When a case settles, your client asks the same question: “When will I get my money?” Wouldn’t it be nice if you only had to ask that question a single time…for all of your clients?
From the beginning of your representation, explain every phase of the lawsuit, including settlement, in a welcome “Shock & Awe” package. When you document the answers to your clients’ questions about their settlement, you save a ton of time and your clients know what to expect. This is a win for you and your clients.
This document, “What Happens When You Settle”, explains the settlement procedures for our clients.
What Happens When You Settle
The procedures for settlements vary depending upon the type of settlement. There are three types of settlements:
- Settlements involving Adults;
- Settlements involving Minors; and
- Settlements involving Death.
This explains each step of the process, the length of the process and what you can expect for each type of settlement. We will also explain the process for negotiating and settling claims made by Medicare and Medicaid for liens and the subrogation claims of group health insurers.
#1: Settlements Involving Adults
In a settlement involving an adult is simple.
When you case settles, we will ask you to sign a Release Agreement. The Release Agreement is a one-page document that specifies the terms of the settlement, e.g., in exchange for $500k you release your claim against Dr. Smith. Once you sign the Release Agreement, your decision to settle is final and you cannot change your mind.
We will send the Release Agreement, together with another document known as a Stipulation of Discontinuance, to the defendant’s lawyer. Upon their receipt of the Release Agreement and Stipulation of Discontinuance, the defendant has twenty-one (21) days to mail the settlement check. The law provides penalties, e.g., interest and costs, if the defense law firm does not mail the settlement check within the 21-day deadline.
Upon our receipt of the settlement check, we deposit the check in our law firm’s escrow account. Typically, the check will clear our law firm’s escrow account within 3-5 days. Once the settlement funds clear our law firm’s escrow account, we will hand-deliver a check to you representing your portion of the settlement (the amount of the settlement after deducting case expenses and the legal fee). If you prefer, we can electronically transfer your funds into your bank account.
#2: Settlements Involving Minors
When a claim involves injuries sustained by a minor (a minor is anyone under the age of 18), the settlement requires court approval. The court hearing is known as an “infant compromise hearing”.
A written application (a/k/a motion) is submitted to the court specifying the terms of the settlement. The motion sets forth the amount of the settlement, case expenses and legal fee, and why the settlement is in the best interests of the child.
A Judge will schedule an infant compromise hearing where the infant and his/her guardians are required to attend. We will attend the hearing with you. In almost all cases, the infant compromise hearing is a formality and the application for court approval of the settlement is granted.
Once the Judge approves the settlement, you will be asked to sign a Release Agreement. We will mail originals of the Release Agreement and the Stipulation of Settlement and a copy of the Order approving the settlement to the defense lawyers via certified mail. Upon their receipt of these documents, the defendant will have twenty-one (21) days to mail the settlement check.
#3: Settlements Involving Death
Settlements involving death require procedures that are more time consuming than settlements involving an adult or infant.
Unlike settlements involving an adult or infant, the approval of a wrongful death settlement requires written application in two different courts, namely, Supreme Court and Surrogate’s Court. Each step of the process can be time consuming depending upon the responsiveness of the court.
Step #1: Approval of the Settlement in Supreme Court
As the first step, we will make a motion asking the Supreme Court (trial level court) to approve the settlement, case expenses and legal fee. As part of the motion to the Supreme Court, we will submit a Settlement Statement listing the case expenses, liens and legal fee. You will be asked to review and sign the Settlement Statement before it is submitted to the court. No court appearance is required.
Once the motion has been submitted to the Supreme Court, the court has sixty-days to render a Decision and Order. The court will often take the full sixty days, or even longer, to render its Decision and Order. On average, it takes the court between 1-3 months to render its Decision and Order granting the motion.
Step #2: Distribution and Allocation by the Surrogate’s Court
As part of the motion for court approval of the settlement, we ask the Supreme Court to transfer the case to Surrogate’s Court for “distribution and allocation” of the remainder of the settlement proceeds among the beneficiaries of the decedent’s estate. This is the second-step of the process for settlements involving wrongful death.
