January 10, 2023
A Letter of Protection, commonly referred to as an “LOP,” is an agreement between plaintiff’s counsel and/or plaintiff and the treating physician, which provides the treating physician with a lien on the settlement proceeds recovered in a personal injury case. While the LOP asserts the lien for repayment of the entire amount charged by the treating physician, the actual amount paid is significantly reduced post-settlement. The original purpose of LOPs were for plaintiffs without health insurance to receive medical treatment prior to the settlement of a case; however, LOPs have become favorable for both uninsured and insured plaintiffs alike.
Benefits of a Letter of Protection for a Plaintiff:
A plaintiff is inclined to enter into an LOP with a medical provider because it provides multiple benefits such as the ability to present to the jury a higher amount of medical expenses since the doctor is not limited to the contractual charges and payments with health insurance companies or Medicare. If a plaintiff is successful in proving their case at trial, the jury can take into account the medical provider’s bill submitted under LOP in computation of the damages rather than the reduced amount that would have been submitted to health insurance.
Not only does the medical bill under LOP provide an increased amount in damages, but it also attempts to increase the settlement value. However, this usually backfires and creates difficulty in reaching amicable settlements due to the defense rightfully refusing to pay damages that are overly inflated. The decreased likelihood of settlements goes on to create increased costs to further litigate cases.
Disadvantages of LOPs for Defendants:
Defendants are now faced with several consequences that arise from the common utilization of LOPs in personal injury cases. Most notably, LOPs cause an increase in expense of litigation due to additional discovery to include depositions of billing representatives, an increase in motion practice to limit the amount of bills boardable at trial, and the costs incurred with retaining a billing expert to opine as to the reasonableness of the bills. LOPs also inflate the actual value of the case, which thwarts settlement negotiations between the parties and ultimately causes a delay in resolution of the case.
On its face, LOPs provide plaintiffs’ medical providers with an invested interest in the litigation since the payment is wholly premised on plaintiffs’ counsel obtaining a financial recovery through either settlement or verdict. To bring this bias to light, defense attorneys, through discovery, seek evidence that proves a mutual interest exists between plaintiffs’ counsel and medical providers to artificially inflate the overall value of the case for a higher pay out. The Florida Supreme Court in Worley v. Central Florida YMCA, 228 So.3d 18 (Fla. April 13, 2017) provided limitations on defendants to discover and introduce evidence at trial regarding the potential bias and mutually convenient relationship between Plaintiff’s counsel and Plaintiff’s medical providers.
In Worley, YMCA sought to discover the extent of the referral relationship and financial dealings between Plaintiff’s counsel and her medical providers due to her inflated medical bills. Plaintiff was asked during her deposition to identify the person who referred her to her treating physician; written discovery was also propounded requesting information as to the nature of the financial relationship between her lawyers and her medical providers. The Florida Supreme Court held that the question of whether an attorney referred their client to a particular physician is protected by attorney-client privilege, and a financial relationship between plaintiff’s law firm and the treating physician is not discoverable.
Plaintiff’s Failure to Mitigate Damages:
Despite the challenges defendants now face in the increased frequency of LOPs, hope is not lost. In Dial v. Calusa Palms Master Association, Inc., 2022 WL 1261150 (Fla 2022), the Florida Supreme Court held that at trial, plaintiff can only introduce evidence as to the discounted amounts paid by Medicare; resulting in evidence of the gross amount of her past medical expenses being excluded. Based upon this holding, Florida circuit courts has expanded upon this ruling to limit plaintiffs to only introducing evidence of discounted amounts paid by private health insurance, not just Medicare.
While it may be difficult to prove an intentional inflation of medical charges to artificially increase the value of a case based on the limitations in Worley, the inflated charges under LOP can be used effectively in showing plaintiffs’ failure to mitigate their damages by not submitting charges through health insurance. When a plaintiff chooses to enter into an LOP arrangement with a treating physician rather than submitting medical bills to their health insurance, it is important to determine the differential between the total amount charged under LOP versus what would have been payable through insurance to effectively argue plaintiffs’ medical expenses that should be limited at trial to the amount that would have been paid by insurance and to further evidence plaintiffs’ failure to mitigate their damages. This will hopefully assist with decreasing pricey settlements and exorbitant jury verdicts.