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Cogan’s Corner – New Civil Procedure Simplifies Settlement Collection

Originally published in the October 31, 2013 edition of the Chicago Daily Law Bulletin.

This article explains the precious time and valuable resources saved by overworked attorneys.

New civil procedure simplifies settlement collection for all parties

The Illinois legislature and Gov. Patrick J. Quinn just gave plaintiff attorneys a dose of pain relief with the passage of P.A. 98-0548.

Codified as Section 2-2301 of the Code of Civil Procedure and effective Jan.1, this new measure outlines reasonable deadlines and pragmatic measures to be taken in order to expeditiously get settlement proceeds into the hands of clients.

The amount of precious time and valuable resources that Section 2-2301 promises to save is invaluable to every overworked attorney’s office, especially those of use working on a contingency fee basis.

Section 2-2301, entitled “Settlement,” applies to personal-injury, property damage, wrongful death and tort actions involving claims for money damages. The only defendants excluded from this provision are the state of Illinois, its agencies, boards, commissions and officers or employees, the attorney general and municipal and local governmental entities and class-action lawsuits.

The key provisions require the settling defendant to tender a release to the plaintiff with 14 days of written confirmation of the settlement which includes all communication by written means, i.e. e-mail, fax, letter, etc. If the law requires court approval of the settlement, the plaintiff is to tender a copy of the court order approving settlement to the defendant.

This is where it gets good. This code provision allows for multiple solutions addressing third-party rights to a portion of the settlement—in other words, it tackles the lien morass. Rather than hassling with getting the endorsement of the known lienors whose names are routinely included as payees on the settlement check, the third party’s right to recovery may be protected through various practical options.

The plaintiff may render to the defendant a signed release of the provider. Short of that, the plaintiff attorney may provide a letter agreeing to hold the full amount of the claimed lien in his or her client fund account pending final resolution of the lien amount. The defendant may also offer to hold the full amount pending final resolution of that amount of the parties may mutually agree on another method of resolving the liens.

While this provision gives the parties multiple avenues by which to get the settlement distribution resolved, plaintiff attorneys must be mindful that it is their ultimate responsibility to resolve those liens favorably on behalf of their clients.

Additionally, RPC 1.15(e) concerning safekeeping property imposes a duty on the attorney to protect third-party claims such as liens. The comment to this paragraph notes that a lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client and may ultimately have to file an action for court resolution of the dispute.

Even more, since plaintiff attorneys may under certain circumstances claim a one-third fee from the lien amount recovered for their efforts on behalf of the third party pursuant to such equitable principles as the common fund doctrine, the onus is on the plaintiff attorney to protect these funds.

As for Medicare and Medicaid liens and insurance subrogation claims, documentation of the plaintiff’s agreement with the relevant governmental entity or the private health insurance company regarding the amount of the settlement and the negotiated lien amount will be accepted in satisfaction of the right of recovery, or letters from either attorney that they will hold the amount, or any other mutually agreed upon mechanism.

Specific to the particularly thorny Medicare lien, it does not lien to letter from the Medicare secondary payer recovery contactor or a final demand letter will satisfy the first documentation option because it does not technically represent, “plaintiff’s agreement” with Medicare.

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If you have been injured in a personal injury or medical malpractice accident, do not hesitate to contact the Chicago accident and injury law firm of Cogan & Power at (312) 477-2500 to schedule a free case consultation, so that we can help you begin the process of recovery as soon as possible. If you cannot come to our offices in downtown Chicago, we will come to you. And because we take cases on a contingency basis, you will not pay any fee unless we get you compensation.