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Young Lawyers DivisionThe newsletter of the ISBA’s Young Lawyers Division

December 2011, vol. 56, no. 3

Wrapping up the case: a primer

If you’re just starting out and/or you’re handling one of your first personal injury cases, this one is for you. You’ve settled the case, or you’ve won a judgment in your client’s favor. Congrats! You’ve deposited the money in your trust account, and you just need to disburse the funds. You might feel like you’re finished with the case. Unfortunately, you still have a lot of work to do. Fortunately, there is a light at the end of the tunnel.

First, if Medicare is involved, hopefully you’ve already started the process of obtaining a lien amount from them. This can take months. (See the article in the December 2010 issue, “A quick guide on how to deal with a Medicare lien,” which can be found at: <http://www.isba.org/sections/yld/newsletter/2010/12/aquickguideonhowtodealwithamedicarelien>.

Although there have been minor changes since then, following that step-by-step guide will still get you through the process just fine). After that, there are rights of reimbursement, hospital liens, attorney liens, and outstanding hospital bills to consider.

In order to address the rights of reimbursement, ask: Does your client have auto insurance with a med-pay provision? Does your client have health insurance? If yes to either, did the auto insurance and/or health insurance pay any of the related medical bills? If yes, then that insurer probably has a right of reimbursement pursuant to the insurance policy signed by your client. If no, you get to move on. However, most times your client’s insurance, of some type, has paid for at least some of the medical bills. Assuming that to be the case, has the insurer asserted a lien? If so, you need to contact the insurer to request the final lien amount as well as a copy of the policy to verify that they have a right of reimbursement. Never just assume that the insurance policy has such a right—double check.

If no lien has been asserted, you must speak with your client. Although your client may have an obligation to their insurance company pursuant to a right of reimbursement clause in the contract they signed, you cannot contact the insurer about this without your client’s permission. Fortunately, most clients, when told that their insurance company might have the right to come after them for reimbursement of benefits paid, give you permission to address any obligations they have, so they don’t have to worry about anything else about the case ever again. (Assuming you have permission from your client, contact the insurer just like you would if a lien had been asserted).

Then, assert the Common Fund Doctrine. By law, insurers who seek compensation based on their right of reimbursement are responsible for their share of the attorneys’ fees. See e.g. Morris B. Chapman & Associates, Ltd. v. Kitzman, 193 Ill. 2d 560, 739 N.E.2d 1263, 251 Ill. Dec. 141 (2000). Assuming that your fees are 1/3 of the settlement, judgment or award, this means that the insurers must reduce the amount of their lien by 1/3. Most insurers do this automatically so double-check before you demand the reduction. However, some insurance companies will wait for you to bring it up. Do not be afraid to mention that you expect that they adhere to the Common Fund Doctrine and will accept a reduction in their lien amount. Note: you can use the Common Fund Doctrine to convince your client to allow you to contact their insurers: the Common Fund Doctrine does not apply if the insurer has to take action to recoup the funds. Thus, your client has incentive to address any right of reimbursement now.

Next, ask yourself, is your client on Medicaid? If so, Medicaid has a right to be reimbursed for payment for related medical bills. Fortunately, all you need to do is contact a local office, and they can give you the lien amount or direct you to someone who can. Medicaid is generally very cooperative with regards to accepting (and often initiating) a reduction in their lien amount pursuant to the Common Fund Doctrine.

Now, move on to the hospital liens. Check all of the lien notices you received from hospitals and/or doctors to make sure that they comply with the Health Care Services Lien Act, 770 ILCS 23/1 et seq (and specifically 770 ILCS 23/10(b), requiring that the notice list the name and address of the injured person, the date of the injury, the name and address of the hospital/doctor asserting the lien, and the name of the person alleged to be liable for the injuries). Assuming that the notice is in compliance, and thus that you must honor the lien, call the hospital to double check the final lien amount. Note that unlike insurance companies, hospitals and doctors are not affected by the Common Fund Doctrine. See Wendling v. Southern Illinois Hosp. Services, 242 Ill. 2d 261, 950 N.E.2d 646, 351 Ill. Dec. 150 (2011).

Be aware that, no individual health care provider can receive more than 1/3 of the settlement, judgment or award, and the total amount of health care liens cannot exceed 40% of the total settlement, judgment or award, pursuant to the Health Care Lien Act, specifically section 770 ILCS 23/10(c). As such, after you’ve contacted all of the hospitals and doctors who have asserted liens, run the numbers. If the total amount of liens exceeds 40% of the settlement, judgment or award, then the doctors’ liens should be reduced, pro rata, to 20% of the settlement, judgment or award, and the hospital liens should also be reduced, pro rata, to 20% of the settlement, judgment or award. If, after making this reduction, the total amount that would be paid to these health care lien-holders is not 40%, then increase, pro rata, the amount that the hospitals or doctors receive (whichever group is owed the greater amount). Then, make sure that no individual health care lien-holder would receive more than 1/3 of the settlement, judgment, or award, by reducing any such amount to 1/3 (and increasing the amount other lien-holders will receive, accordingly). While doing this, make sure you read the statute (770 ILCS 23/10(c)) to be sure you’re following the procedure correctly. NOTE: if you are making a reduction pursuant to the Health Care Services, Act, you cannot receive more than 30% of the settlement, judgment, or award in attorneys’ fees. Also, if you intend to make a reduction pursuant to the Health Care Services Lien Act, you should probably contact the health care lien-holders to let them know.

Next, address any and all attorneys’ liens in the file. Did another attorney refer the client to you? Did they incur any expenses in the file? Are any other attorneys entitled to fees? Make sure you account for every attorney with an interest in the file. Otherwise you may end up without any future referrals.

Then, if there is money to spare, ask your client if they would like for you to address the outstanding balances with their healthcare providers. Much like insurers who have not asserted a lien, you cannot disburse funds to healthcare providers who have not asserted a lien without your client’s permission. However, most clients want all of their bills taken care of, if only so that they stop receiving calls from the billing department and/or collections agencies. If you have permission, get ready to make a lot of phone calls. Often the hospital has already sent the account balance to a collections agency.

Finally, add it all up and make sure (a) that you have not exceeded the amount of the settlement, judgment or award; and (b) that you have enough to give your client whatever you promised they’d receive from the settlement, judgment or award. Then, double- and triple-check your math. Once you are satisfied, cut the checks. Send a letter with every check that you mail, making sure to include language along the lines of: “negotiation of this check will serve as acknowledgement that this amount is full and final payment of any reimbursement (or claim or obligation) owed by [client] relating to the incident which took place on [date of incident].” Then write a check to yourself. You’re done! ■


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