Letter of Protection

Good morning. I’m Marcus Michles, and welcome to this week’s installment of our video blog here at Michles & Booth.

I want to talk to you about some things that may seem obvious, but you may find out that the law works a little differently than you might have thought. I want to talk about Letters of Protection.

Now if you get into a car accident by now you know you’ve got no-fault coverage and PIP to pay for your medical bills, but what happens if your medical bills exceed the $10,000 dollars that you have in PIP?

Well, if you don’t have health insurance, and you don’t have a lot of financial resources, how are you going to get the medical care that you need to get you to the end of the case?

A lot of people don’t realize it, but lawyers are ethically prohibited from paying for those healthcare services, even if our clients need it. So if my client comes to me and says “hey, I need a MRI but my PIP is exhausted, and I don’t have the money, and a MRI is like $1500 to $2000 dollars, how am I going to get the MRI?” As a lawyer, I would love to pay those bills in advance, because I know that down the road that client is going to be reimbursed, but my ethics rule will say I can’t do that…and so I don’t.

Quite honestly, there are probably lawyers out there that do, and they’re in the gray area a little bit, but I don’t do that. We don’t do that here at Michles & Booth.

So how do our clients get that healthcare that they need?

Well, the answer, and it’s a little tricky, is a Letter of Protection. Now a Letter of Protection that we call LOP’s are no different than what you used to call an IOU. It’s a piece of paper that says I’ll pay you back. The Letter of Protection is a document that the client signs and the lawyer signs and the healthcare facility signs, and it’s a contract that says when and if your case resolves, you owe us for the services. That’s a little tricky, because as you think about it, the healthcare facility doesn’t know for sure if you’re going to be successful with your claim. The lawyer thinks you are. You think you are, but things happen. Right?

So the healthcare provider is taking a chance by treating you now and accepting a promise to pay later hoping that later day comes. Right? Well, the client (you, the victim or the patient)…all you know is that you need that MRI, so you’re going to sign that document, right? And you’re going to tell your lawyer “hey, sign that document so I can get the MRI”. That works pretty well except you gotta remember that when you sign that document, you’re signing a blank check.

Because if that healthcare provider provides more and more and more and more healthcare, your bill goes up and up and up and up and up. Think about it as a physical therapy or chiropractic care, and the chiropractor says “Here, I want you to sign this Letter of Protection on day one”, and a hundred days into it, you’ve got a $20,000 to $25,000 dollar bill that you’ve promised to pay from the proceeds of your case. Well, it’s a pretty good investment, but you don’t know at that time, when you’re signing that Letter of Protection, you don’t know what the total assets are on the other side to collect. You can be signing that blank check, and you could end up owing more than you get in.

So, for a long time, I’ve cautioned lawyers and patients and healthcare providers. All those communities have to understand that Letters of Protection are like a blank check. You’ve got to sign them carefully, sign them cautiously and then understand that you have a debt that will be taken out of your collection at the end to repay regardless of what that total turns out to be.

So, on the day that you need that healthcare, signing he LOP is easy, but on the day you resolve your claim, paying back that LOP is difficult as well.

So, have a good conversation if you’re represented by counsel. Have a good conversation with your lawyer about when and if to sign a LOP. Have a real candid conversation with the healthcare provider, because they want you to sign that guarantee of payment. But you’ve got to be careful on a case-by-case basis to do it.

If you’re out there and you have questions, you can give me a call. Next week we’re going to talk about non-recourse financing, which is another option — very risky — but out there. It has a usefulness to a case, but it’s also a little controversial.

So, if you’ve got questions about how to get your medical bills paid, you can give me a call. I’ll be happy to help. Ask your lawyer. Ask your friends. Ask your healthcare provider, but be careful about signing those Letters of Protection.

Until next time, I’m Marcus Michles here at Michles & Booth. We’ll talk about non-recourse financing next week.


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