What Happens When There’s Not Enough Money To Go Around?
When an unsafe driver fails to provide financial responsibility for the harm and losses they caused, insurance coverage may be limited. In such cases, there are several steps that can be taken. The same is true if the under-insured or uninsured motorist coverage of the innocent victim is insufficient to pay for all medical bills or other liens related to the case.
If the insurance company for the at-fault motorist realizes that there are multiple claims that exceed the “policy limits” (the amount of money available for payment), they can pay all of the money under the policy to the Court in what is known as an “Interpleader action.”
In other words, the insurance company pays money to the Clerk of the Court for safekeeping. The Court then sends notice to all the people and companies who may be claiming part (or all) of the money. The Court can then have a trial to determine which of the lienholders, bill collectors, plaintiffs, health + disability insurance companies, and counsel should get the limited funds. The Abrams Landau Ltd.‘s Trial Team has actually gone to court on interpleader cases. The two examples that follow are instructive:
Example #1: A foreign exchange student was in a car with four other classmates when the driver ran off the road because he was speeding around the turn. He crashed and caused injuries to everyone inside. Doug Landau’s client was the most seriously injured, and spent significant time in the hospital, with bills well into the six figures. The insurance company on behalf of the car owner only had limited coverage. Therefore, the insurance company filed an Interpleader Action. They realized that the claims of the five injured students exceeded the insured’s coverage limit, so they deposited the money into the Clerk of the Circuit Court’s account.
The parties then prepared for trial. Doug Landau, with the experienced assistance of Senior Paralegal Kristin Tanzi, was able to present his case and was able to claim the lion’s share of the money available, plus interestThe exchange student from Germany studying in Richmond, Virginia returned to Europe after fully recovering from her injuries. Oddly, two of the five foreign exchange students never claimed their money, so it reverted back to the insurance company after a number of years. The Defense Lawyer could not believe his luck!
Example #2: Doug Landau was retained by a New Jersey Mass-Tort Law Firm. This New Jersey Law. The firm was involved in a mass tort multi-district litigation arising from a dangerous drug. The cases were filed by a Virginia lawyer, whom Doug was unfamiliar with, and involved multiple law firms from all over the country that routinely handles mass tort work seen advertised on television. Eventually, the cases were settled for many millions of dollars. The local counsel in Virginia appropriately paid the injured victims and the government lien holders. However, that Virginia lawyer quickly realized that the remaining amount of money was insufficient to pay the attorneys fees, and the litigation loan, which had a huge “balloon” payment.” Upon realizing the insufficiency of funds in his account, the Virginia lawyer panicked and paid the several million dollars to the Clerk of the Court to avoid multiple lawsuits and prolonged litigation. Very few of the lawyers involved had ever actually tried an Interpleader case.
What should have happened? As soon as the settlement money was received, the Virginia lawyer should have put all of the money in the Interpleader account before paying the claimants, lienholders, government, etc. This way, everybody could come before the court at one time, make their case, and distributions could be made fairly. The case was assigned to Judge Randy Bellows of the Fairfax Circuit Court as a “special master” type proceeding. Doug Landau, and his first boss Robert Hall (former VTLA President), sat at the counsel table with two dozen lawyers behind them on the benches. Robert Hall was senior counsel and a dean of the Virginia Bar. Landau had actually tried the Interpleader case and represented one of the claimants with a several million dollar stake in the outcome. While Discovery was ongoing, and the Virginia lawyer who was the local counsel went into bankruptcy protection, the parties were able to fashion a compromise. Everybody got paid something, but nobody got everything they sought. This was another example of getting a “square peg into a round hole.” Landau notes that the amount of attorney time among the two dozen law firms involved in the litigation, plus the firms they hired to represent their interests, probably amounted to several hundreds of thousands of dollars more in the case!
In the New Jersey law firm Interpleader case, Landau was paid on an hourly retainer. His fee ran into many thousands of dollars because of the time required for court on numerous occasions, filing pleadings, and responding to two dozen other law firms’ antics. However, in the German foreign exchange student case, tried in the Fredericksburg/Spotsylvania area, Landau’s reimbursement was based upon a contingency fee agreement. In other words, Landau and his trial team were not paid anything if they were unsuccessful on behalf of their injured client. If they were able to win the case, as they did, then they were paid a percentage of the outcome.
Other instances where there may be a “square peg in a round hole” situation is where someone was injured on the job in a car crash, slip and fall, a dog attack, or by a defective/unsafe product. In those instances, the Worker’s Compensation Insurance Company and employer have an “IOU” on any recovery. There have been cases successfully settled by the Abrams Landau Worker’s Compensation and Personal Injury Teams involving multiple stakeholders with “IOUs” that greatly exceed the amount of available insurance. In those instances, Kristen Tanzi will sometimes hire experts to negotiate these “subrogation liens.”
“Subrogation” simply means that the insurance company steps into the shoes of the injured person or policyholder. “Coordination of benefits” is sometimes a major component of what the Abrams Landau Injury Team does for their clients. Frequently, there will be a permanent injury with a lengthy disability, and health insurance will initially pay for the medical care, hospitalization, physical therapy, diagnostic testing, and medications. In addition, there may be Medical Payments coverage on the vehicle that was involved in the crash. Medical Payments coverage, or “MedPay” for short, is sometimes called “PIP” or Personal Injury Protection in other states. Usually, a separate premium is paid for coverage regardless of fault, in addition to liability limits. This coverage is typically for a smaller, set amount. In a number of cases, Doug Landau has been able to stack MedPay policies from one, two, and even three policies in the household. Stacking MedPay can provide significant coverage. In one case, Landau was able to combine $50,000 in med pay coverage, with $300,000 in liability insurance that his own client had in an under-insured motorist situation. This was critical, as the defendant only had a $50,000 liability policy, which would have fallen far short of the accumulated medical bills, health insurance payments, and other lienholders’ “IOUs.“
One of the things that lawyers sometimes forget is that they are not, under the ethics rules, allowed to unilaterally decide who gets how much. If there is limited coverage, a lawyer cannot unilaterally decide that his clients get $45,000 of the $50,000 in coverage. In the same way, they cannot decide if doctors and hospitals, who may have bills over $100,000, should only receive $5,000. The better practice is again to put the money into an Interpleader and resolve it in open court and fairly to all concerned. Sometimes, while the money is sitting in an Interpleader account, the parties may reach an agreement. Otherwise, there is a finality to it when the Judge rules. If no one appeals, the money is distributed very efficiently by the Clerks of our Circuit Courts.
If you or someone you know has suffered in a car accident or other catastrophic injuries, and if you have questions about applicable laws, please don’t hesitate to contact us via email or phone. There are strict legal deadlines for Interpleaders, and other actions to distribute money, as a result of a personal injury claim. Please contact us at (703) 796-9055 or email frontdesk@landaulawshop.com.