In the aftermath of personal injury, victims often face the added stress of financial hardship on top of their physical injuries. In California, personal injury law firms can step in to advance medical costs, ensuring clients receive the care they need to get back on their feet and in the game. This practice is fully supported by the state's legal framework.
Legal Backing: Rule 1.8.1 and Client Support
Under the State Bar of California's Rules of Professional Conduct, Rule 1.8.1 explicitly permits lawyers to advance the costs of litigation:
"While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to the client, except that: (1) a lawyer may advance or guarantee the costs of litigation [italics added], including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such costs (subject to any applicable protective order or agreement)."
This rule is a clear indicator that advancing medical costs is not only permitted but is also a practice that aligns with an attorney’s duty to support the client's best interests during litigation.
The Howell Hurdle: Ensuring Full Damages
In the Howell v. Hamilton Meats & Provisions case, it was determined that personal injury compensations for medical expenses should reflect the amount actually paid, rather than the initially billed higher amount, thus necessitating the classification of medical cost advances as loans to fully safeguard the plaintiff's recoverable damages. Here are the steps to document these costs as loans:
1. Written Agreement: Draft a formal agreement between the attorney and the client, stating that any advanced costs will be treated as a loan that the client is obligated to repay.
2. Repayment Terms: Outline specific terms of repayment in the agreement, clarifying that repayment is contingent upon the conclusion of the case, whether by settlement or judgment.
3. Interest Terms: If applicable, include any interest terms in the agreement, ensuring they comply with applicable laws and professional conduct rules.
4. Client Acknowledgment: Have the client formally acknowledge their understanding and acceptance of the loan terms, ensuring that they are fully informed and consent to the arrangement.
5. Separate Accounting: Maintain a separate account or ledger documenting each advancement as a loan, tracking expenses meticulously to ensure clear financial records.
6. Disclosure to the Court: If required, disclose the loan arrangement to the court, demonstrating transparency and adherence to legal and ethical standards.
With the medical costs meticulously documented as loans, we can move confidently towards trial or settlement discussions, knowing the recoverable damages reflect the true extent of the client’s expenses.
Countering Collusion: Steps for Maintaining Arm's Length Relationships
As we safeguard the client's financial recovery, we must also proactively dispel any notions of impropriety between law firms and medical providers. To mitigate allegations of collusion and maintain arm's length relationships with medical providers, attorneys should take several steps:
1. Documented Agreements: Establish clear, written agreements with providers detailing the terms of services, which reinforce the independence of the medical provider’s judgment.
2. Fair Market Rates: Ensure that all services are billed at fair market rates, avoiding any suggestion of inflated costs for the sake of increased damages.
3. Independent Verification: Utilize third-party medical billing experts to verify the reasonableness of costs.
4. Disclosure: Be transparent with all parties, including the court if necessary, about the nature of the relationship with the provider and the financial arrangements.
5. No Referral Fees: Avoid any referral fee arrangements with medical providers, which could be construed as kickbacks.
6. Expert Testimony: Employ expert testimony to validate the necessity and cost of medical services, strengthening the legitimacy of the expenses.
Our Firm's Commitment: A Big League Approach
In conclusion, our firm's steadfast commitment to the principles outlined by Rule 1.8.1 ensures that we not only cover all the bases for our clients' financial needs but also uphold the highest standards of professional integrity. We stand ready to step up to the plate, ensuring that each case is championed with the confidence and skill required to secure a win on behalf of our clients.
Scott Seegmiller, J.D.
Big League Law, Inc., (949) 777-5611