A letter of protection is a contract in which an attorney representing a personal injury plaintiff promises to pay a medical provider’s charges out of any financial recovery the attorney receives on behalf of the plaintiff. A letter of protection is not a lien.
A lien is a creditor’s legal claim on a property that secures payment of a debt. For instance, the bank’s mortgage on your house is a lien. Likewise, a letter of protection serves as a sort of lien in favor of the medical provider. Our financial experts here at Tribeca explain.
How a Letter of Protection Works
Letters of protection seem complicated, but the core principle of how it works is straightforward. As explained previously, letters of protection allow you to get the medical treatment you need. It’s a promise that your attorney makes with your doctor to ensure payment.
Say, for example, you get into a car accident and have no insurance to pay for your medical bills. Without insurance, you can face extremely high medical costs you may not be able to afford. For example, a simple broken bone can cost you thousands of dollars. To get you medical treatment, your attorney can draft a letter of protection on your behalf.
Using this letter of protection, your doctor can either accept or reject it. If your doctor agrees with the letter, your attorney will pay for your medical costs after you win your settlement. This legal document shows medical care professionals that they will get paid for their services.
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Is Getting a Letter of Protection the Same as Getting a Lien?
Legal jargon can be confusing to understand. While a letter of protection seems similar to a medical lien, they are both very different from each other. The short answer is, no, a letter of protection is not the same as a lien.
A lien is a legal demand the hospital will make for repayment. In contrast to a letter of protection, liens don’t get filed by you. Instead, the hospital will file them to ensure that you don’t get your treatment for free. Thus, liens are mandatory, whereas a letter of protection is voluntary.
Your Lawyer’s Fiduciary Duty to Pay Pursuant to a Letter of Protection
In all 50 states, an attorney has a fiduciary duty to protect his or her client’s financial recovery. A fiduciary duty is an obligation to act in the best interests of another.
In this case, the attorney must safeguard the client’s settlement money and ensure that it gets distributed to the parties who have a claim against the client in connection with the personal injury case. This includes anyone to whom the attorney gave a letter of protection.
The letter of protection is a binding and enforceable contract. If the lawyer fails to pay the medical provider or gives the money to the plaintiff instead, the medical provider can sue the lawyer for breach of contract. In addition, the lawyer can be subject to disciplinary action.
However, the letter of protection is not a 100% guarantee that the doctor will get paid. And, it is not a lawyer’s promise to pay the client’s medical bills out of their own pocket. If the plaintiff loses her case or the settlement award is not enough to cover the medical bills, the plaintiff still owes them and is obligated to pay them.
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Letters of Protection Compared to Other Liens
There is a major difference between a letter of protection and other liens. Many liens are recorded in county or state records to serve as notice to other parties interested in the property that secured the lien. Letters of protection don’t get filed in government records.
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Letters of Protection Compared to Lawsuit Loans
A lawsuit loan, or pre-settlement funding, is an advance provided by a litigation funding company to get paid from the plaintiff’s financial recovery in a lawsuit. A lawsuit loan differs from a letter of protection in several important respects.
- The lawsuit loan goes directly to the plaintiff. Plaintiffs will often use the money to pay for medical treatment, but they’re not restricted to just paying the doctor or hospital bills. Plaintiffs can use a lawsuit loan to pay for anything, like rent, groceries, or car payments.
- A letter of protection offers the plaintiff less protection than a lawsuit loan. The lawsuit loan advance is non-recourse, meaning that the plaintiff does not have to repay it if she loses her case or the recovery is not enough to cover the advance.
- In general, the plaintiff will not pay an extra fee to his or her attorney to issue a letter of protection. On the other hand, the litigation funding company will assess a fee because the plaintiff is using a lawsuit loan advance while the lawsuit progresses. That fee will get paid when and if the plaintiff receives a financial recovery.
Get Financial Help for Medical Treatment Today
Whether you need help with a letter of protection or need cash fast, Tribeca can help you. You don’t have to let your accident put you into a financial hole, especially if it wasn’t your fault. Hold out for the best settlement possible with our funding services today. We will work with you and your lawyer every step of the way. You can reach us online or over the phone to learn more.