The Legal Examiner Affiliate Network The Legal Examiner The Legal Examiner The Legal Examiner search feed instagram google-plus avvo phone envelope checkmark mail-reply spinner error close The Legal Examiner The Legal Examiner The Legal Examiner
Skip to main content

Art of Settlement

In today’s complicated regulatory landscape, a comprehensive plan for compliance has become vitally important to personal injury practices.  Lawyers assisting catastrophically disabled clients are personally exposed to government recovery actions, damages and malpractice risks daily when they handle or resolve such cases.  The list of things to be concerned about is growing daily.

This page helps lawyers navigate these complexities encountered at settlement by boiling down the issues in an easy to understand fashion, making it an essential item on every trial lawyer’s bookmarks list.  With the guidance of nationally recognized settlement compliance expert Jason Lazarus, you will be able to issue spot to make sure you protect your client as well as your firm.

This page dedicated to regulatory compliance when resolving catastrophic claims will teach you about:

  • Resolution of healthcare liens
  • Closing cases compliantly at settlement
  • Medicare Secondary Payer Compliance
  • Preservation of needs-based government benefits

Resolution of Healthcare Liens

You might ask yourself, why hire experts to assist with lien resolution when I can do it myself.  You also might ask whether it is ethically permissible to outsource lien resolution to a lien resolution company.  The first question is quite simple to answer and the second one requires a little more examination of the rules regulating lawyers.

The problem really starts with the responsibilities a law firm has at the beginning of each new case as it pertains to liens.  I use lien synonymously with subrogation, reimbursement, and debts here even though there are differences.  Given the law, a law firm must track liens that are asserted against their client’s personal injury claim and in some instances will have an affirmative duty to investigate and identify possible liens (Medicare & Medicare Advantage plans are good examples).

The law firm must determine whether a lien holder’s claim has merit and is legally valid.  To reach resolution, this requires a law firm to have significant contact and interaction with a variety of lien holders along with recovery vendors.  At the conclusion of the case, it frequently requires protracted negotiations to reach an agreement to resolve the claims made by a lien holder or recovery vendor against a settlement, judgment, or verdict.  The bigger issue, given the distractions it creates, is that law firms frequently wait too long to begin to negotiate a reimbursement to a lien holder which can delay disbursement to the injury victim.  All the foregoing creates pressure on law firms to outsource lien resolution functions.

Why Outsource?

As to the question of why outsource, it really comes down to efficiency and results.  When resolving a lien on behalf of an injury victim, you typically are either dealing with a government benefit health plan or an aggressive recovery vendor on behalf of a plan.  Dealing with Medicare, Medicaid, FEHBA on the government side can be time consuming and ineffective.  Having to negotiate with and against recovery contractor groups for Medicare Advantage plans and Rawlings, Equian, Optum and Conduent can be equally difficult if not more so.  Recovery contractors are massive corporations whose sole reason for existence is to take dollars from a personal injury victim’s recovery.  They do this by relying upon the efforts of talented trial lawyers who secure settlements and receive verdicts.  These recovery contractors have very deep pockets and large staffs to pursue nothing but liens which makes for lopsided battles.

So, to sum up succinctly why you may want to hire an expert lien resolution group to help you and your client:

  • To make your law firm more efficient by reducing operating expenses
  • Give you a deep team of experts to fight the massive recovery vendors and
  • Most importantly, get the best possible resolution for the injury victim when it comes to what must be paid back to a lien holder

Ethics of Outsourcing Lien Resolution

The question at hand is what are the ethical rules guiding the outsourcing of lien resolution services to experts?  The ABA’s Formal Ethics Opinion 08-451 is a great starting point for the analysis.  While it does not address lien resolution directly, it does give the guiding framework for outsourcing.  The operative provisions of the ethics opinion state:

“A lawyer may outsource legal or nonlegal support services provided the lawyer remains ultimately responsible for rendering competent legal services to the client under Model Rule 1.1. In complying with her Rule 1.1 obligations, a lawyer who engages lawyers or nonlawyers to provide outsourced legal or nonlegal services is required to comply with Rules 5.1 and 5.3. She should make reasonable efforts to ensure that the conduct of the lawyers or nonlawyers to whom tasks are outsourced is compatible with her own professional obligations as a lawyer with “direct supervisory authority” over them.

