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Potential Trap For Litigation Defense: Taking Care of Lienholders in Settlements

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Potential Trap For Litigation Defense: Taking Care of Lienholders in Settlements

Settling a personal injury lawsuit is the usually the objective for litigation defense attorneys.  When the case gets settled, the defense attorney must review the entire file for all liens whether they are medical or otherwise.  Protecting a medical provider’s lien is a duty, not only of the plaintiff’s attorney, but also of the defense attorney when the defense has notice of the lien..

Making certain lienholders are paid

The last thing a defense attorney wants is a letter from a lienholder about an alleged lien that was not protected.  In the past, defense attorneys would demand specific releases and settlement agreements between the plaintiff’s attorney and the medical provider. This allows the defense’s insurer to tender a draft directly to that lienholder. As an alternative, the lienholder can give power of attorney to the plaintiff’s attorney and the defense insurer can tender the draft to the plaintiff’s attorney.  Another way for the defense insurer to tender a settlement draft is to put all lienholders on a single check with the individual plaintiff and his attorney as payees.

Settlement delays attributed to public lienholders

Liens by Medicare/Medicate and public aid would slow down this settling process.  Once Medicare/Medicate is notified of a settlement, it may take Medicare/Medicate months to send a letter with payments it demands be reimbursed.  These various scenarios keep the defense file open longer, even though a settlement amount is agreed upon.

Illinois offers litigation defense attorneys another option

Now, according to 735 ILCS 5/2-2301, the parties have another scenario to protect lienholders when a case is settled.  735 ILCS 5/2-2301 states that in a personal injury, property damage, wrongful death or tort action involving a claim for money damages in which there is a known third-party right of recovery or subrogation interest (including attorney's liens, healthcare provider liens, or rights of recovery claimed by Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and Family Services, or private health insurance companies), the plaintiff may protect the third-party's right of recovery or subrogation interest. This is accomplished, where applicable, by tendering to the defendant: a signed release of the attorney lien and (1) a signed release of a health care provider lien or (2) a letter from the plaintiff’s attorney agreeing to hold the full amount of the claimed lien in the plaintiff’s attorney’s client fund account pending final resolution of the lien amount.

This statute puts the burden of protecting the lienholders squarely on the plaintiff’s attorney provided the plaintiff’s attorney initiates the statute by writing a letter agreeing to hold the full amount of the claimed lien in a client fund account.  This allows the insurer to tender a single draft to the plaintiff’s attorney and close out the claim.

When insurance defense attorneys are aware of liens from Medicare or out of state providers, this statute may be the quickest and safest way to tender payment by putting the burden on the plaintiff’s attorney. However, if the plaintiff’s attorney does initiate this procedure, then the defendant’s insurer must tender payment within 30 days of receiving the release and letter.  If the payment is not tendered within 30 days, subsection (e) states that if, after a hearing, the court having jurisdiction over the parties finds that timely payment has not been made by a defendant pursuant to subsection (d) of this Section, judgment shall be entered against that defendant for the amount set forth in the executed release, plus costs incurred in obtaining the judgment and interest at the rate specified under Section 2-1303 of this Code, calculated from the date of the tender by the plaintiff under subsection (d) of this Section.

Insurance defense attorneys must always be aware of any liens on a claim and remember to address those liens at the time of settlement. If you have questions pertaining to litigation defense and insurance defense, contact Alexander Sweis at McKenna Storer.

Categories Insurance Litigation Defense



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