Tag Archives: Settlements

Calculating Lien Reductions under the Illinois Health Care Services Lien Act (after McVey)

The Illinois Supreme Court issued an opinion on McVey v. MLK Enterprises this week. Plaintiffs lawyers who accept small and/or difficult cases are frustrated.

The Health Care Services Lien Act, 770 ILCS 23/10(c), provides a framework to reduce the liens of health care providers (in some circumstances) after a case has been settled. The quick and dirty of this law (which is actually quite intricate) is that the total of all medical liens were reduced to 40% of the verdict or settlement, and the attorney’s lien was reduced to 30%, with the idea that there would still be money available to go to the injured party.

In practice, this doesn’t always work out the way it should. First, the Act didn’t address subrogation claims (like those for health insurance, Medicaid or Medicare). This has been mitigated somewhat by the new 770 ILCS 23/50, which allows for a reduction in subrogation if there is comparative fault or “uncollectability of the full value of the claim.” Second, the Act specifies that, even though a lien can be reduced, the injured party still owes the full amount of the bill. So if there is a $10,000 bill that is reduced to $6,000 under the Act, the injured person still owes $4,000 unless the attorney can negotiate that away (which we always try to do – typically by adding a little extra to the reduced lien amount). Third, to apply the Act to a provider who wasn’t willing to reduce its lien voluntarily, there has to be a suit or at least some sort of action filed by which the Court can adjudicate the liens. That’s fine if a case has already been filed, but for some that are resolved pre-suit, it could add filing fees and costs.

The McVey case created (or at least highlighted) a fourth problem with the Act. The 30% that goes to the attorney also includes the attorney’s costs incurred in prosecuting the case. Most attorney fee contracts provide that the attorney is paid 33.33% plus reimbursement of costs at the end of the case. So if an attorney settles a typical case for $10,000 after spending $500, the attorney would be paid $3,333.33 plus the $500 back. If the attorney needs to use the Health Care Services Lien Act to reduce the liens, then the attorney would only take home $3,000 total – 30% of the settlement.

Doesn’t seem that bad, right? Not in that case. The difficulty comes in where there is a compromise settlement of a difficult case, or a verdict without much awarded for pain and suffering.

Imagine the “bad verdict.” $10,000 in medical bills. Jury awards $12,000. Attorney has taken depositions and needed two treating doctors to testify at trial, spending $3,000. Attorney’s fees are now only $1,000, per statute. What if there were $5,000 in costs? Then the attorney loses $4,000.

Imagine the “50/50” case. Both parties say they had the green light. Case worth, say, $20,000 but with a 50% chance of winning. $3,000 in costs, but a $10,000 offer. If the attorney takes the offer, he gets his costs back and nothing else. If he rolls the dice and goes to trial, his costs go up and he may get nothing – or even less. If there are medical liens out there, then there are unpaid medical bills. Settlement is probably in the client’s best interest, but then the lawyer would have worked and “loaned” $3,000 of his own money, for free.

This isn’t a pity party for us poor plaintiffs lawyers, although it certainly may sound like that. The real problem here is that many people will have difficulty finding attorneys who are willing to fight tough cases. Not all cases are clear cut. Some have difficult liability. Sometimes it’s tough to prove that the crash or whatever actually caused the injury. People with tough cases need lawyers who are willing to fight for them – even more than most people do because the cases are harder. People like me take those cases and enjoy the challenge – but if we can win and still not even recover what we spent out of pocket? It may make us think twice about taking the case, and it may leave injured people without the legal help they need.

(Howard Zimmerle is a personal injury lawyer handling car accident and other injury cases in the Quad Cities area. He can be reached at hzimmerle [at] mjwlaw.com or 309-794-1660). 

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Filed under Illinois Case Law, Illinois law, Legal News, Settlements

US Supreme Court Helps Insurance Companies, Screws Injured People

The US Supreme Court decided US Airways v. McCutchen today, allowing insurance companies to write their way around the common fund doctrine and similar law, and taking money away from injured people.

Make no mistake – this is a big deal.

See, the world used to work like this:

  1. Step 1: Person gets injured.
  2. Step 2: Health insurance company pays medical bills.
  3. Step 3: Injured person hires attorney, spends time, money and effort to settle case with tortfeasor. 
  4. Step 4: Injured person pays insurance company back, but keeps a fair percentage (typically 1/3 of the lien) for the time, money effort and attorneys fees spent in obtaining the settlement to pay the insurance company back. Without that effort, the insurance company would have gotten nothing.

Now things are different.

Step 4 now reads “Injured person pays insurance company back the full amount, so long as the insurance company requires them to do so.”

In some cases this won’t be a big deal. For many, many cases, liens and attorneys fees will eat up much or all of a potential settlement – especially in tougher cases, smaller cases, or cases with inadequate insurance. This is a lot of cases.

Bummer.

(Howard Zimmerle is a personal injury attorney in the Quad Cities of Iowa and Illinois. He has offices in Davenport and Rock Island. He can be reached at 309-794-1660 or hzimmerle [at] mjwlaw.com).

 

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Illinois Health Care Services Lien Act – New Case

(NOTE that as of 5/21/2015, Stanton v. Rea, discussed below, has been OVERRULED by the Illinois Supreme Court and is no longer good law.)

