Insights

As if it weren’t tough enough nowadays to settle lawsuits with insurance companies, now they are using the pretense that there may be a Medicare lien to delay paying you your settlement. Insurance companies are using several delaying tactics which leave plaintiffs’ attorneys and their clients in limbo waiting for settlement checks for as long as 6 months.

Before a lawsuit is settled in personal injury litigation, plaintiffs often receive financial assistance from third parties such as Medicare and Medicaid. Other third parties include workers compensation carriers and private insurance carriers, but they are not the focus of this article. Medicare/ Medicaid may seek to recoup any amount paid by defendants to plaintiff. By statute, plaintiffs are required to reimburse Medicare/Medicaid for any payments made to them from a damages award or settlement payment received by plaintiffs at the conclusion of the litigation.

Defendants and their counsel are aware that payments made pursuant to a settlement agreement may be subject to liens or claims by those who provide insurance. One of their tactics is to require that the plaintiff get a conditional letter of approval from Medicare before releasing settlement funds. The conditional approval indicates the amount of the Medicare lien. However, it can take months to receive the letter from Medicare.

Typically, in settlement agreements, defendants will require that the plaintiff hold harmless defendants from any claims made by those insurers or other third parties. Now, in addition to requiring indemnification from the plaintiffs receiving the settlement payment, insurance companies are also requiring plaintiffs’ attorneys to agree to hold the insurance company harmless from third-party claims arising out of the insurance company’s settlement payment to plaintiff. In other words, the insurance companies are asking plaintiffs’ attorneys to indemnify them for potential Medicare liens.

That is so even in cases where there is no claim for reimbursement of medical expenses. For example, in employment cases, where there is not even an allegation of medical treatment for the wrong alleged, insurance companies are demanding that plaintiffs’ attorneys agree to sign off on indemnification clauses, thus making the attorney a party to the underlying settlement agreement. Most, if not all, plaintiffs’ attorneys would be reluctant to do so, thus further delaying settling a case and getting paid on that settlement.

Insurers are also asking for indemnification even where they are expressly prohibited from doing so. In 2010, the Association of the Bar of the City of New York Committee on Professional and Judicial Ethics recently issued an Opinion holding that plaintiffs’ counsel may not agree to hold defendants harmless from claims arising out of defendants’ payment of settlement consideration and defendants’ counsel may not ask plaintiffs’ counsel to provide such an agreement.

Formal Opinion 2010-3 makes plain that it is unethical for attorneys for insurance companies or other defendants to require, as part of the settlement of a lawsuit, plaintiffs’ attorneys to indemnify defendants for Medicare liens or other liens. It is equally unethical for a plaintiffs’ attorney to agree to such a clause. This is because that would constitute financial assistance to a client, which is prohibited by Rule 1.8 (e)(1). Accord Illinois Advisory Op. 06-01 (2006); Indiana Op. 1 (2005); Kansas Op. 01-05 (2002); North Carolina Op., RPC 228 (1996); Advisory Committee of the Supreme Court of Missouri, Formal Op. 125 (2008); Arizona Op., No. 03-05 (2003); Florida Op. 70-8 (rev. 1993).

The delays caused by these insurance company tactics often result in cash flow strain on attorneys and their clients alike. Companies that offer post-settlement funding can help attorneys wait out the ever-lengthening delays by insurers.

To learn more about how post-settlement funding can help you when you’re waiting for a settlement check, visit RapidFunds® Frequently Asked Questions page or contact Sherry Foley, Esq. at sfoley@rapidfunds.com for more information.

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