If you’re just about to settle your case (or if you already have) you’re probably wondering when you’ll actually be paid. The typical lawyer answer is “it depends,” which is true, but I’m going to tell you what “it” depends on, and how long “it” usually takes. There are delays which happen before your attorney gets the settlement check and delays which happen after your attorney gets the settlement check. Some of these are unavoidable, but some are not — and some can be mitigated.
Getting Paid After Settlement — Delays Getting the Check From the Insurer
The first delay you will likely encounter in getting paid after your settlement is the time it takes the defendant’s insurer to issue the settlement check. Florida has a specific statute addressing this issue, Fla.Stat. §627.4265, which reads as follows:
In any case in which a person and an insurer have agreed in writing to the settlement of a claim, the insurer shall tender payment according to the terms of the agreement no later than 20 days after such settlement is reached. The tender of payment may be conditioned upon execution by such person of a release mutually agreeable to the insurer and the claimant, but if the payment is not tendered within 20 days, or such other date as the agreement may provide, it shall bear interest at a rate of 12 percent per year from the date of the agreement; however, if the tender of payment is conditioned upon the execution of a release, the interest shall not begin to accrue until the executed release is tendered to the insurer.
This sounds great in theory: if the insurer doesn’t pay up within 20 days of settlement, they have to add substantial interest to the settlement. However, did you spot the two loopholes in this statute? First, the agreement must be in writing. This is a relatively minor loophole, as most attorneys know enough to reduce an oral settlement agreement to writing (through letters confirming the agreement, usually). The second loophole, however, is more problematic. It states that if the insurer requires a release as part of the settlement — which they all do — interest won’t begin to accrue until the executed release is tendered to the insurer. Here’s where problems arise. How much time does the defense attorney or insurance company have to send you a release? No deadline is mentioned. If changes need to be made to the release, how long do they have to accept or reject those changes? Again, no deadline. Conditioning the accrual of interest on the execution of a release allows for needless delays while the insurer drags its feet drafting an acceptable release. So, what is a plaintiff to do?
Whether or not your state has a statute like Florida’s, it would be a good idea to include a deadline for the delivery of an acceptable release in your settlement agreement. You could agree that the defendant shall issue you an initial proposed release within 5 business days of the settlement, with the final version being agreed upon no later than 7 business days thereafter (otherwise the settlement is void). This way, you can be sure that the insurer will issue your check within 20 days of settlement. If you sense that your case is getting close to settling, you may want to suggest this to your lawyer. If your state doesn’t have a statutory deadline for issuing the check, you can make that deadline part of the agreement as well. I have had cases where the insurer offered to expedite the check (payment within 24-48 hours) just to sweeten the pot. A little forethought before you agree to a settlement can save you needless delays afterwards.
Getting Paid After Settlement — Delays After Your Lawyer Gets the Settlement Check
There is one large and unavoidable delay you (and your lawyer) have to deal with after her receives the settlement check. It must be deposited into and clear his “trust account” before he can pay you. Trust accounts are required by state bar associations, and the interest which accrues on deposits in trust accounts usually goes towards legal aid services for the poor — it definitely does not go to your lawyer. Your lawyer wants your check to clear his trust account just as badly as you do, as he does not get paid until it clears, either. Settlement checks can take 10 business days to clear some trust accounts, unless they are issued by the same bank as the trust account, or if they are cashier’s checks (which is extremely rare). This is one delay you’re just going to have to endure. Ask your attorney’s office manager how long checks take to clear their trust account to get a more precise estimate of the delay.
Another delay which comes up after your lawyer gets the settlement check is the payment of your medical and insurance liens. There can be delays in doctors and insurers sending “final balance due” statements (although hopefully you had a good idea of what was owed before you settled). If Medicare or Medicaid paid any of your medical bills, they can be notoriously slow in delivering final balance statements.
There can also be delays as your lawyer attempts to negotiate the settlement of these liens and bills (yes, you can often pay less than is owed) so you get more money. If the full amount of your liens and bills exceeds your portion of the settlement (after attorney’s fees and costs), your lawyer will have to finish these negotiations with your lienholders before you get paid anything. If the full amount of your liens and medical bills is clearly less than your portion of the settlement, I suggest that you ask your lawyer for a “partial distribution” from his trust account (after the check clears, of course). When a lawyer makes a partial distribution, he holds an amount which would clearly cover all outstanding liens in his trust account and pays you the balance of your portion of the settlement. If he negotiates the liens down afterward, he pays you the rest in a second distribution. Here are two examples to illustrate:
- Example One: Jim settles his car accident case for policy limits of $10,000.00. His total outstanding medical liens are $6,500.00. In this case, Jim couldn’t get a partial distribution because his portion of the settlement, assuming a 40% attorney fee, is $6,000.00 — less than the full amount of his medical bills. Jim will have to wait until his lawyer negotiates his medical bills down before being paid anything.
- Example Two: Jill settles her car accident case for $100,000.00. Her outstanding medical liens are $20,000.00. Again assuming a 40% attorney fee (I’m omitting the attorney’s costs for simplicity), Jill could ask her lawyer for a partial distribution of $40,000.00 ($60,000.00 client portion minus $20,000.00 in liens) and then later receive another distribution of the balance after her liens are negotiated down.
These are the most common delays in getting paid after settlement. However, there are always unusual circumstances, such as bankruptcy, divorce, and even sometimes problems with the defendant’s check clearing, which can affect your settlement. If you are experiencing unusual delays in getting paid beyond those I’ve described, you should address them with your lawyer. For the usual delays, you’ll just have to be patient.