YOU BETTER PAY UP:Illinois’ Prompt Pay Statute

Donald Patrick EcklerAugust 6, 2015

Pretzel & Stouffer, CharteredOne South Wacker Drive, Suite 2500

Chicago, IL 60606312-578-7653

deckler@pretzel-stouffer.com

Sec. 2-2301. Settlement of claims; payment.

(a) In a personal injury, property damage, wrongful death, or tort action involving a claim for money damages, a release must be tendered to the plaintiff by the settling defendant within 14 days of written confirmation of the settlement. Written confirmation includes all communication by written means.

TO WHAT KIND OF CASES DOES THE STATUTE APPLY?

• While intended to apply to personal injury cases, it is broad enough to apply to business tort cases

• Does it apply to cases before they are filed? Or only filed actions?

• How does it apply when more than one defendant is settling?

(b) In a personal injury, property damage, wrongful death, or tort action involving a claim for money damages in which the law requires court approval of a settlement, the plaintiff shall tender to the defendant a copy of the court order approving the settlement.

See Section (d), which modifies when payment must be made based upon compliance from the plaintiff in providing approval of settlement.

(c) In a personal injury, property damage, wrongful death, or tort action involving a claim for money damages in which there is a known third-party right of recovery or subrogation interest (including attorney's liens, healthcare provider liens, or rights of recovery claimed by Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and Family Services, or private health insurance companies), the plaintiff may protect the third-party's right of recovery or subrogation interest, where applicable, by tenderingto the defendant:

THE PLAINTIFF’S OPTIONS FOR HANDLING LIENS

• All of these options are at counsel for plaintiff’s discretion. Does this statute absolve the defendant of its duties to protect the interest of lien holders and Medicare? Likely not.

• It is important in the negotiation of a settlement to make as a condition that the liens be satisfied before a settlement is reached

THE PLAINTIFF’S OPTIONS FOR HANDLING LIENS

(1) A signed release of the attorney's lien.

(2) Either:

(i) a signed release of a healthcare provider lien; or

(ii) a letter from the plaintiff's attorney agreeing to hold the full amount of the claimed lien in the plaintiff's attorney's client fund account pending final resolution of the lien amount; or

(iii) an offer that the defendant hold the full amount of the claimed right to recovery pending final resolution of the amount of the right of recovery; or

(iv) documentation of any other method of resolution of the liens as agreed by the parties.

THE PLAINTIFF’S OPTIONS FOR HANDLING LIENS

(3) Either:

(i) documentation of the agreement betweenthe plaintiff and Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and

Family Services, or the private health insurance company as to the amount of the settlement that will be accepted in satisfaction of right of recovery; or

THE PLAINTIFF’S OPTIONS FOR HANDLING LIENS

(ii) a letter from the plaintiff’s attorney agreeing to hold the full amount of the claimed recovery in the plaintiff’s attorney’s client fund account pending final

resolution of the amount of the right to recovery; or

(iii) an offer that the defendant hold the full amount of the claimed right to recovery pending final resolution of the amount of the right of recovery; or

(iv) documentation of any other method of resolution of the liens as agreed by the parties.

Consequences For Not Considering Medicare’s Interest

A. If Medicare is not paid within 60 days, it is entitled to interest. See 42 USC § 1395y(b)(2)(B)(ii).

B. The primary payer may also be required to pay Medicare even if it already paid the Medicare beneficiary. See 42 CFR § 411.24(i).

C. Medicare can also take legal action to recover twice the amount of the Medicare payment. See 42 USC § 1395y(b)(8)(B)(ii); 42 CFR 411.24(c)(2), (h).

D. There is also a private right of action by the plaintiff. See USC § 1395y(b)(3)(A).

Consequences For Not Considering Medicare’s Interest

E. Finally, failure to report a payment to a Medicare beneficiary can be subject to $1,000 per day/per case fine from the date the Medicare beneficiary received funds, as well as other remedies. See 42 § 1395y(b)(8)(B)(i).

