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Lien Resolution

Outsourcing Lien Resolution: An Ethical and Effective Solution for Personal Injury Attorneys

May 11, 2023

By Jason D. Lazarus, J.D., LL.M., MSCC

In the complex world of personal injury law, litigating trial lawyers must prove causation, liability, and damages to ensure their clients receive the compensation they deserve. To navigate this challenging landscape, personal injury law firms often rely on specialized experts to help them with and prove their case. Personal injury lawyers routinely engage experts in other complex areas of law, such as probate, guardianship, government benefit preservation, tax, or bankruptcy. Attorneys also frequently rely on accident reconstructionist experts, economic damages experts, and Medicare experts.

Settlement is no different!  Lien resolution is a prime example of a specialized area where outsourcing at settlement makes sense, both ethically and professionally.  By enlisting subrogation experts, personal injury lawyers can enhance their clients’ net recovery while navigating the potential pitfalls inherent in the resolution process.

Ethics of Outsourcing Lien Resolution

Lien resolution is complicated by the varied and extensive laws governing health insurance subrogation claims. ERISA, the Medicare Secondary Payer Act, Medicaid, FEHBA, and other types of private insurance liens are specialties unto themselves. Each type of lien has its own statutory and regulatory body of law, can be subject to different state regulations, and can often coexist on the same case. A single personal injury victim may have multiple liens asserted against their recovery, which further complicates the lien resolution process.

Outsourcing lien resolution services is ethical because it allows trial lawyers to secure the best possible outcome for their clients, and ensures that all subrogation claims, reimbursement obligations, and liens are resolved in accordance with the law. The liability falls on the trial lawyer to protect their client from litigation and potential loss of health care coverage by properly addressing valid lien holders. Failure to do so could result in legal malpractice or personal liability, for example, for double the lien amount under the Medicare Secondary Payer Act’s double damages provision.

The American Bar Association (ABA) Model Rule 1.15 sets the standard for the ethical duty of trial lawyers to protect disputed funds when a lien holder claims more than they are entitled to from a settlement, judgment, or award. Many states have ethical rules or opinions which mirrors Model Rule 1.15 which can be read to impose a duty upon trial lawyers to safeguard disputed funds.  Furthermore, Model Rule 1.1 requires a lawyer to have the necessary knowledge, skill, thoroughness, and preparation to undertake lien resolution. If a lawyer lacks the expertise to resolve liens, they must ensure competent representation through other means, such as retaining experts.

The ABA’s Formal Ethics Opinion 08-451 provides guidance on the ethical rules for outsourcing legal and nonlegal support services. It states that a lawyer may outsource services as long as they remain ultimately responsible for rendering competent legal services to the client under Model Rule 1.1. The lawyer must also comply with Rules 5.1 and 5.3, protect confidential information, ensure the competence and training of the provider, and obtain disclosure and informed consent from the client.

Several states have further defined the ethical requirements for outsourcing lien resolution. New York, Ohio, and Utah, for example, all permit personal injury lawyers to retain an outside lien resolution firm and charge its fee as an expense of litigation paid by the client, as long as certain conditions are met. These conditions include obtaining informed consent from the client, charging reasonable fees, ensuring a net benefit to the client on each lien negotiated, complying with state-specific bar rules and substantive law, and maintaining ultimate responsibility for the work product.

Conclusion

In conclusion, outsourcing lien resolution services is an ethical and effective solution for personal injury attorneys. By partnering with expert lien resolution providers, lawyers can ensure the best possible outcomes for their clients while adhering to the highest professional standards. By following the ethical guidelines set forth by the ABA and state bar associations, attorneys can confidently outsource lien resolution services and focus on their primary responsibility: advocating for their clients and securing just compensation for their injuries.

The benefits of outsourcing lien resolution services go beyond merely complying with ethical guidelines. By engaging experts in the field, personal injury attorneys can save valuable time and resources, allowing them to dedicate more attention to their clients and their cases. This collaboration also enables personal injury lawyers to provide a higher level of service, as they can leverage the specialized knowledge and experience of lien resolution professionals to negotiate better outcomes for their clients.

Additionally, outsourcing lien resolution services can help law firms manage risk more effectively. Given the complexity and potential consequences of mishandling liens, partnering with specialists can significantly reduce the likelihood of errors and oversights that could lead to litigation, professional liability, or damage to the firm’s reputation. This risk management benefit further supports the ethical rationale for outsourcing these services.

In summary, outsourcing lien resolution services is not only an ethical decision, but it also offers numerous advantages for personal injury attorneys and their clients. By partnering with expert providers, attorneys can focus on their core competencies, offer enhanced services, and manage risks more effectively.

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