“Distribution” refers to the distribution of the settlement funds among the beneficiaries of the decedent’s estate. Under New York law, the funds are divided among the beneficiaries of the estate according to the “Kaiser” formula. The “Kaiser” formula specifies that the settlement funds will be divided among the distributees of the Estate based upon the years of their future dependency upon the decedent.
For example, let’s say the surviving widow has 20 years of future dependency upon the decedent, while the surviving infant might have 5 years of future dependency upon the decedent. The settlement funds will be divided based upon the ratio of the years of future dependency for each distributee. With the ratio of 4/1, the surviving widow receives 80%, and the surviving infant receives 20%, of the remaining settlement funds.
The Surrogate’s Court will issue a Court Order/Decree that divides the settlement funds among the pain and suffering and wrongful death claims. This is known as “allocation”.
In a wrongful death lawsuit, there are usually claims for pain and suffering and wrongful death. Pain and suffering refers to the conscious pain and suffering of the decedent prior to death. Wrongful death refers to the monetary losses sustained by the beneficiaries (a/k/a “distributees”) of the decedent’s estate, such as loss of income, loss of maternal guidance, nurturing and advice, burial expenses.
The portion of the settlement allocated to wrongful death is divided according to the loss sustained by each beneficiary. This part of the allocation is usually based upon the “Kaiser” formula.
The portion for the settlement allocated to pain and suffering is divided among the beneficiaries according to the decedent’s Last Will and Testament. If the decedent died without a Last Will and Testament, this portion of the settlement funds is divided according to New York law for those dying without a will (a/k/a the law of intestacy).
Step #3: What to Expect in Surrogate’s Court
We will prepare a Petition asking the Court for its distribution and allocation of the remaining portion of the settlement funds. All beneficiaries of the Estate will be put on notice of the Petition and in most cases, the Surrogate’s Court will schedule a date for a hearing. All beneficiaries and creditors of the Estate will have notice of the hearing and have an opportunity to be heard.
In most cases, the hearing in the Surrogate’s Court is a formality. The Surrogate’s Court will render a Decree granting our Petition for distribution and allocation. Once we possess a written Decree from the Surrogate’s Court, we can distribute the remaining portion of the settlement funds held in our law firm’s escrow account.
While the Surrogate’s Court has sixty (60) days by New York law to issue a Decision and Order in response to our petition, it often takes longer. Regrettably, some Surrogate’s Courts might take 3-6 months to render a Decision and Order. Unfortunately, we do not control the length of time that it takes for the Surrogate’s Court to respond to our Petition.
While it might take longer than we expect to obtain approval of the settlement from Surrogate’s Court, we will process the paperwork as quickly as we can. We understand that you would like your settlement to be finalized as soon as possible and we will do everything in our ability to make that happen.
What You Need to Know about Liens
When Medicare or Medicaid pays a portion of the medical expenses, they will claim a lien against the settlement. A lien is the statutory right of Medicare and Medicaid to recover the expenses they’ve incurred relating to the injuries claimed in the lawsuit. Medicare and Medicaid have a lien based upon federal law and their rights cannot be ignored.
Occasionally, a group health insurer (e.g., Blue Cross/Blue Shield) may make a subrogation claim for expenses that it incurred relating to the injuries claimed in the lawsuit. Unlike a lien, a subrogation claim is based upon the subrogation clause set forth in the health insurance policy issued by the group insurer. New York has an “anti-subrogation” law that prohibits most subrogation claims.
When a lien or subrogation claim is made, we can’t ignore it. Medicare/Medicaid will send an itemized list of their expenses and frequently some of the expenses are unrelated to the injuries claimed in the lawsuit. We will contact Medicare/Medicaid to reduce the lien if we believe the expenses are unrelated to the injuries claimed in the lawsuit.
If we cannot agree with Medicare/Medicaid as to the final amount of the lien, we must withhold money from the settlement equal to the amount of the lien in our law firm’s escrow account. Once we have your approval and the final amount of the lien is agreed upon, we will pay the lien to Medicare/Medicare.
We are Here for You
Please let us know if you have any questions.
We are grateful for this opportunity to serve you.