In addition, appropriate disclosures should be made to the client regarding the use of lawyers or nonlawyers outside of the lawyer’s firm, and client consent should be obtained if those lawyers or nonlawyers will be receiving information protected by Rule 1.6. The fees charged must be reasonable and otherwise in compliance with Rule 1.5, and the outsourcing lawyer must avoid assisting the unauthorized practice of law under Rule 5.5.”

To summarize, if you are going to outsource you must remain ultimately responsible for the work and provide “direct supervisory authority” over those to whom you outsource to.  You must protect confidential information and ensure that the provider who will be outsourced to is competent and suitably trained.  Disclosure and informed consent of the outsourcing should be obtained from the client.

While that is the general framework, some states have further defined what is ethically required when outsourcing lien resolution.  One great example of this is New York.  In an opinion issued in July of 2008, the NYCLA Professional Ethics Committee permitted New York lawyers to retain an outside lien resolution law firm and charge its fee as an expense of litigation paid by the client.  According to the opinion, NYCLA, Ethics Op. 739 (7/7/2008), with the client’s informed consent, a personal injury law firm may contract with a lien resolution firm and asses its fee as a cost in a contingency fee arrangement as long as the fee was reasonable.

The definition of the fee being reasonable was analyzed in terms of “net benefit to the client”.  The example was given that a “lawyer who outsources a complex lien problem to another attorney who, in turn, resolves it for a fraction of the lien amount, gains a net benefit to her client.”  The general parameters of outsourcing in New York were laid out as:

“It is ethically permissible for a plaintiff’s personal injury attorney to retain a specialty firm to handle the resolution of a Medicare, Medicaid or private healthcare lien on a settled lawsuit. Under the following conditions, the fee for said outside service may be charged as a disbursement against the total proceeds of the settlement: (a) at the outset of the representation, the Retainer Agreement with the client provides that the attorney may do so, and the client has given informed consent thereto; (b) the actual charges are passed on to the client at cost (without any overage or surcharge) and must be reasonable; (c) the transaction results in a net benefit to the client on each lien negotiated; ( d) the transaction complies with all principles of substantive law, including the fee limitations on contingent fees in the New York Judiciary Law and Appellate Division rules; and ( e) the referring attorney remains responsible for the overall work product. If counsel cannot comply with all of the above conditions, the fee for said services should be charged against the attorney contingency fee.”

ERISA Liens

ERISA governs nearly all employer health plans.  The primary exceptions are government employer plans governed by FEHBA and state government or church plans which are governed by state law.  Most, if not all, ERISA health insurance plans state that injuries caused by a liable third party are not a covered expense and require reimbursement when a plan pays for injury related medical expenses (often referred to as subrogation clauses).  ERISA provides that health plans which qualify under its provisions can bring a civil action under section 502(a)(3) to obtain equitable relief to enforce the terms of the plan.  Appropriate equitable relief is really the only enforcement mechanism an ERISA plan can utilize to address its reimbursement rights contained in the plan.  While that all may sound simple, ERISA is a “compressive and reticulated statute” which means that the law on this subject is quite complicated.[2]  So the Supreme Court has clarified exactly what is appropriate equitable relief under ERISA over the last twenty years.

Related Articles

2420 S. Lakemont Ave., Suite 160
Orlando, FL 32814

www.specialneedsfirm.com
877-977-3387

www.synergysettlements.com
877-242-0022

About Our Firm

Special Needs Law Firm is a boutique practice focused specifically on two specialized areas of the law: Special Needs Settlement Planning (Pubilc Benefit Preservation) and Lien Litigation.

Synergy Settlement Services allows trial lawyers to focus on what they do best by handling the difficult issues at settlement such as lien resolution, Medicare Secondary Payer Compliance, public benefit preservation, settlement planning and tax deferral of contingent legal fees.