One of the great tools in a plaintiff lawyer’s arsenal in Illinois is the Health Care Services Lien Act, which reduces the amount of certain medical liens in some cases. It can really help increase the total amount your client ends up with in a settlement.

A new case from the 5th District, Stanton v. Rea, notes that the 40% of the settlement that goes to the medical lienholders should not be calculated until after costs have been subtracted from the settlement. In other words, the Act doesn’t mean 40% of the pie, it means 40% of the pie after costs. In some cases, that can make a big difference.

My partner, Mike Warner, just spoke on some new aspects of the Lien Act at the recent Rock Island County Bar Association Seminar. I think a thorough “how to” post is forthcoming.

(Howard Zimmerle is a personal injury lawyer in the Quad Cities of Iowa and Illinois, helping people who have been injured due to someone else’s fault. He can be reached at 309-794-1660 or hzimmerle [at] mjwlaw.com).

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How Confident Should You Act in Front of Your Clients?

One of the old maxims in business is “underpromise and overdeliver.” That holds true in most businesses and professions I can think of, including the law. 

As a plaintiff’s personal injury lawyer, however… there’s a line somewhere. 

Most of the time we deal with people who have very little legal experience – and almost always no relevant personal injury experience. If they have an idea in mind about what their case is worth, it often comes from either (a) news reports of big verdicts/settlements (ie McDonalds coffee case), or (b) what some friend/neighbor/coworker got in a settlement several years ago. 

So when we discuss settlement or trial, our job is to inform our clients so that they can make the right decisions. If they have a great case, they still need to know that juries do weird things. Slam dunk cases can be lost. Juries can award medical bills of $200,000 and $10,000 in pain and suffering and think they are doing you a favor. Juries tend to make the right decision, but there are always horror stories of juries who make decisions on bad assumptions, or because they didn’t like someone’s shoes, or whatever. 

If your client’s case is dicier – questionable liability, major issues of some kind, whatever… you have to be blunt with your assessment of chances. You have to be able to explain that, say, juries often don’t award anything for minor impact auto cases, or that their treating doctor will connect the accident and injuries, but not with as much gusto as the defense’s doctor. 

You have to do all of this in a way that clients understand the potential pitfalls, but still trust your abilities and still know that you believe in them and will fight for them. 

If you are too blunt with your assessment of trial potential, your client might start to doubt you. They might think they didn’t hire the right lawyer. They might spread bad word of mouth. 

On the other hand, if you are too rosy, and if things don’t go well, they will doubt you. They will think they didn’t hire the right lawyer. They might spread bad word of mouth. They might even sue you for malpractice, breach of warranty, or something creative like that. 

The key is riding the line – staying honest and blunt, but with the right level of optimism. At the very least, in every case your client needs to understand that we never know exactly what a jury is going to do. The case depends on 12 (or 6 or 8 or whatever) people we’ve never met and only get a limited amount of time to talk to beforehand. It depends on whether all witnesses show up, whether they come across well in stressful situations, whether the judge applies the law correctly, etc, etc, etc – many things that we just can’t know until they happen. We have a good idea what will happen, but you just never know. 

(Howard Zimmerle is a personal injury, medical malpractice, nursing home malpractice, trial lawyer in Rock Island, Illinois, with an office in Davenport, Iowa. He can be reached at 309-794-1660 or hzimmerle [at] mjwlaw.com).

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IRS Clarifies Taxability of Tort Damages

The Internal Revenue Service has shed some light on the taxability of tort damages. Attorneys typically have the kneejerk response that personal injury damages are not taxable. That is only true to a point.

The new regulation clarifies a few things, namely:

  • Damages for personal injury or sickness are not taxable
  • Damages for “emotional distress” are taxable unless they are attributable to a physical injury or sickness
  • Punitive damages are taxable

The emotional distress language is important for people who handle employment law cases, false arrest, or other torts where emotional distress is recoverable but don’t typically involve physical injury or sickness.

(Howard Zimmerle is a trial lawyer from Illinois. He practices throughout western Illinois and Eastern Iowa. He can be reached at 309-794-1660 or at hzimmerle [at] mjwlaw.com.)

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Become an Instant Expert on the New Illinois Workers Compensation Law in 5 Minutes

By reading my post at the Rock Island Workers Compensation Attorney Blog. Like an expensive hairdo, it hits the highlights. The big points to us lawyer-folk are the changes to compensation for carpal tunnel and other hand injuries, wage differential awards, and use of the AMA guides. For unionized construction workers, you could be in trouble. For stoners, you could be in trouble. For doctors, you just took a pay cut.

It’s all at the other blog. Read up and become instant experts.

(Howard Zimmerle is a workers compensation attorney practicing in Rock Island, Moline, Henry County, Knox County and surrounding areas. He can be reached at 309-794-1660 or hzimmerle [at] mjwlaw.com)

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Howell v. Dunaway reversed by Illinois Supreme Court

About a year ago I blogged about a 5th District case that would allow lawyers to reduce the amount of medical provider liens pursuant to the Illinois common fund doctrine.

Never mind, because the Illinois Supreme Court reversed it.

It was a nice tool while it lasted.

(Howard Zimmerle is a personal injury lawyer in the Quad City area. You can reach him at 309-794-1660 or hzimmerle [at] mjwlaw.com)

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Filed under Illinois Case Law, Illinois law, Settlements