Claim Against Estate Offset By Tobacco Company Litigation

JANUARY 6, 2003 VOLUME 10, NUMBER 27

Beginning in the mid-1990s many states filed litigation against major tobacco companies (or joined existing litigation) seeking reimbursement for the some of the costs of treating smokers. After those lawsuits resulted in recovery of $1.3 billion for the states, a number of smokers (and the families of deceased smokers) filed court actions seeking a share of the settlement money. Those claims have been universally rebuffed—until the family of Geraldine Raduazo came up with an argument that persuaded the New Hampshire Supreme Court that her estate should benefit from the tobacco litigation.

Ms. Raduazo, a lifelong smoker, had developed a number of medical problems relating to her smoking habit. She required extensive medical treatment, and she could not pay for all of it. Like other indigent patients in need of medical care, Ms. Raduazo applied for and received coverage through the Medicaid program. By the time of her death in 1997 she had received $169,765.16 in benefits from Medicaid.

Federal law requires every state to have a mechanism for seeking recovery from the estates of deceased Medicaid recipients, and so the New Hampshire program initiated a recovery action against Ms. Raduazo’s home—the only asset she left in her estate. Because the home was valued at about $60,000 the state’s claim would completely consume the proceeds from its sale, leaving nothing for her family.

Ms. Raduazo’s estate argued that New Hampshire’s share of the tobacco litigation settlement was based at least partly on the claims of smokers like Ms. Raduazo. In effect, argued the estate, New Hampshire had already taken her most valuable property—her claim against the tobacco companies—in satisfaction of any right it might have to recover the cost of medical care from her or her estate. Ms. Raduazo’s estate and heirs might not be entitled to any money from the tobacco settlement itself, the estate reasoned, but the state should not be allowed to also take her home to satisfy the debt.

The probate court sided with the state and dismissed the estate’s claim, but the New Hampshire Supreme Court reversed that decision. The final resolution is not yet known, because the higher court directed that the probate court conduct further proceedings. The probate judge must now consider how much of Ms. Raduazo’s illness was related to smoking, what portion of the settlement should be attributed to her claim, and other items as directed by the state’s highest court. Estate of Raduazo, December 18, 2002.

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