When I settle a personal injury claim for one of my accident victim clients, it is common for me to have to pay some of the settlement money to other people or businesses related to the case. Of course my job is to see that as much of the settlement as is possible gets into my client's pocket but it's sometimes out of my hands and there is nothing I can do. This often results in my client receiving less money than the amount the client agreed to settle their case for. Almost always my clients are aware of what is going on because we do our best to make sure there are no surprises. It can still be frustrating for them—and even more so for persons who don't have an attorney to explain exactly what is happening, and why. In this post I hope to explain exactly where this money might go.
Any time we settle a claim for one of our clients we prepare a document we call a “Settlement Statement”. This is essentially a ledger that starts with the gross settlement amount and ends with the net amount to be paid to our client. All of the amounts between those figures show the difference.
Most notable on the list are attorney fees and costs. These are different figures. The “fee” is the amount of the settlement my clients agreed to pay me for the work I did on their case. Because we almost always work under a contingency fee agreement, our fee is based off a percentage of the overall settlement. “Costs” are those amounts that my firm spent in furtherance of our client's case. These costs may be small (as is the case in amounts paid to a get a copy of a collision report) or may be significant (as is the case in experts we hired to prove our clients case).
In addition, many health and automobile insurance policies contain provisions that require the accident victim to pay back the insurance company if they receive a settlement from an at-fault party. This is typically the case with personal injury protection/PIP policies and health insurance policies. So, when we settle a client's case we have to figure out what amount these types of insurers paid and then negotiate that amount to reduce the amount our clients have to pay back. The amount of reduction we're able to obtain, if any, depends on the type of policy and the amount of the settlement.
Sometimes our clients received health or medical care they have not paid for by the time we are settling their case. In those instances, we usually need to make sure their medical providers and facilities receive the payment for the services they rendered to our clients and we issue checks to them for the amount of their bill. Sometimes the amount of a settlement these providers can receive is limited by statute, other times we are able to negotiate the amount with the provider. As always, the amount of the reduction varies significantly depending on the situation and treatment provided and may not even be possible in some instances.
When we explain all of this to our clients, many times they ask us “why do I have to pay for my medical bills, why doesn't the person that hurt me have to pay for those?” The answer to the question, in most situations is that they do—the at-fault party did pay for them, but with some exceptions the law usually does not allow a person to receive money for medical bills from two different sources—that would create a windfall to the client.
The amount of the settlement remaining after attorney fees, legal costs, reimbursement of insurance payments, and payment of medical liens and balances, is the amount that goes to the client's pocket.
As with all things, specific questions about a certain case should be directed direct to the attorney assisting you in the handling of your claim. In most instances, after a quick explanation it all makes sense.