Ruling lets foster mom to 'profit from her own neglect,' attorney says
BY ZIVA BRANSTETTER World Enterprise Editor
Friday, October 19, 2012
10/22/12 at 2:02 PM
See the filings:
Read the 10th U.S. Circuit Court of Appeals’ ruling.
Read the original lawsuit filed in Tulsa County District Court over the death of Aurora Espinal-Cruz.
An appeals court ruling has allowed a Tulsa foster mother to "profit from her own neglect" by collecting about $1 million in insurance proceeds after a baby died in her care, according to court records and a motion by an attorney representing the child's estate.
The ruling Wednesday by the 10th U.S. Circuit Court of Appeals found that children in Oklahoma's foster care system or their estates have no right to file "bad faith" lawsuits against companies providing insurance for the state.
Although the baby's estate won a $24 million judgment in state court against the foster mother, she had no funds to pay the judgment. Two insurance companies providing policies for DHS claimed that their policies shouldn't have to pay the claim, and the matter wound up in federal court.
In order to collect the judgment, attorneys representing the baby's estate had to agree to give the foster mother a portion of any settlement proceeds from their federal "bad faith" lawsuit against the insurance companies.
U.S. District Judge Gregory Frizzell ruled that foster children lack standing to bring such lawsuits, preventing the baby's estate from collecting on the entire judgment, and the 10th Circuit's ruling upheld that decision.
Michael Barkett, an attorney representing the estate of 7-month-old Aurora Espinal-Cruz, said the firm plans to contest the ruling.
"If it (the ruling) stands, it preserves the ability of insurance companies to collude with negligent foster parents, avoid accountability to foster kids, and forecloses foster kids' rights to protect and enforce their rights against such conduct," Barkett said.
However, Keith Taunton, a spokesman for Colony Insurance Co., said, "The holding by the 10th Circuit in this appeal merely reaffirms Oklahoma law regarding the interpretation of insurance contracts generally and does not change anything as far as foster parents or the DHS foster program are concerned."
Colony was one of two insurance companies paid by the Oklahoma Department of Human Services to provide liability insurance under the foster care program.
Aurora was 7 months old when she died in 2002 in the Tulsa foster home of Deanza Jones. No criminal charges were filed against Jones in the death.
But Barkett's appeal to the 10th Circuit alleges that "while under the custody and care of foster parent Deanza Jones, Aurora suffered and died an agonizing death while left neglected and unattended for many days."
"Aurora was found to have been suffering from untreated viral respiratory illness for days. She died by suffocation on her own emesis and coughed up blood while left abandoned by Jones in a filthy crib infested by cockroaches. Aurora's skin in and around her diaper area had been eaten away by cockroaches," the appeal states.
In filings that were part of a state lawsuit against her, Jones denied allegations that she neglected the child.
Aurora and her 4-year-old sister, Casandra, were placed in Jones' home shortly before Aurora's death Jan. 27, 2002.
A teacher noticed bruises on the older girl, and DHS investigated whether the bruises were caused by "their stepfather's harsh discipline," court records state. The girls' mother, Jamie Cruz, "was never accused or suspected of any abuse or wrongdoing," Barkett's appeal states.
In 2003, Cruz's estate sued Jones, DHS and several DHS employees individually in Tulsa County District Court.
The estate's attorney alleged that DHS had received child-abuse complaints against Jones in the past. About nine months after Aurora's death, Tulsa police investigated a new report of child abuse and arrested Jones on a complaint of injury to a minor child, an arrest report states. She was later charged on accusations that she struck an 8-year-old boy several times with an extension cord, injuring his leg.
Jones admitted her guilt and received a two-year deferred sentence, records show.
DHS dropped Jones and her husband from its foster program because of the child abuse allegations in 2002, officials said. The lawsuit also alleged that DHS workers failed to notify Aurora's foster parents of her respiratory illness.
DHS settled the lawsuit for the maximum allowed under state law, $175,000, and was dropped as a defendant from the suit.
DHS was required by state law to provide liability insurance coverage for foster parents and purchased the coverage from Colony and United National Insurance Co.
Barkett said the companies rejected an offer to settle the state case for the maximum limits of each policy: $600,000 combined.
After a trial in 2007, a jury returned a $20 million verdict against Jones, which grew to $24 million with interest, records show.
But the insurance companies claimed that their policies shouldn't have to pay the judgment. In such cases, those who hold insurance policies - in this case, the foster mother - can file "bad faith" claims to collect judgments, alleging that insurance companies should have paid claims under the policy.
The issue of whether a foster child had standing to file such a lawsuit against an insurance company had not been decided in Oklahoma before, Barkett said. He said the estate was forced to work with Jones to try to collect the judgment. However, Barkett said Jones refused to press a bad faith claim against United, which began providing her with legal representation after the trial.
Legal filings allege that United secretly paid Jones $100,000 to broker a settlement with Aurora's estate after the $20 million verdict was returned.
United settled with the estate and was dismissed from the case for $2.75 million.
Colony sued Aurora's estate in federal court three months after the jury verdict. Colony's suit claims that it had no duty to pay the $24 million judgment or defend Jones.
Barkett countersued both insurance companies, claiming that they acted in bad faith. He said as part of the deal to settle the United claim, Aurora's estate had to agree to give Jones 25 percent of any money collected in the federal suit against Colony.
During discovery, Colony produced documents showing that its policy actually did cover the estate's claims and that its legal exposure was large "due to the egregious facts of the case," Barkett's appeal states.
During settlement talks in federal court, "Jones and Colony abruptly broke away from the estate at an apparently pre-determined negotiation point, entered a separate room and literally locked the estate out," Barkett's appeal states.
"Inside, Jones and Colony brokered a collusive 'settlement agreement' for a fractional amount of the realistic damages exposure faced by Colony," his appeal states.
Records show that Colony agreed to pay the estate $4 million to settle Jones' claims in the federal suit, with about $1 million going to Jones and the rest to the estate, per her agreement.
However, the estate continued to try to collect the rest of the judgment in state court.
On Feb. 16, 2010, Frizzell entered a judgment in favor of Colony and against the estate. Frizzell also denied Barkett's request to bring the issue before the Oklahoma Supreme Court.
In his appeal to the 10th Circuit, Barkett states: "This case could have far reaching effects for the good of the public. ... A foster parent should not be able to profit from her own neglect by forcing the foster child's estate to have to agree to her terms or else have no cause of action at all. The insurance company should not be permitted to make 'backroom' deals with the foster parent to discount its exposure and thwart the verdict of a jury."
But John Heil III, an attorney representing Jones in the federal case, said such claims are "absolutely unfounded."
"If we would not have presented a claim against Colony, the estate never would have received what it did," Heil said.
The 10th Circuit ruling upholds Frizzell's finding that foster children lack standing to bring such lawsuits.
"These statutes, even read together, do not indicate that the provision of liability coverage to the foster parent is intended or required to benefit the foster child. Instead, it could protect the foster parent from liability resulting from the foster care arrangement," the appeals court's ruling states.
Oklahoma's administrative code states: "Liability insurance is provided for foster families for damages incurred by children in OKDHS custody. Such insurance is not "permissive."
Title 74 of state law states that the "primary purpose for purchasing such insurance" is "for injuries or damages arising out of the foster care relationship and the provision of foster care services."
Original Print Headline: Court lets foster mother net $1M
Ziva Branstetter 918-581-8306
Seven-month-old Aurora Espinal-Cruz died of a respiratory infection while in DHS foster care. Courtesy