Asserting Your Right to MedPay and PIP Payments in PI Cases

Editor's Note: This is article #3 in a bimonthly series designed to empower you to take PI cases if you aren't; or achieve better outcomes if you're already doing PI. The first article appeared in the July 2022 issue.

Plain and simple: If you take cases on personal injury, you likely have a right to MedPay and PIP payouts where available. The trouble is, these payouts are often improperly sent to patient attorneys, who hold onto the payments until the end of the case ... and even take a cut for themselves.

This should never happen, so let's talk about how to assert your right to MedPay and PIP payments. But before we get into the solutions, a little background is necessary.

The Basics

MedPay is a component of some patients' automobile insurance policies that requires the auto insurance company to promptly pay medical expenses, up to the policy limit, regardless of who is at fault. MedPay is available in most states and is shockingly inexpensive.

Personal-injury protection (PIP) is also a component of some auto policies, and it includes not just medical expenses, but also childcare, lost wages and other benefits.

PIP coverage is generally more expensive, but it is also issued regardless of fault. Indeed, PIP is a requirement in "no fault" states as part of the legislative scheme, purportedly to control rising insurance costs.

In either case, the purpose of these provisions is so that the patient, as the insured, can get prompt medical attention based upon the assurance of prompt payment per the policy terms.

At times, MedPay and PIP payouts can cover a chiropractor's entire bill. Other times, they can pay down a portion of your bill, which in turn, reduces the patient's financial responsibility, establishing the medical expenses paid – all without raising the patient's auto insurance rates.

The Problem

An attorney should rarely have anything to do with MedPay and PIP payments. They are intended to cover medical expenses, and in the case of PIP, childcare and lost wages. Since they are issued regardless of who is at fault, attorneys should never take a cut. When they do, they are literally taking money out of their own client's pocket.

But for various reasons, insurers often send these payouts to the attorney's office. The good attorneys turn over MedPay and PIP benefits if the insurance company sends them to their office instead of the chiropractor's office, and they turn them over right away. But the difficult attorneys? They hold onto the checks until the case concludes and often take attorney's fees out of the funds inappropriately.

This is wildly inappropriate, and it hurts you as well as your patient. After all, if you are paid only two-thirds on a MedPay bill because the attorney takes a one-third cut, your patient now owes the remaining 33 percent!

The patient, not the attorney, should benefit from every MedPay and PIP insurance dollar by having those dollars reduce the patient's outstanding medical bills. After all, it is the patient who paid the insurance premium. And the explicit purpose of these provisions is that the patient, as the insured, can get prompt medical attention based upon the assurance of prompt payouts per the policy terms.

Yet many attorneys have fallen to greed and added MedPay and PIP attorney fee entitlements to their retention agreements. When an attorney takes a percentage of the MedPay or PIP, the attorney is very likely acting unethically. Your patient might not know any better, but attorneys do.

The Solution

So, how do you resolve this? It starts with the mother of all solutions in personal injury: a rock-solid lien agreement or letter of protection.

Contracts are the language spoken by attorneys, so having a detailed lien agreement, signed by both your patient and the attorney, is the basis for both protecting yourself and creating full transparency to everyone. (If you are in a letter-of-protection state, make the "letter" a lien contract.) The language should include, among many other things:

A clause stating that the attorney signing the lien has a "fiduciary duty" to you as the medical lien holder. (A "fiduciary" is a person who holds a legal or ethical relationship of trust with another. Fiduciary duties exist to ensure that those who handle or manage other people's money act in the interests of those other people, rather than serving their own interests. The purpose is to give people confidence that they can rely on and trust in another.)

While some states imply fiduciary duties upon attorneys who signed a lien, it is better if you remove ambiguity by placing this directly in the lien agreement. (And if an attorney tries to cross out this language, that's a red flag the attorney is going to try something down the line!)

A clause mandating the turnover of any MedPay or PIP issued specifically on your bill, but received by the attorney, and rescinding any MedPay or PIP attorney fee entitlement that may be in the attorney-patient agreement. That rescission of any attorney fee entitlement is important to protect your patient.

A line for the attorney's signature, alongside your patient's signature, as well as a space for the attorney to print their name and title. Don't accept a scribble with no name or title. You may get a "that wasn't me" down the road.

Chicken-scratch signatures fail to identify who signed the lien. And if the patient changes counsel or a co-counsel is brought in (often trial counsel), have the new attorney sign the lien.

When you use a rock-solid agreement, you have a legal document you can point to that compels the attorney to turn over MedPay and PIP payments issued to them instead of to you.*

If the attorney is still not handing over MedPay and PIP payments, try this:

1. Send written notification to your patient that the attorney has breached the lien and is holding onto MedPay and PIP payments.
2. Explain that this will hurt the patient; after all, if a portion of MedPay and PIP payments goes into the attorney's pockets, they aren't being put toward the balance of the bill, and the patient will have to pay out of their own pocket.
3. Explain that unless the attorney releases MedPay and PIP payments, you will be forced to declare a lien breach and the patient will have to pay your bill now. If the attorney still won't turn over payments, you might send a letter to the patient explaining the breach and demanding payment.

The patient will likely rush to contact their attorney to resolve this issue; and the attorney will know that you don't play silly games and that you stand up not just for yourself, but also for your patients!

Author's Note: The above does not constitute legal advice; readers should contact the legal, business and financial professionals licensed in their states before implementing new strategies.

*I urge you to access the lien agreement I developed 10 years ago, and have updated every year since, at PIMadeEasy.com. Compare with your own, but before adopting any new clauses, be sure to have your health care attorney review all legal documents to make sure they comply with the laws in your state.