Florida Bankruptcy Court Orders Medicare Liens To Be Reimbursed Before Debtor’s Attorney’s Fees Paid
This matter involved an attorney (Debtor) who filed Chapter 11 bankruptcy while pending payment of a contingency fee. The fee was earned after Debtor’s representation of John Tillery in a personal injury matter against an insurance company. Tillery had previously been ordered to pay Debtor 25% of his settlement with the insurance company, however, the insurer refused to disburse settlement proceeds to Tillery until Medicare's conditional payment claims related to the personal injury settlement had been resolved. Debtor filed a motion asking the Bankruptcy Court to hold Tillery in contempt for failing to comply with the order to pay Debtor the attorney’s fees he was owed.
Tillery claimed that he could not comply with the order to pay Debtor because the insurer had not yet released the settlement proceeds. The Court, however, did not find fault with the insurance company’s refusal to release the funds. While the Court acknowledged that many insurers choose to release the settlement funds in exchange for hold-harmless language in the settlement agreement, it ultimately noted that the insurance company’s “refusal to rely on a hold-harmless promise is certainly permissible and reasonable.” In re Jordan, No. 3:19-bk-0725-JAF, 2020 Bankr. LEXIS 2363, (Bankr. M.D. Fla. Sep. 2, 2020). This appeared to be grounded in the fact that Medicare could ultimately seek recovery from the insurer if the liens were not timely reimbursed, leaving the insurer to recover from Tillery.
The Court did not find Tillery in contempt, but instead issued an Order requiring him to obtain the formal demand and provide reimbursement to Medicare. After Medicare’s liens had been addressed, the insurer should release the funds and Debtor would be paid his fee.
Being that the Bankruptcy Court’s ultimate goal was to get the Debtor paid, it could have simply issued an order requiring that Tillery pay Debtor the money he is owed, regardless of when the settlement proceeds will be disbursed. Interestingly, however, it went a step further to ensure that not only was the Debtor paid, but that Medicare’s interests were also addressed. Beyond that, it found no fault with the insurer for refusing to rely on indemnification language from Tillery.
While there are ways to provide protection to defendants, yet still making the claimant responsible for liens, the best way to protect yourself is to reimburse Medicare directly prior to releasing any settlement funds. Of course, we understand that this is not a feasible option in all cases. That is why we are here to not only help guide you through the lien resolution process, but also to assist with settlement language before any of these issues arise. Should you need assistance with Medicare settlement language or lien resolution, please feel free to reach out.