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Settling a Medical Malpractice Lawsuit – Tying Up Loose Ends

by Edward J. Kroger, MD, JD on September 29th, 2010

The majority of medical malpractice lawsuits never reach a jury. Settlement discussions occur in most cases, either informally or through a formal mediation process. The focus of most settlements is on the money being paid to settle the liability claims, but important ancillary issues should be considered and addressed before the parties reach a final agreement. Typically, the majority of these concerns are not addressed at the start of a mediation, but more often become part of the negotiations after it appears the parties are potentially in reach of an agreement on the dollar value. Waiting until after a final dollar value is agreed upon may be too late to raise these issues.

Consent. Many insurance policies require the defendant’s consent to settle the case. This is one of the few settlement concerns that is typically discussed either before or very early in the mediation.

Taxable Court Costs. Taxable court costs are certain specific litigation costs recorded by the court and are typically assessed against the losing party at trial. Recoverable court costs are specifically set forth by statute and do not include all litigation costs. Taxable court costs include the cost for ordering an original medical, billing or employment record (but not additional copies), the cost of mediation, the cost of an original deposition transcript (but again not copies), court fees, and ad litem fees.

The parties can agree as part of a settlement that the parties will be responsible for their own court costs. A defendant might agree to pay for the plaintiff’s court costs up to a certain amount. This is often helpful when the plaintiff is not sure of his incurred costs to date. Agreements to pay “all of the taxable costs,” without a specific limitation on amount or extent, can lead to later surprises and disagreements. If one defendant settles and others continue in the suit, the settling defendant should be careful not to agree to pay for “all plaintiff’s court costs,” as these costs will continue to be incurred after the settling defendant resolves his or her part of the suit.

Need for Ad Litem. Generally, an ad litem will be needed if a party serving as next friend or guardian of another person (i.e. minors or incapacitated persons) has interests adverse or potentially adverse to the person they serve. If an ad litem is not already involved in the case at the time of settlement, the parties should consider whether one is required.

Ad Litem Fees. Ad litem fees are usually not established until the settlement hearing and are based on a recommendation by the ad litem and approval by the court. Because the amount of the ad litem fees is often not known at the time of the settlement negotiations, the parties should negotiate whether the defendant will be wholly responsible for all ad litem fees, or for some percentage of or a fixed amount of the ad litem fees, with the rest paid by the plaintiffs.

Confidentiality. Most defendants want the settlement to be confidential, whereas most plaintiff attorneys want to publish the settlement in firm advertisements, websites, and court reporter publications. Confidentiality thus becomes a common problem at the time of settlement. Many plaintiff attorneys agree to make the settlement confidential at the time of the settlement, but then later balk at agreeing to the often more substantial confidentiality provisions requested by defendants in the formal settlement agreement documents. To avoid this disagreement, it is helpful to bring a proposed confidentiality clause to mediation and have both parties agree to it before settlement is reached.

Liens. All liens must be addressed at the time of the settlement. Most private liens will be addressed (and negotiated) by the plaintiff prior to mediation. Following a settlement, the plaintiffs remain responsible for any unsettled private liens. Of greater concern for the defendants are Medicare and Medicaid liens. By law, Medicare and Medicaid can pursue reimbursement from the settling defendant irrespective of any settlement with the plaintiff. Moreover, the law now requires insuring entities paying settlements on behalf of defendants to report settlement payments to the Centers for Medicare and Medicaid Services (CMS) with hefty penalties for failing to comply. CMS has provided a tool for defendants to query the system to identify whether a plaintiff is a Medicare beneficiary. Thus, before proceeding with any settlement with the plaintiff, defendants should investigate potential Medicare and Medicaid liens and obtain documentation, or insist that the plaintiff produce documentation, that all Medicare and Medicaid liens have been satisfied.

Nonparties. At the time of settlement, defendants want to settle all possible claims that could have been made by the plaintiffs or potential plaintiffs. The defendants should carefully consider whether there are any potential parties to the suit who can later make claims. For example, in a wrongful death claim some of the potential statutory wrongful death claimants may not be named plaintiffs in the suit. The defendants should obtain the agreement of these potential claimants to the settlement agreement. Otherwise, the defendants risk a later suit seeking recovery on the same set of facts.

Structured Payments. Some larger settlements will be resolved through the use of a structured payout agreement (sums of money paid to the plaintiffs over a period of time by an insurance company instead of or in addition to a lump sum payment). Disputes can arise between the plaintiffs and defendants who each wish to use a specific structured settlement broker. The decision as to which party will choose the structured settlement broker should be negotiated prior to settlement.

Preparation of Settlement Agreement and Final Judgment Documents. Typically the formal settlement agreement and final judgment documents are drafted by the defense counsel paying the largest part of the settlement. Several drafts of the documents will likely be circulated among the parties to work out differences. The parties should discuss deadlines for submitting documents or resolving issues related to the settlement at mediation.

Payment Specifics. Plaintiff’s counsel should timely provide to defense counsel specific payment instructions including the proper payee, federal tax identification numbers, and addresses.

Funding Timetable. Plaintiffs typically want to be paid quickly. How quickly the settlement funds can be made available by defendants should be explicitly discussed at the time of settlement to avoid a later misunderstanding.

References. CPRC 154.023 – Mediation; TRCP 125 – Parties Responsible; TRCP 129 – How Costs Collected; TRCP 131 – Successful Party to Recover; TRCP 558 – Judgment; TRCP 559 – Costs.

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