Tracking Damages from a Personal Injury Report Showing Detail of Amounts Paid to Plaintiff Exhibit "5" Report Showing Itemization of Damages Exhibit "6" Report Showing Disbursements to Be Authorized by Plaintiff
| Jurisdiction | United States,Federal |
| Citation | Vol. 11 No. 2 Pg. 17 |
| Pages | 17 |
| Publication year | 1998 |
Mark J. Gergersen, Attorney and James A. Shore, C.P.A.
1. INTRODUCTION A QUEST TO TRACK DAMAGES
In 1988, I (Mark Gregersen) graduated from a Utah law school and moved my family to Los Angeles County. Among my adventures, I worked for a firm which represented solely motorcyclists injured in accidents. Of its army of paralegals, one devoted her efforts to tracking medical expenses. The firm owned impressive technology, but the "meds" paralegal possessed only an adding machine, which she used to track total charges, not unpaid balances. Our biker clients lacked sophistication, but not assertiveness. Our clients would never authorize settlement without knowing what would remain for them.
To accurately calculate our clients' share of any settlement offer, we had to then (and have to now), identify, project, and total all outstanding obligations due to a multitude of care providers, insurers, and others.
To minimize tedium and eliminate additions errors, I have since sought a method to track damages by computer.[1] First, I used a spread sheet. This allowed me to add expenses automatically, and eliminate addition errors. As I received more medical bills, I would add these to the spread sheet and create a revised total without re-entering the medical bills which I had previously posted. Searching for more "user-friendly" software, I began to use a single-entry accounting program (Quicken®), which proved superior to a spread sheet. For each entry injured client, I created a Quicken file, within which I created an account for each doctor, hospital, and subrogated insurer. Recently, 1 have reviewed specialized Case Management software (such as PINS®/NEEDLES®[2] ), which provides all-round tools for handling the multitude tasks associated with personal injury cases. Although they do not focus on accounting, many Case Management program possess a limited capacity to perform "single entry" accounting.
But single entry has limitations. For example, the collateral source rule preserves a Plaintiff's claim against the Defendant, even though a bill is paid by Plaintiff's health insurer.[3] Thus, a system should track the reduction of medical bills which Plaintiff owes, while separately tracking the damages (e.g., medical charges) which Plaintiff continues to be owed. To meet this need, I experimented with double-entry accounting software (Quickbooks®).[4]
The concept of double entry can be likened to a principle of physics. Isaac Newton observed that in our physical world, for every action there is an opposite and equal reaction.[5]Similarly, if Plaintiff's health insurer pays a doctor bill, then liability due the doctor is decreased AND as an opposite and equal reaction the liability due the health insurer is increased. Therefore, if a system is to accurately track damages of an injured plaintiff, then the system must 1) track both halves of the transaction, and 2) show the nexus between both halves of the transaction.[6]Through trial and error, I came to understand that there is power in using computerized double-entry accounting, to track damages. Still, I did not know how to completely harness this power.
I joined forces with James A. Shore, an experienced Certified Public Accountant. Accountants make it their business to discover and record the "opposite and equal" financial transactions. At first we had difficulty communicating, since our professions think and speak differently. As our minds met, refinements resulted.[7]Following is our system to track damages. Note that we implemented these concepts using Quick-books® software. However, these ideas may be used to track damages in Case Management software, spreadsheets. Quicken®, and other accounting packages (or for that matter even on paper or in your head).
2. HOW TO BEGIN: TRACK MEDICAL EXPENSES
Start simply. Begin by tracking only medical expenses and payments. If you attempt to start tracking all items at once, you may be overwhelmed by detail. To illustrate the tracking of medical expenses, we use the hypothetical transactions shown in Exhibit "1" (Table of Sample Transactions). This exhibit lists each event, together with the applicable law and accounting transactions. Account names are italicized.[8](We avoid using the terms "debit" and "credit.") From these sample transactions, numbered one through eight, we have used Quickbooks® to generate Exhibit "2A" (Report Showing Status of Medical Expenses). We have also generated Exhibit "2B" (Report Showing Status of Liens).
3. FROM MILK TO MEAT: TRACK ALL DAMAGES
Once you and staff grow comfortable with tracking medical expenses, you are ready to track additional items of damage, to show the complete economic picture of your injured client. For example, you can track such transactions as those shown in Exhibit "3" (Table of Additional Transactions). For brevity, the details of these additional transactions (numbered nine through twenty-one) are omitted.
