in a wrongful death action. This means that the Surrogate’s Court will issue an Order directing the amount of money that each distributee or beneficiary is entitled to from the lawsuit.

There are typically two types of allocations. There is an allocation pursuant to EPTL 4-1.1. That allocation is reserved for the wrongful death cause of action. In the case of VCF claims, distribution pursuant to EPTL 4-1.1t is also reserved for the non-economic loss portion of the award. The pain and suffering portion is typically distributed in accordance with the Kaiser formula, or EPTL 5-4.4 and EPTL 5-4.3. The pain and suffering portion of a compromise proceeding is not distributed in accordance with EPTL 4-1.1 and may vary depending on the number of people dependent on the Decedent and their degrees of dependency. Typically the pearson or people who were most dependent on the Decedent (spouse, disabled child(ren), underage child(ren) will receive the largest share)

 In order for the Surrogate’s Court to determine how much each person gets, it is necessary to file a petition with the Court.

What should a Petition for a Compromise Proceeding Contain?

Pursuant to EPTL 5-4.6, with limited exception, the fiduciary of the estate must file a compromise proceeding seeking to have the settlement of the lawsuit approved by the Surrogate’s Court. The Petition must include the basic facts surrounding the wrongful death matter, the Distributees, the desired allocation between the pain and suffering award and those attributed to wrongful death and litigation expenses. Information on the expected contents of the petition can be found in the Uniform Rules For The Surrogate’s Court Section 207.38 

Section 207.38 provides that:

(a) Upon any application for leave to compromise a claim for wrongful death or personal injuries, or both, the petition and the supporting affidavits shall set forth the time, place and manner in which the decedent sustained the injuries, and a complete statement of all such facts as would justify the granting of the application. If the cause of action did not arise under the laws of the State of New York, the laws of the jurisdiction under which said cause of action arose must be established to the satisfaction of the court.

(b) The petition also shall show the following:

(1) the age, residence, occupation and earnings of the decedent at time of death;

(2) the names, addresses, dates of birth and ages of all the persons entitled to take or share in the proceeds of the settlement or judgment, as provided by EPTL 5-4.4, or by the applicable law of the jurisdiction under which the claim arose, and a statement whether or not there are any children born out of wedlock;

(3) a complete statement of the nature and extent of the disability, other than infancy, of any person set forth in paragraph (2) of this subdivision;

(4) the gross amount of the proceeds of settlement, the amount to be paid as attorneys’ fees, and the net amount to be received by petitioner as a result of the settlement;

(5) any obligations incurred for funeral expenses, or for hospital, medical or nursing services, the name and address of each such creditor, the respective amounts of the obligations so incurred, whether such obligations have been paid in full and/or the amount of the unpaid balance due on each of said claims as evidenced by proper bills filed with the clerk;

(6) whether any hospital notice of lien has been filed under section 189 of the Lien Law, and if so, the particulars relating thereto;

(7) on the basis of the applicable law, a tabulation showing the proposed distribution, including the names of the persons entitled to share in the proceeds and the percentage or fraction representing their respective shares, including a reference to the mortality table, if any, employed in the proceeding which resulted in the settlement or judgment, and the mortality table employed in the proposed distribution of the proceeds; and

(8) the cost of any annuities in compromises based upon structured settlements in wrongful death actions.

(c) Where the petition also makes application for the compromise of a claim for personal injuries sustained by the decedent, the petition shall set forth the amount allocated to each cause of action, the basis for such allocation, the effect of such allocation on decedent’s estate tax liability, and proof of the citation of the New York State Department of Taxation and Finance, or their waiver thereof.

(d) A supporting affidavit by the attorney for petitioner must be filed with each petition for leave to compromise, showing:

(1) whether the attorney has become concerned in the application or its subject matter at the instance of the party with whom the compromise is proposed or at the instance of any representative of such party;

(2) whether the attorney’s fee is to be paid by the administrator, and whether any payment has been or is to be made to the attorney by any other person or corporation interested in the subject matter of the compromise;

(3) if the attorney’s compensation is to be paid by any other person, the name of such person;

(4) the services rendered by the attorney in detail; and

(5) the amount to be paid as compensation to the attorney, including an itemization of disbursements on the case, and whether the compensation was fixed by prior agreement or based on reasonable value, and if by agreement, the person with whom such agreement was made and the terms thereof.

(e) In an application for the compromise of a claim solely for personal injuries, the petition shall contain all the facts in relation to such claim and comply with as much of the provisions of this rule as are applicable, and in addition, the petition shall recite the date letters were issued, whether more than seven months have elapsed from such date, the names and post-office addresses of all creditors, or those claiming to be creditors, and the distributees of the decedent, specifying such as are infants or alleged incompetents.

(f) Whenever papers are filed for the compromise of a cause of action in which the original action alleged conscious pain and suffering and wrongful death, and the action is subsequently settled for wrongful death only, the waivers and consents of any adult distributees who will not share in the recovery must recite that they are aware that, by consenting that the entire settlement be considered as a settlement of the cause of action for wrongful death, they are waiving the right to receive any distributive share out of the settlement.

In layman’s terms, The compromise proceeding itself must be supported by: 1) an Attorney Affirmation, reciting legal services rendered, specific means of attorney compensation  2) a simple accounting by the Fiduciary of the Estate including the gross proceeds, expenses, and a proposal detailing the allocation of the funds; and 3) a proposed Decree setting forth the distribution. 

What happens after The Petition is filed?

The Court will review the Petition. The Court must obtain Jurisdiction over all interested parties and distributees as well as the New York State Department of Taxation and Finance. Jurisdiction can be obtained either by having the distributees execute a waiver and consent or by the Court issuing a Citation and thereafter having Citation served upon the distributees. 

After jurisdiction is complete, the Court will determine whether there are any objections. If there are no objections, then the Court will issue a Decree approving the proposed allocation. Typical objections in a Compromise Proceeding center around how much certain individuals who have varying degrees of dependency on the Decedent may be entitled to. For example, a spouse may need more money because she may have been more dependent on the Decedent than the Decedent’s grown children who no longer resided with the Decedent at his death. 

Does a Compromise Proceeding ALWAYS have to be filed?

The answer is no. Pursuant to EPTL 5-4.6(g), there is an exception for recovery of an award from the September 11th Victim’s Compensation Fund. Where the award consists solely of non-economic losses (funeral expense reimbursement being included as non-economic losses herein) a personal representative may file a consent to the adequacy of the award by all interested parties in lieu of a compromise proceeding.

We routinely assist Personal Injury and 911 Victim’s Compensation Fund attorneys with their compromise proceedings.

For more information, please contact NYC Probate Litigation, Guardianship, NYC Probate and Estate Planning attorney Regina Kiperman:

Phone: 917-261-4514
Fax: 929-556-2089

Or visit her at:
40 Wall Street
Suite 2508
New York, NY 10005

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