As if it wasn’t difficult enough today to settle a lawsuit with an insurance company, they are now using the pretext that there may be a Medicare lien to delay payment on their settlement. The insurance companies also require that the plaintiffs’ attorneys agree to exempt the insurance company from third party claims arising out of the payment of the insurance company settlement to the plaintiff. In other words, the insurance companies are asking the plaintiffs’ attorneys to compensate them for possible links to Medicare.
This is the case even in cases where reimbursement for medical expenses is not claimed. In employment cases, where there is not even an allegation of medical treatment for the incorrect assumption, insurance companies require that plaintiffs’ attorneys agree to sign severance clauses, making the attorney a part of the underlying settlement agreement. . Most, if not all, of the plaintiffs’ attorneys would be reluctant to do so, further delaying the resolution of a case and getting paid for that settlement.
The Judicial and Professional Ethics Committee of the New York City Bar Association recently issued an Opinion arguing that plaintiffs’ attorney may not agree to release defendants from claims that arise out of payment of the defendants’ settlement consideration and defendants’ attorney cannot Ask plaintiffs’ attorney to provide such settlement.
Formal Opinion 2010-3 makes clear that it is unethical for lawyers for insurance companies or other defendants to require, as part of the settlement of a lawsuit, that plaintiffs’ attorneys indemnify defendants for the Medicare links or other links. It is equally unethical for the plaintiffs’ attorney to agree to such a clause.
Before a claim is resolved in personal injury litigation, plaintiffs often receive financial assistance from third parties, such as Medicare and Medicaid. Other third parties include workers’ compensation companies and private insurance companies, but they are not the focus of this article. By law, plaintiffs are required to reimburse Medicare / Medicaid for any payments made to them from damages or a settlement payment received by plaintiffs at the conclusion of the litigation. Medicare / Medicaid may attempt to recover any amount paid by the defendants to the plaintiff.
Defendants and their attorneys know that payments made pursuant to a settlement agreement may be subject to bonds or claims from their insurance providers. Typically, in settlement agreements, the defendants will require the plaintiff to release the defendants from any claims made by those insurers or other third parties. Now, in addition to demanding compensation from the plaintiffs who receive settlement payment, the defendants are demanding that their attorneys provide the same guarantees, essentially personally guaranteeing the plaintiffs’ compensation obligation. The New York City Bar Association held that it is unethical for defendants to require the same of plaintiffs ‘attorney and it is also unethical for plaintiffs’ attorneys to agree to such terms because they would constitute financial assistance for a client, which is prohibited by Rule 1.8 (e) (1). Illinois Advisory Agreement Op. 06-01 (2006); Indiana Op. 1 (2005); Kansas Op. 01-05 (2002); North Carolina Op., RPC 228 (1996); Missouri Supreme Court Advisory Committee, Formal Op. 125 (2008); Arizona Op., No. 03-05 (2003); Florida Op. 70-8 (rev. 1993).
Delays caused by enforcing such a clause often result in cash flow stress for both attorneys and their clients. Financing companies like American Asset Finance LLC offer post-settlement financing that can help attorneys and plaintiffs wait for mounting delays from insurance companies.