4. USE THIS SYSTEM TO FILL YOUR NEEDS
A. Prepare to Settle. To discuss settlement with your injured client, place Projected Settlement amounts into accounts labeled as "WHAT IF." This allows automatic calculation of other related amounts, such as the residual funds to be distributed to your client. Print a separate report for each scenario, which captures its assumptions (input) and conclusions (output).[9]Our sample transactions 1 through 21 (shown in Exhibits "1" and "3"), are used to generate Exhibit "4A" (Report Showing Projected Settlement). For those who speak accounting, this report is actually a Balance Sheet.[10]We assume in our hypothetical example that as a last effort to settle the case, Plaintiff's attorney has negotiated an offer from Defendant to settle the case in the amount of $51,500.00. Plaintiff's attorney believes that such a settlement is fair and in the best interest of Plaintiff. Therefore, Plaintiff's attorney seeks Plaintiff's acceptance of the $51,500.00 offer.
Exhibit "4A" estimates that if Defendant's settlement offer of $51,500.00 is accepted by Plaintiff, then after all liabilities are repaid, the total payments to Plaintiff from this case will be $32,486.52. However, $32,486.00 is an estimate of the total amounts which will be paid to Plaintiff, including all amounts Plaintiff has already received from insurance companies (for property damage, lost earnings PIP benefits, and out-of-pocket reimbursements). Plaintiff desires an estimate of what additional monies he or she will receive from accepting the $51,500.00. Therefore, from the sample transactions we generate Exhibit "4B" (Report Showing Detail of Amounts Paid to Plaintiff), which estimates that of the $32,486.52 total payments to Plaintiff, accepting the $51,500.00 would allow a $25,671.55 additional payment to Plaintiff. Armed with this estimate, Plaintiff can more comfortably decide whether to accept or reject the settlement offer.
B. Prepare for Trial.
Possessed with current and accurate financial data, you will likely settle the case. But if a trial is necessary, print a report which itemizes and totals amounts due from the Defendant. From our sample transactions, we generate Exhibit "5" (Report Showing Itemization of Damages). Offer the report as a summary under Utah Rule of Evidence 1006, so the fact finder can understand the bills and damages. You may decide to print graphics, such as a pie chart showing a visual representation of the relative quantities of damages.
C. Prepare to Compromise a Minor's Claim.
If you represent a parent as Guardian ad Litem of a minor child, then track the damages of the child. When the parent pays for a prescription, this creates a liability of the child to the parent. At the hearing to compromise the minor's claim, t he parent can seek approval for repayment of this liability. By tracking all such amounts, you offer the Court and your clients an organized view of all financial transactions of the child.
D. Wind Up the Case.
As you deposit settlement monies into your trust account, you enter this deposit into your client's computerized "books" and print a status report, which shows intended disbursements of settlement monies. You present this report to your client, and obtain his or her written approval, before making final disbursements to insurers, care providers, Plaintiff, and yourself. From our sample transactions, we generate Exhibit "6" (Report Showing Disbursements to be Authorized by Plaintiff). Experience has shown that this single step can avoid the later need to spend 1) time (trying to make sense of past financial transactions), and 2) money (personally repaying liens which were "missed.") This account mirrors the attorney's trust account, and should contain all transactions of the Plaintiff, which involve the attorney's trust account.[11]
As you accurately track medical expenses, you may find errors in medical bills, caused by a provider's failure to acknowledge payment by Plaintiff's insurer. You can then print a report showing the correct balance, and itemizing entries from which your balance is derived. Clients appreciate attorneys who sophisticatedly detect such errors, even if your discoveries work to preserve only modest sums.
E. Adopt to your Client's Case.
Each case is different. You will encounter circumstances which require modification of your system. For example, cases with multiple defendants may benefit from use of clearing accounts, allowing an estimation of the amount due from each defendant, pending an authoritative allocation at trial.[12]
5. CONCLUSION
When a case is young, the attorney may perceive the need to track only assets: what Defendant owes Plaintiff. For example, the attorney may wonder whether medical bills exceed $3,000 so that general damages can be pursued. The attorney may neglect to track liabilities: what Plaintiff owes...
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