Defense lawyers and insurance companies have this irrational fear of an unpaid lien holder coming back and claiming the insurance company is obligated to reimburse for the unpaid debt. Sure, some adjusters and lawyers push this issue because they are pathologically difficult. But I also think that they have an earnest belief that this could happen and, more importantly, that they will get blamed for it.
This problem has grown especially acute since Medicare came out with new reporting rules in personal injury claims that many insurance companies believe means that the plaintiff is obligated to prove the negative that they don’t have Medicare. “You are 32 years old making $75,000 a year? So? Prove to me you are not on Medicare.”
You would think this increasing fear would be tempered by the fact that this doomsday scenario has not come to pass even a handful of times in human history. (Source: I’ve never heard of it happening other than one Medicare case, a thousand years ago, where the plaintiffs’ lawyers really were up to no good.)
So the adjuster-defense lawyer wonder twins concocted a plan to decrease the likelihood of a lien ever coming back on them: having both the plaintiff and the plaintiff’s attorney indemnify them for any lien.
Maryland Ethics Commission: Docket No. 2012-03
So here’s what happened that led to a Maryland State Bar Association ethics opinion. After agreeing to the amount of a car accident settlement, the insurance company demands that the plaintiff’s lawyer and the plaintiff indemnify both the insurance carrier and the defendant from any claim for any of plaintiff’s medical bills, medical liens, or workers compensation liens related to the car crash. The question posed to the ethics commission is whether this demand violates the Maryland Rules of Professional Conduct.
The MSBA ethics commission found that asking the plaintiff’s lawyer to indemnify settling defendants violated Maryland’s ethical rules. I could lay out all of the rules cited in – (MRPC 1.8(e) and MRPC 1.7(a) (2) if you want to get geeky about it – but most of us just care about the take home message: they can’t pull this garbage after settling a personal injury case in Maryland anymore without having this opinion thrown at them.
Related Problem We Had Last Week
We finally settled a wrongful death medical malpractice lawsuit this week. Hard case to get settled. We finally resolved the case at the second mediation. Defendant’s malpractice lawyers wanted a provision that the client – not us – indemnify for any claims made by a lien holder who brought a claim against defendant or the medical malpractice’s insurer.
Now, asking for an indemnification of the lien itself is just silly. It would be like my kids asking me to sign something promising to feed and cloth them. I’m already on the hook for that. But they took it a step further – asking for indemnification from any claim, including frivolous claims, filed by anyone claiming a lien.
Believe me, we just wanted to get the case resolved and done with. But we couldn’t sell out the client by having them indemnify them against a bunch of bill padding defense lawyers ringing up a $20,000 tab. So we held out ground and, eventually, after a bunch of emails, the defense lawyers caved. Now, I don’t think this demand was unethical. But it certainly was unreasonable.
You can read the full ethics opinion here.