Letters of Protection – What You Need to Know
An LOP is an acronym for Letter of Protection often given by personal injury attorneys in return for services performed for their clients in anticipation of settlement. This post will discuss letters of protection, what they are, why they are used and how they compare with other options available in the marketplace.
Letter of Protection (LOP) Purpose
Letters of protection are generally given to secure medical treatment in accident cases in which the plaintiff is injured through no fault of their own AND when there is no available insurance coverage to pay for the treatment.
Although many states have “no-fault” automobile insurance laws, many injured plaintiffs simply do not have available medical insurance to pay for treatment sustained in motor vehicle or other accidents such as slip and falls, premises liability and other cases.
Letters of protection assure the medical providers that payment will be made after the case is settled. The doctor can then make a business decision as to whether they are willing to perform the service.
Many doctors have working relationships with attorneys who appreciate these accommodations. Here’s an example of how it works:
Consider an automobile accident in which Peter is injured. Paul was driving the other car and, according to the police report, his failure to yield caused the accident. Peter’s doctor doesn’t really want to treat him because there is no insurance and he’s been stiffed by accident patients before. However, Peter hired an attorney who the doctor has worked with before. The attorney issues a letter of protection to the doctor for Peter’s treatment. The doctor is now assured that if the case is successful, he will be paid out of the settlement proceeds.
How a Letter of Protection Works
When a personal injury lawsuit is resolved, money is generally sent to the attorney and deposited into an attorney trust account. The attorney then pays any costs, filing fees, expert fees, etc.; pays himself his fee; and pays the remainder to the client.
Essentially, a LOP is a promise to pay out of the proceeds of settlement along with those other costs.
Other examples of liens that might affect the plaintiff’s ultimate recovery include federal tax liens, child support liens, med-pay liens, and lawsuit loans.
Letters of Protection are fairly standard. Most LOP’s read something like this:
Dear Dr. Smith:
I represent Joe Patient, who suffered injuries in an accident on 1/1/21. I understand he is currently under your treatment for injuries sustained during this incident. Unfortunately, Joe does not have health insurance or the financial ability to pay for your services currently. We allege the accident of January 1 was not Joe’s fault and are actively seeking monetary damages from the other parties. Joe’s claim is still pending.
Accordingly, we request you accept this Letter of Protection and remove his account from active collection until we can resolve his claim. As consideration, we promise to contact you and make arrangements to pay your bill prior to distributing any settlement proceeds to Joe. Further, this letter in no way makes the payment of your bill contingent on the outcome of Joe’s lawsuit. By accepting this Letter of Protection, you agree not to seek payment until the civil action concludes.
Thank you for your time and attention in this matter. Kindly send all future correspondence to this office pending the outcome of this case.
Counsel for Joe Patient
The primary focus of an injured party is to get better. LOP’s help make that possible by affording much needed medical treatment which may not otherwise be available without the presence of a negligence claim.
Letters of protection are quite common in personal injury practice. Yet LOP’s are not the only option. Below we discuss the use of the lawsuit loan for use in the securing of medical procedures.
Letter of Protections v. Lawsuit Loans
A lawsuit loan is a cash advance made by a lawsuit funding company to a plaintiff in a lawsuit. In return, the plaintiff pledges a portion of the future proceeds of the case. Lawsuit loans are often used to secure medical treatment, primarily surgeries. While surgical lawsuit loans can help clients get the treatment they need, there are some important differences between lawsuit loan funding for medical expenses and LOP’s.
Although typical personal injury loans are paid directly to plaintiffs, lawsuit loans for medical treatment can be paid directly to the medical providers. In this way, the doctor gets paid immediately. Lawsuit settlement loans are then placed as a lien on the file by the plaintiff’s attorney.
As stated earlier, a letter of protection does NOT make the payment for the medical treatment contingent on a successful outcome in the case. The patient remains liable for the treatment. A lawsuit loan is less risky because the provider is paid in full. The plaintiff is “off the hook” as far as payment for medical treatment is concerned if the case should be lost. Instead, the lawsuit funding company takes on this risk.
Medical providers price their services in personal injury cases knowing full well it could take years before they are paid in full. The good news with lawsuit loans is that a cash price is usually negotiated at the time of service, so the bill generally is less than it otherwise would be with a LOP.
Of course, there is a cost for the service of transferring risk. So the tradeoff is that the lawsuit loan company must get paid at the end of the case along with their charges for the use of the money.
Medical treatment is an integral part of a personal injury lawsuit. Both lawsuit loans for medical treatment and letters of protection can serve a vital role in securing the proper care. Both methods can serve injured parties. It is up to the individual to decide whether to assume or transfer the risk of repayment in his/her particular case.
Thank you for your interest in letters of protection and lawsuit loans.