LEARN
MORE

CalSTRS Was Entitled to Recover Benefits Paid to a Teacher Who Settled Her Malpractice Lawsuit Without Notifying Them

CATEGORY: Public Education Matters
CLIENT TYPE: Public Education
DATE: Sep 30, 2024

In March 2015, Arasely Soto, a teacher in the Beaumont Unified School District, suffered a severe cerebral artery stroke during a routine medical procedure at San Gorgonio Memorial Hospital. The stroke caused significant brain injury, rendering her unable to work.

In July 2015, Arasely Soto and her husband Raul Soto initiated a medical malpractice lawsuit against the hospital and Dr. Devin Borna, one of her treating physicians. The lawsuit sought damages for lost wages, medical expenses, and general damages due to the alleged negligence of the medical providers. In March 2017, Dr. Borna served a subpoena on the State Teachers’ Retirement System (CalSTRS) for records regarding Arasely Soto’s pension benefits. CalSTRS provides retirement, disability, and survivor benefits to California’s public school educators and their beneficiaries. CalSTRS complied with the subpoena in April 2017 by producing the requested documents. Additionally, CalSTRS sent a letter to Arasely Soto’s counsel in the malpractice action, informing them that it was complying with the subpoena and providing the records.

In January 2018, the Sotos attended a CalSTRS benefits planning session. During the session, CalSTRS provided the Sotos with written materials that explained their rights and obligations. These materials included a detailed explanation of CalSTRS’s right of subrogation, which would allow CalSTRS to recover its costs from the third party that was responsible for the injury. The materials explained that if the Sotos pursued a claim against a third party for Arasely Soto’s injury, they had to notify CalSTRS. This would allow CalSTRS to intervene in the claim, file its own action, or place a lien on any judgment or settlement. The materials also explained that if the Sotos did not notify CalSTRS and they recovered money from a third-party settlement, they might have to reimburse CalSTRS for the disability benefits.

One day after this session, the Sotos settled their claims against Dr. Borna for a six-figure amount without notifying CalSTRS. Ten days later, in January 2018, Arasely Soto applied for disability benefits with CalSTRS. In February 2018, CalSTRS acknowledge receipt of her disability benefits application. In May 2018, the Sotos settled their claims against the hospital for a seven-figure amount, again without notifying CalSTRS. In late June 2018, CalSTRS approved Soto’s application for disability benefits. CalSTRS later learned of the Sotos’ settlements.

In May 2021, CalSTRS filed a lawsuit against the Sotos, seeking reimbursement for the disability benefits it had paid. CalSTRS alleged that its right to reimbursement was based on Education Code sections 24500 and 24502, which authorize recovery from third parties who caused the injury. Additionally, CalSTRS argued that the Sotos had deprived it of its subrogation rights by failing to notify it of the settlements and obtain its consent.

CalSTRS’s moved for summary adjudication, asking the trial court to declare that it was entitled to statutory and equitable subrogation or reimbursement from the Sotos. The Sotos moved for summary judgment, arguing that Education Code did not authorize recovery directly from them and that the Civil Code barred CalSTRS’s reimbursement claim. California Civil Code section 3333.1 is part of the Medical Injury Compensation Reform Act (MICRA). It allows a medical malpractice defendant to introduce evidence of collateral source benefits, such as disability or insurance payments, to reduce damages awarded to the plaintiff. If these benefits are introduced, the collateral source is prohibited from seeking reimbursement or subrogation. In other words, sources like disability insurers cannot recover their payments if the defendant uses them to offset damages.

The trial court granted CalSTRS’s motion for summary adjudication, finding that CalSTRS had a statutory right to seek reimbursement. The trial court ruled that these sections allowed CalSTRS to recover directly from the Sotos because the Sotos had settled with the defendants without notifying CalSTRS or obtaining its consent. The trial court concluded that the Civil Code did not bar CalSTRS’s claim. It reasoned that section 3333.1 did not apply because Arasely’s disability benefits were not introduced as evidence in the malpractice action to offset the recovery. It also found that the Education Code provisions, enacted after section 3333.1, took precedence over section 3333.1.

The Sotos appealed, asking the court of appeal to direct the trial court to vacate its orders and recognize that section 3333.1 barred CalSTRS’s reimbursement claim.

The court of appeal denied the petition. It concluded that CalSTRS had a valid statutory right to seek reimbursement directly from the Sotos. The court of appeal reaffirmed that the Education Code provisions allowed CalSTRS to recover directly from the Sotos since they had settled their claims without notifying CalSTRS or obtaining its consent. The court of appeal noted that the Sotos had not segregated their claims in the settlements. This means they did not specify which portion of the settlement was for damages already covered by CalSTRS’s disability payments and which portion was for other types of damages such as pain and suffering. Therefore, CalSTRS was entitled to pursue reimbursement directly from the Sotos for all of the benefits it had paid.

The court of appeal ruled that California Civil Code section 3333.1 did not bar CalSTRS’s recovery because the medical malpractice defendants did not introduce evidence of Arasely Soto’s CalSTRS disability benefits.

The court of appeal affirmed the trial court’s decision and denied the Sotos’ petition for writ of mandate.

Soto v. Superior Court (2024) 102 Cal.App.5th 429 [321 Cal.Rptr.3d 531].

View More News

Public Education Matters
University Cannot Allow Protesters to Render Programs or Campus Areas Less Accessible to Jewish Students
READ MORE
Public Education Matters
AB 218’s Retroactive Waiver of the Claim Presentation Requirement is not an Unconstitutional Gift of Public Funds
READ MORE