New Settlement Rules and Deadlines Mean the Best Approach for the Defense is to be Proactive

9173784342_9a3690113e_z (1)The new Illinois settlement statute aims to expedite the payment of settlements in civil cases—and with stringent penalties on the defendant for non-compliance, the best approach is to be proactive.  While there may be instances of slow to process settlements and late-paying carriers, the real source of delay – both to the frustration of defendants and plaintiffs alike – has been the lengthy intervals required for plaintiffs to resolve outstanding liens and Medicare issues.

So far, the jury is still out on the practical effects of the new law. While many companies and their insurance carriers are already aware of the new rules, a quick review of the requirements and potential pitfalls of the new law is in order as settlements tend to pick up towards the second half of the year.

The law puts the onus on settling defendants to quickly tender releases and pay settlement proceeds by setting statutory deadlines.  It also provides an enforcement mechanism by putting penalties – including the entry of judgment and assessment of costs – on the books.  However, the law provides no time limits, deadlines or penalties on plaintiff for failing to sign the release, resolve lien issues or timely obtain court orders where necessary to approve settlements.  Prudent claims handlers should keep these requirements in mind as they work through settlements and close out their claims.

What is covered?

The law applies to civil cases involving personal injury, wrongful death, property damage or any other tort action involving claims for money damages. However, the State of Illinois and claims against municipalities or units of local government, state officers and employees sued in their official capacities are not covered by the new requirements.  Class action lawsuits are also exempt.  The law also allows parties to “opt-out” of the new statutory deadlines by agreement, although in most instances there seems to be little incentive for plaintiffs to do so.

What does the law require?

Significantly, a settling defendant must now tender a release to plaintiff within 14 days of written confirmation of the settlement.  “Written confirmation” is defined to mean “all communication by written means” and should be assumed to include email correspondence.  “Tender” is defined to mean personal delivery or delivery by any means providing a return receipt.

Upon receipt the executed release document, including release of attorney’s lien – and the court order approving the settlement, if required (example:  a minor plaintiff or wrongful death claim on behalf of an estate), the defendant must tender the complete settlement proceeds within 30 days.

Plaintiffs can enforce these deadlines by filing a motion with the court.  If, after a hearing, the court finds that timely payment has not been made, the law provides that “judgment shall be entered against the defendant for the amount set forth in the release, plus costs incurred in obtaining the judgment”  and statutory interest from the date the release documents were tendered.

What about healthcare liens?

Private provider and Medicare liens are often a hold-up to the settlement process, particularly where plaintiffs have not started the process early.  The new law endeavors to both speed up settlements and protect third-party right of recovery or subrogation interests, where applicable, by providing a number of mechanisms to both protect the lien and permit payments to plaintiffs.

The law provides several methods by which plaintiff may protect the third-party’s  healthcare provider’s right of recovery or subrogation interest, by providing the defendant with one of the following: (i) a signed release of healthcare provider lien; (ii) a letter from plaintiff’s counsel agreeing to hold the full amount claimed in lien until final resolution of lien amount; (iii) an offer that the defendant hold the full amount of the right of recovery; or (iv) documentation of any other method of resolution of the liens as agreed by the parties.

Medicare, Centers for Medicare and Medicaid Services (CMS), Illinois Department of Health and Family Services, and private health insurance liens are subject to similar requirements and allow the plaintiff to provide either: (i) an agreement between plaintiff and Medicare, CMS or Illinois Department of Health and Family Services  as to how the lien is to handled; (ii) a letter from plaintiff’s counsel agreeing to hold the full amount of the claimed in lien until in the plaintiff’s attorney’s client trust account pending final resolution of the lien amount; (iii) an offer that the defendant hold the full amount of the claimed right to recovery pending resolution of the final amount; or (iv) documentation of other methods to resolve the lien as agreed by the parties.

Practical considerations

Be Proactive.  Defendants should request all documents necessary to process the settlement up front, and make clear what documents will be required to issue payment.  Various situations, including structured settlements and complex cases with multi-party settlement agreements and multiple payors may raise issues that are not specifically addressed in the statute. In these instances, a wise settling defendant will be careful to include all pertinent terms and conditions in the release so that there is no confusion about what documents and information will be required before the 30 day tender rule is triggered.

If and when disagreements arise as to what is required under the statute, counsel should not delay in seeking a ruling from the court by filing a motion to compel or enforce settlement, rather than risk running up against the 30 day deadline and risk the statutory penalties.

To recap, settling defendants must tender a release within 14 days of written confirmation of the settlement agreement.  Once the plaintiff tenders the signed release – and any other required documents – defendants have 30 days to tender complete payment of the settlement funds, or face the risk of judgment, statutory interest and attorneys’ fees in enforcing the statutory deadlines.

Settling defendants and their insurance carriers can avoid conflict during the settlement process by being familiar with the statute and working with counsel to resolve issues.

Image by Aussiegall licensed under CC BY 2.0