Interesting New Illinois Case on Hospital Liens and the Common Fund Doctrine

EDIT: The Illinois Supreme Court has reversed this case. Ignore everything I wrote below, and remember that you’re stuck with the Lien Act as the only means to reduce hospital and physician’s liens. – HZ 3/24/11

 

Ever wonder how you can tell you’re lame? When you write a blog post about how a case on “hospital liens and the common fund doctrine” is “interesting.” This is a far cry from the old me, who was only interested in baseball and playing guitar.

Anyway, the case (which you can find here) is from the 5th District Appellate Court. It holds that the common fund doctrine is applicable to hospital liens, and can be used to reduce the amount hospitals recover from a personal injury verdict or settlement.

Yet in a way, it’s broader than that. In a more accurate way, it’s far narrower.

By its language, the case seemingly applies Bishop v. Burgard, 198 Ill.2d 495, 509 (2009) not just to hospitals, but also to any health care provider asserting a lien against an injured party. How does this work? Here:

  1. Hospital bills patient $10,000.
  2. Case settles for, say, $100,000.
  3. Client pays $33,333.33 (or so) in attorneys fees out of the settlement proceeds.
  4. Hosptial would normally be entitled to its entire $10,000. Yet this case notes that the Hospital is only getting repaid by virtue of the attorney’s work, and would reduce the Hospital’s recovery to $6,666.66 (representing 2/3 of the total).

Ah, but it’s not that simple.

The last paragraph of the opinion is important, so hopefully trial lawyers stopped jumping up and down for a minute to read the whole case. The case takes no opinion on whether the hospital is entitled to the remaining 1/3 of its billed amount or not. THIS IS VERY IMPORTANT!

Just like the Health Care Lien Act, this looks like it would reduce a lien but not reduce the amount of the bill. The key to handling a case like this, as a plaintiff’s lawyer, is to negotiate a final settlement of the provider’s bill rather than taking your 1/3 and going home. If you don’t, your client could be billed for the remainder, sometimes weeks or months later after all of the settlement money has been spent.

(Howard Zimmerle is a car accident lawyer in Rock Island and Moline, Illinois – with a new office in Davenport Iowa.)

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9 Comments

Filed under Illinois Case Law, Illinois law, Medical Information, Negotiations, Settlements, Traps, Trial Practice

9 responses to “Interesting New Illinois Case on Hospital Liens and the Common Fund Doctrine

  1. Its good to know about this working and that is quite surprising for me to know about these prices for case settles and client payments..You have well said in last paragraph about lien and client..

  2. michel

    What if the lienholder didn’t perfect their lien to begin with? Is your obligation to the client or the lienholder? Why not reduce your fees and give the lienholder to settle and your client (the victim) would receive more money.

  3. My goal in settling a case is to extinguish any of my client’s liabilities relating to this case. I don’t want a client who gets money in his pocket, but then gets walloped by a large bill I didn’t pay.

    I have to pay liens and subrogations (that I’m aware of) from settlement proceeds. It’s thornier with providers who haven’t perfected a lien. Rule 1.15 of the Illinois Rules of Professional Conduct seemingly has it both ways – it tells us that we have to turn over settlement funds to others who have an interest, but it also seems to indicate that a client can tell us not to do that. It DOES require us to tell those who may have an interest, so it’s like waking up a sleeping lion and hoping it doesn’t attack you.

    So the bottom line is negotiation, and yes, sometimes that includes cutting my fees to make a settlement work.

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