Liens: A Hidden Trap

Many lawyers are too quick to agree or allow their clients to agree to liens. This is a huge mistake and can cost you several thousands of dollars.  I’ve even seen cases where the previous lawyer racked up more liens than possible settlement funds – meaning the client would get nothing.

A lien is your agreement to pay your medical provider from your settlement. Medical providers love this, because they can collect more from you and your settlement than they would from your health insurance. Many lawyers and medical providers will make you feel good about a lien arrangement and how they are doing you a favor and simply waiting for payment for their services.  This is bad news.

Here’s a quick example:

You need a pain procedure. The pain procedure is billed at $3,000.

If you go through Health Insurance:

Bill, $3,000.
Health insurance payment, $800
Co-pay/deductible, $250.

If you agree to a Lien:

Bill, $3,000

If the net after your attorney’s fees and costs of your settlement is $50,000, and you used your health insurance, you would net $49,750 (because you had to pay $250 co-pay/deductible).

If, instead, you’d agreed to a lien, then, you would only net $47,000 (because you had to pay the entire $3,000 bill from your settlement). 

Worse yet, when you agree to a lien, the medical provider is no longer restricted to billing what is a reasonable and customary rate. So, that same $3,000 procedure, they get instead to choose how much they want it to cost and can say that it is a $15,000 procedure. And if they do that, then you only net $35,000 (because you pay $15,000 from your settlement).

You may be thinking that you’re not understanding this correctly because it’s too shady or that just couldn’t be how the world works, but, I assure you that’s exactly how it works and you are understanding exactly right.

Now, there are, however, a couple of scenarios where a lien does make sense – 1) you don’t have health insurance or 2) the medical care you want isn’t covered by health insurance (stem cell therapy, chiropractic care, etc.)

When you have the choice between a lien or using your health insurance, almost 100% of the time, you should use your health insurance.

If your lawyer or a medical provider starts suggesting liens, run for the hills or run to us and we’ll get you taken care of the right way.

Gimmick Discount & Escalating Fees

You’ve heard the old sayings, “it’s too good to be true” or “you get what you pay for.”

A typical and reasonable contingent attorney’s fee is 1/3 of the gross settlement. Meaning, for every $3 dollars the lawyer is successful in obtaining for you, he gets $1 and you get $2.

You will see advertised on billboards, and if you meet with some lawyers, a discount fee of 25%. However, it’s usually a gimmick because there’s an escalation clause in the contract that says the fee becomes the typical 1/3 if the case takes longer than a couple months (and it almost always does) and it jumps to 40-50% or more if a lawsuit ends up being filed. So, when you thought you were getting a discount, you often end up paying even more.

If you do end up getting the discount, you often get what you pay for. If a lawyer who charges 1/3 can get you $100,000 (your net is $66,666) and a lawyer who charges a 25% fee is only able to get you $65,000 (your net is $48,750), then your net is still far better paying the 1/3 fee (net $66,666 vs. $48,750).

We are not at discount firm. And, at the same time, our fee does not increase if we have to file a lawsuit. Our fee is 1/3 start to finish even if we end up having to take your case through to trial.

An Art/Tailor Fit versus Cookie Cutter

Think of a custom home versus a tract home or a McDonald’s cheeseburger versus a cheeseburger from a steakhouse. One is cookie cutter.  The other is an art and quality.

Most lawyers think their job is to collect your medical records, bills, and some proof of lost income relating to your accident and to provide those to the insurance company. And, this is exactly what they do. They collect medical records and bills and send a one maybe two page letter with a table showing your medical bills and then expect an insurance company to take the case seriously and to get you a good offer.

The right way to do it is to create and present a custom and tailor fit package, detailing your several injuries, limitations, your past medical bills and anticipated future medical bills, your lost income and how your injuries affect your unique circumstance. Cases are about people; it’s about storytelling.

In a way, the presentation of your case is like fine cuisine, handmade furniture, a well-rehearsed symphony or a thought-provoking film. There is plenty of substandard food, furniture, music, and entertainment out there in the same way that most injury lawyers don’t care enough except to make a quick buck and move on.

If done the right way then you’ll know you got the best possible outcome in your case.

Attorney Owned vs. Private Capital

Until a few years ago, only lawyers could have an ownership interest in a law firm. That’s different now and anyone can own a piece of a law firm. Our opinion is that this is not a good thing. You’ve probably experienced what we mean but with a Dentist or Doctor’s office which underwent this same change but many years earlier. Maybe you’d been seeing the same doctor for several years, but then his practice was bought out by a private investor and then all of a sudden it was hard to schedule with that doctor or, once you were able to see the doctor, your appointment felt very rushed. This is the byproduct of a business and putting its bottom line and revenue first and the patient’s needs second. They try to get as many patients in and out the door as possible, and where before a doctor could spend the appropriate amount of time with his patient, now he’s required to see a certain quota of patients per day.

In a law firm owned by private capital and non-lawyers, it’s arguably one step worse. What’s best for the client isn’t necessarily or always what’s best for the business. So, the business of the law firm is conflicted. Lawyers are ethically obligated to do what’s right for their clients, but the business of a law firm owned by private capital doesn’t have that same ethical obligation.

We are attorney owned.  We do not report to shareholders or investors.  We report to you and you only – our clients.