Settlement

• Author: Leonard H. Bucklin
• Pages: 373-386

22. Settlement

Breathes there a case with soul so dead that settlement is not discussed sometime

during a deposition or trial? The forms in this Settlement section will be: (1) your

portable memory of important facts bearing on negotiations and settlement, (2) your

chart on where you want to go in negotiations, and (3) for plaintiff’s counsel, a record of

the client’s direction to settle.

§22.1 Warning: Disbursing Settlement Proceeds

The first item of business is a warning to you. When a plaintiff gets money from a tort

suit through a judgment or settlement, the creditors of the plaintiff can assert claims

against those proceeds. Watch out! You as an attorney (whether plaintiff’s or defen-

dant’s attorney) may have a duty of notification, payment and accounting to those cred-

itors. The risks of liens are not just for plaintiff’s attorneys and plaintiffs anymore.

Defense counsel, defense insurers, and the defendant personally may have risks if the

settlement does not adequately address liens.

Most trial attorneys are vaguely aware that subrogation rights may exist and that statu-

tory or contract lien rights might also exist. However, most attorneys are not aware of the

strength of those creditors’ rights against the attorney who disburses the lawsuit proceeds

to the plaintiff without proper notification, payment or accounting to the creditors. This is

not the place for a textbook of information to you on the particular liens in your state, but

it is the time to impress upon you the need to fill in the provided forms ... especially in the

blanks that ask you to list the insurers and lienholders that you know exist.

In personal injury lawsuits, medical providers, subrogated insurers, government enti-

ties, and others can and do assert lien rights against the settlement funds. As a conse-

quence, liens have a significant impact on the way settlements are negotiated, the

amount offered by defense insurers, the ways in which settlement releases are drafted,

and the possibility of legal malpractice.

Avoid disappointed clients. It is important to either make an agreement with a subro-

gated insurer, or else discuss with the client the possible claim by an insurer to a portion

of the recovery before the settlement is agreed upon. Otherwise your clients may be dis-

appointed when required to give money to their own insurer for the insurer’s rights of

subrogation, and netting less money than they had expected to receive.

Now you know why we supply forms that ask you to fill in names and numbers

regarding insurance policies, liens, subrogation interests, and letters of protection. The

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