To get the flavor of what Medicare can seek, one needs look no further than U.S. v. Stricker, 09 PT 2423 filed in the Northern District of Alabama where the U.S. tried to get at the proceeds from a $300 million settlement with 907 Medicare beneficiaries in 2003. Dismissed on statute of limitations.

Suggested Language to Use Where Plaintiff’s Counsel Insists on Holding the Settlement

Proceeds in Trust

The Releasor acknowledges that she accepts payment of the sum set forth above as a full and complete compromise of all matters between the Releasor and the Released Parties, and that this sum is inclusive of all liens, costs and attorneys’ fees which the undersigned may be required to pay from these settlement proceeds, including any interest in the payment of Medicare or IHFS.

Suggested Language to Use Where Plaintiff’s Counsel Insists on Holding the

Settlement Proceeds in Trust Pursuant to 735 ILCS 5/2-2301(a)(2)(ii) and correspondence of June 10, 2015, the Releasor agrees that all of the proceeds of this settlement will be held in the trust account of my attorney until 1) a final demand letter is received from CMS and equivalent from IHFS and 2) all liens and interests of any kind in this settlement, including those of Medicare and IHFS, are satisfied and released. Counsel for the Releasor agrees that the settlement proceeds will be held in trust and no portion of the settlement proceeds will be paid to the Releasor or to counsel until 1) a final demand letter is received from CMS and equivalent from IHFS and 2) all liens and interests of any kind in this settlement, including those of Medicare and IHFS, are satisfied and released.

Suggested Language to Use Where Plaintiff’s Counsel Insists on Holding the Settlement

Proceeds in Trust

Counsel for the Releasor agrees that the settlement proceeds will be held in trust and no portion of the settlement proceeds will be paid to the Releasor or to counsel until 1) a final demand letter is received from CMS and equivalent from IHFS and 2) all liens and interests of any kind in this settlement, including those of Medicare and IHFS, are satisfied and released.

Suggested Language to Use Where Plaintiff’s Counsel Insists on Holding the Settlement

Proceeds in Trust The Releasor further avers that all liens for medical and other services related to the above mentioned occurrence and its consequences have been or shall be paid in full and further, that she has reimbursed or shall cause all persons or entities who hold or assert liens, medical or otherwise, in relation to this matter to fully reimburse for all such charges, expenses and/or services. The Releasor and her attorney agree to defend, protect, indemnify, and hold harmless the Released Parties from any claims, demands, obligations or suits now existing or hereafter arising from or made by or on behalf of any person or entity either holding or claiming a lien or other right of compensation or reimbursement from the proceeds of the above-referenced settlement, including any claim by Medicare or Medicaid.

DEADLINE TO TENDER PAYMENT

(d) A settling defendant shall pay all sums due to the plaintiff within 30 days of tender by the plaintiff of the executed release and all applicable documents in compliance with subsections (a), (b), and (c) of this Section.

PENALTIES FOR FAILURE TO TIMELY PAY

(e) If, after a hearing, the court having jurisdiction over the parties finds that timely payment has not been made by a defendant pursuant to subsection (d) of this Section, judgment shall be entered against that defendant for the amount set forth in the executed release, plus costs incurred in obtaining the judgment and interest at the rate specified under Section 2-1303 of this Code, calculated from the date of the tender by the plaintiff under subsection (d) of this Section.

DEFINITION OF TENDER

(f) As used in this Section, “tender” means personal delivery or delivery by a means providing a return receipt.

PARTIES THAT ARE EXEMPT(g) This Section applies to all personal injury, property damage, wrongful death, and tort actions involving a claim for money damages, except as otherwise agreed by the parties. This Section does not apply to:

(1) the State of Illinois;

(2) any State agency, board, or Commission, as defined in Section 1-7 of the Illinois State Auditing Act;

(3) any State officer or employee sued in his or her official capacity;

(4) any person or entity that is being represented by the Attorney General and provided indemnification by the State pursuant to the State Employee Indemnification Act;

(5) any municipality or unit of local government as defined under Article VII of the Illinois Constitution; and

(6) class action lawsuits.

EFFECTIVE DATE

Section 99. Effective date. This Act takes effect January 1, 2014.