Sep
16

CLIENT ALERT: New Time Limits and Other Obligations in Civil Settlements

Posted in Civil Procedure

On August 26, 2013, Illinois Governor Patrick Quinn signed into law Illinois Senate Bill 1912 (Public Act 098-0548), which will place time limitations on “settling defendants” to tender draft releases and settlement payments with resultant penalties for the failure to do so.

The law, which becomes effective January 1, 2014, is applicable to personal injury, property damage, wrongful death, or tort actions involving a claim for money damages, except as otherwise agreed by the parties, and will require a release to be tendered to the plaintiff by the “settling defendant” within 14 days of written confirmation of the settlement.  If the settlement requires court approval, the plaintiff shall tender a copy of the court order approving the settlement.

If there is a known third-party right of recovery or subrogation interest, including attorney’s liens, healthcare provider liens, or rights of recovery claimed by Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and Family Services, or private health insurance companies, the plaintiff “may protect the third-party’s right of recovery or subrogation interest” by tendering to the defendant:

(1)    A signed release of the attorney’s lien;

(2)    Either:

(a)    A signed release of a healthcare provider lien; or

(b)    A letter from the plaintiff’s attorney agreeing to hold the full amount of the claimed lien in the plaintiff’s attorney’s client fund account pending final resolution of the lien amount; or

(c) An offer that the defendant hold the full amount of the claimed right to recovery pending final resolution of the amount of the right of recovery; or

(d)    Documentation of any other method of resolution of the liens as agreed by the parties; and

(3)    Either:

(a)    Documentation of the agreement between the plaintiff and Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and Family Services, or the private health insurance company as to the amount of the settlement that will be accepted in satisfaction of right of recovery; or

(b)    A letter from the plaintiff’s attorney agreeing to hold the full amount of the claimed right to recovery in the plaintiff’s attorney’s client fund account pending final resolution of the amount of right to recovery; or

(c)    An offer that the defendant hold the full amount of the claimed right to recovery pending final resolution of the amount of the right of recovery; or

(d)    Documentation of any other method of resolution of the liens as agreed by the parties.

Once the “settling defendant” is in receipt of the executed release and all required documentation listed above, it must tender full payment of all sums due to the plaintiff within 30 days.  If the settling defendant fails to tender full payment within 30 days from receipt of the executed release and all required documentation listed above, the court shall enter judgment against the settling defendant for the amount set forth in the executed release, plus costs incurred in obtaining the judgment and interest at the statutory post-judgment interest rate (currently at 9%), calculated from the date of the tender of the required documents by plaintiff.

This new legislation causes particular concern with respect to the settlements where there is the right of recovery of conditional payments under the Medicare Secondary Payer Act.  In this situation, a “settling defendant” and its counsel will not be fully protected from subsequent recovery by CMS and the harsh penalties for non-compliance under the Act until receipt of the final conditional payment demand letter from CMS (which will not be issued until after settlement is reached) and then subsequent payment of the claimed total reimbursement amount owed.  The other options provided for in Senate Bill 1912 (Public Act 098-0548) — a letter from the plaintiff’s attorney agreeing to hold the full amount of the claimed right to recovery in the plaintiff’s attorney’s client fund account pending final resolution of the amount of right to recovery; an offer that the defendant hold the full amount of the claimed right to recovery pending final resolution of the amount of the right of recovery; or documentation of any other method of resolution of the liens as agreed by the parties  — may not be sufficient to insulate oneself from the Medicare Secondary Payment Act requirements.  Therefore, especially in matters involving Medicare, the “settling defendant” and its counsel should consider opting out of the new legislation as part of any settlement agreement because the Medicare conditional payment resolution process can take longer than the time allotted by this new provision.

Jamie Hull

Jamie Hull

Jamie L. Hull is a partner in the firm's Chicago office where she concentrates her practice in insurance coverage litigation, business litigation and appellate matters.

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