People often call our injury firm with stories like this one: “I received a settlement of $50,000 in my personal injury case, but after attorney fees, expenses and reimbursements, I was left with almost nothing, what can I do?”
As a personal injury lawyer, I find these stories heartbreaking because clients who are injured should get a fair amount for their injuries, but just looking at the total settlement amount does not tell the whole story. What matters to most clients is the “bottom line” amount they will take home after their lawyers are paid, after the expenses are paid, and after any reimbursements are paid or otherwise dealt with. At Gautreaux Law, we make sure our clients know how much money will go in their pocket before they agree to a settlement amount. This article will do a fairly deep dive into the details of settlements in personal injury cases, so that you can know how the process works and avoid making potentially costly mistakes.
Insurance Companies Usually Settle for a “Lump-Sum” After all your Medical Treatment is Complete
To understand how to avoid mistakes, let’s start with an overview about the settlement itself. Here is often what happens: a person is injured in an auto wreck and hires a personal injury lawyer for assistance (hopefully not by just calling whoever appears on the television with the loudest ads). The lawyer manages to negotiate a settlement with the other driver’s insurance company. The lump sum settlement amount the insurance company agrees to pay will be used to pay for everything: medical expenses, investigative expenses, loss of income, pain and suffering, attorneys fees, etc.
Now, the important thing here is that the person who was hurt has probably been getting medical treatment and the medical bills have already been paid. Usually, the medical bills are paid by the person’s health insurance or Medicare or Medicaid, just as they would be paid if the person had medical treatment not associated with an auto wreck. What most clients don’t understand is that those medical bills that have been paid usually have to be paid back. Some clients think that the at-fault driver’s insurance company will pay the medical bills as they get treatment, but that is almost never the case. The at-fault person’s auto insurance rarely will agree to pay any medical bills before they actually settle the personal injury case. Instead, insurance companies would rather settle for a “lump-sum” amount all at once after all the medical treatment is completed.
So, here are the 3 things you need to understand prior to settling your personal injury case?
#1 Reimbursement – What is it?
I paid premiums for my health insurance, so why do I have to pay them anything when I settle my personal injury case?
So, medical treatment is complete and a settlement has been reached. For simplicity, let’s say the person injured their back and got medical treatment that included an Emergency Room visit, an MRI, physical therapy and pain injections, but no surgery. The medical bills totaled $27,000 and the health insurance company paid the bills as they were received for all this medical treatment. The total amount paid by the insurance company was $14,000. Note that this is much lower than the actual bills because of reductions that are part of the health insurance contract between your insurer and medical providers; the actual medical bill is almost always much higher than the amount paid by your health insurance company because of these contractual write-offs.
Your health insurance company has sent to your lawyer and to you a letter saying that they want to be reimbursed for any amounts it paid for your medical treatment resulting from the auto wreck. People are often surprised by this fact and wonder why they have to worry about paying back their own health insurance company from the settlement. The short answer is that the law does sometimes allow this. It can be complicated, depending on the type of health insurance you have. For example, large private employers who provide health insurance can often seek their money back under a federal law called ERISA (Employee Retirement Income Security Act). State and local government employees’ health insurance is subject to a different set of rules, and Medicare and Medicaid present yet another set of legal rules for reimbursement. And, just to add to the complexity, insurance coverage such as “med pay” in your own auto insurance coverage presents yet another scenario.
The bottom line is that you may have to face a reimbursement that takes away some of the money you get out of the settlement. In our example, if your lawyer tells you that you need to write a check to your health insurance company for the $14,000 it paid for your medical treatment due to the wreck, you’ve now lost $14,000 out of the $50,000 settlement. That is a big chunk of money out of your pocket and into the pocket of your health insurance company.
#2 Expenses in Your Case
In addition to medical reimbursements, another way your “bottom-line” is affected is the payment of case expenses. Case expenses include things like the cost of obtaining medical records, the cost of hiring an investigator to help prove your case, and maybe the cost of outside medical experts to show that your injuries were in fact caused by the wreck. The important point is that case expenses are normally paid upfront by your lawyer, and just like with health insurance reimbursements that we addressed above, case expenses are reimbursed after your case settles. This is another way that the settlement amount that you put in your pocket is reduced.
#3 Attorneys Fees
Most folks understand that contingent attorneys fees have to be paid as well. “Contingent” means that the lawyer receives a percentage of the settlement amount rather than being paid by the hour. Sometimes, people call and ask if, in addition to the settlement amount, the attorneys fees are paid separately by the at-fault driver’s insurance company. The answer is no, that almost never happens in a typical personal injury case, such as an auto or trucking wreck. Instead, insurance companies typically want to pay a lump sum amount and be done and finished with the case, leaving you to have to pay everything from the settlement, including attorneys fees, expenses and any required reimbursements.
Your Personal Injury Settlement: How all this works and why it matters to you
Let’s go back to the example we started with. You got a $50,000 settlement. The attorneys’ fees are one-third, so that is $16,666. The health insurance reimbursement is $14,000, and for this example, let us assume that the case expenses were $1,000. The math works out as follows:
Settlement amount agreed to: $50,000
Attorneys Fees: $16,666
Health Insurance Company: $14,000
Expenses: $ 1,000
Net amount to client: $18,334
You can now see why understanding these 3 things – Reimbursements, Expenses and Attorneys Fees – are so important. You would probably want to make sure you have a really clear idea from your lawyer about the attorneys fees, reimbursements, and expenses before you settle your case so you know the “bottom line” amount you will receive.
In our experience at Gautreaux Law, it is very important to try to reduce the amount of the legally required reimbursements (sometimes these are called subrogation). The legal rules can be complicated, and that is why it is important that your lawyer not get in a hurry to settle the case, but instead makes sure that the reimbursements are analyzed carefully and kept to a minimum.
Contact Our Macon, GA Legal Team if You’ve Been Injured
Gautreaux Law specializes in Personal Injury cases, including car and truck wrecks, medical malpractice, sexual assaults, and wrongful death. Our firm has been representing injured people in Georgia for over 20 years and we believe in complete transparency. Our legal team will communicate with you throughout the entire process so that you will know and understand what is happening in your case. Contact Gautreaux Law for a free consultation or call us at 478-238-9758.