A letter of protection (LOP) is a legal document used in personal injury cases to ensure you can receive medical treatment without immediately paying for it. It’s a letter your attorney sends to a healthcare provider guaranteeing payment for medical services from a future settlement or judgment in a legal case. That way, you receive the medical attention you need when you need it.
A letter of protection is similar to pre-settlement funding in that it enables a plaintiff to receive important medical care during the litigation process.
Key Points
- Letters of protection provide access to medical care by deferring upfront costs.
- Proper use of letters of protection can strengthen negotiation power by providing detailed medical records and liens that reflect the full extent of a plaintiff’s injuries.
- An experienced attorney can help mitigate risks associated with letters of protection and maximize potential settlement awards.
Definition of a Letter of Protection
A letter of protection is a legally binding contract issued by your attorney to your healthcare providers. Regardless of your health insurance situation, this document enables you to receive medical treatment without upfront cost. Basically, you are guaranteeing payment from the anticipated settlement to the physician.[1]
Purpose and Use Cases
Letters of protection enable access to medical care for plaintiffs who may have limited financial means. If you don’t have access to immediate funds or insurance coverage, a letter of protection can allow you to seek out physiotherapy, surgery, or other medical care you may need to recover from your injury.[1]
While hospitals can’t refuse to treat patients with severe or life-threatening injuries, most other medical circumstances require payment arrangements ahead of treatment.[2]
Many health insurance policies also render coverage secondary to other liability insurance, which means medical providers won’t accept it as a guarantee of payment. For example, health insurance may defer liability for workplace injuries to worker’s compensation insurance or car accident injuries to automotive insurance providers.[3]
Key Parties Involved
The key parties included in a letter of protection agreement include:[4]
- Plaintiff. The individual seeking compensation for damages for personal injury, typically for medical expenses, lost wages, or pain and suffering.[5]
- Plaintiff’s attorney. The plaintiff’s attorney provides legal representation during the case. They issue the letter of protection to medical providers in addition to handling settlement negotiation, documentation, and other obligations.
- Medical providers. Healthcare facilities or professionals who, under a letter of protection, provide medical services to the plaintiff and defer payment until the case ends.
- Defendant/insurer. The plaintiff files the lawsuit against and seeks compensation from the defendant or their insurer, depending on the nature of the case.[[6]
How a Letter of Protection Works
The typical process for a letter of protection includes:[7]
- Attorney issues letter of protection. The plaintiff’s attorney issues a letter of protection to medical providers detailing that payments for medical services will come from a future settlement. When the provider signs, they’re obligated to provide treatment with entitlement to future payment.
- Plaintiff obtains medical treatment. The plaintiff receives medical treatment and services necessary for their recovery from medical providers.
- Providers record liens. Medical providers may be required to record liens against settlements awarded to the plaintiff, securing their right to payment and ensuring compensation for services provided.[7][8]
- Settlement pays liens. The plaintiff’s attorney disburses settlement proceeds directly to payment for medical liens to satisfy the obligations of the letter of protection.[8][9]
Obtaining Medical Treatment
The letter of protection ensures plaintiffs can immediately access essential medical services, regardless of their financial circumstances. Depending on the nature of the injury, plaintiffs can receive comprehensive care with necessary diagnostics, treatments, therapies, and other services. Deferring payment allows plaintiffs to focus on recovery with minimal financial burden.[1]
Payment from Settlement Funds
Once a case awards the settlement amount, the plaintiff’s attorney disburses settlement funds to compensate medical providers for their services. Medical providers may record liens against this settlement to ensure payment. The settlement disbursal prioritizes payment to medical providers according to the liens.[10]
Payments from settlement funds differ from pre-settlement fund payments, which function as cash advances to cover other plaintiff needs during the legal process. Settlement disbursals repay these amounts to the funding company rather than medical providers.
Enforceability and Legal Standing
When properly implemented, a letter of protection is a legally binding contract between the plaintiff’s attorney and medical providers that details the provisions and financial arrangements for medical services. It must be in writing and must be signed by your attorney for it to be legal and enforceable.
A letter of protection binds both parties to fulfilling their obligations. Should a dispute arise regarding the obligations of the letter of protection, whether in regard to payments or services, the court can enforce its terms.[1]
Benefits of Using a Letter of Protection
A letter of protection provides many benefits to plaintiffs during the legal process, especially for cases with essential but costly medical care needs. Immediate access to medical care helps relieve financial burdens, secure legal contingency fee arrangements, and strengthen negotiation power.
Furthermore, deferring payment can help reduce other financial strain. For example, plaintiffs may be able to avoid depending on credit to pay their expenses, thus avoiding credit score penalties for outstanding medical debt.
Access to Medical Care
By allowing plaintiffs access to diagnostics, treatments, therapies, specialized care, and other medical services without upfront payment, they can address injuries and health problems immediately. Prompt and continuous care for injuries is often essential for minimizing recovery delays and chronic health concerns.[8]
Financial relief is especially important if plaintiffs face additional challenges as a result of their injury, such as lost wages. Removing these financial barriers can provide plaintiffs with peace of mind during the litigation process, allowing them to achieve better outcomes for their health while navigating a legal case.[8]
Contingency Fee Arrangements
A letter of protection can facilitate contingency fee arrangements with your attorney. This arrangement allows you to defer payment for legal representation until the relevant case is settled. Legal contingency fees depend on the case’s outcome and typically award a set percentage of the settlement amount.[1]
These arrangements present mutual advantages for both parties—with their compensation dependent on a favorable outcome, the attorney ensures the plaintiff has optimal access to medical and legal resources to improve the chances of a settlement.
Negotiating Power for Settlement
Access to medical treatment can strengthen a plaintiff’s legal position by demonstrating evidence of the severity of the injuries, the associated medical expenses, and the consequent suffering.[1] By seeking comprehensive medical consultation that anticipates the full scope of health care needs, plaintiffs can also avoid premature settlements that undercompensate them for their injuries.
Thoroughly documented medical treatment reflects the extent of damages and provides negotiation leverage to achieve a potentially higher settlement. Medical records and liens detail and validate the necessity of medical services, and continuous treatment demonstrates the impact of injuries on the plaintiff’s everyday life, their commitment to recovery, and their need for financial compensation.[9]
Potential Risks and Drawbacks
While letters of protection offer significant advantages, potential drawbacks may limit their net benefit. Following the best practices detailed later in this article, plaintiffs and attorneys can mitigate these risks associated with letters of protection.
Delayed or Denied Payments
Letters of protection obligate you to medical service payments, regardless of the outcome of your case. If your case is unsuccessful or results in a settlement amount lower than your medical costs, you’ll be responsible for paying out of pocket.[10]
Even if your outcome is favorable, legal processes, negotiations, and other factors can delay settlement fund disbursal, potentially causing strain if you still need medical services in the coverage gap between a letter of protection and a settlement award.
Given these risks, some plaintiffs opt for pre-settlement funding, as it may offer better financial security.
Lien Attachment to Settlement
While medical liens ensure medical providers receive compensation for services, they receive priority in the settlement award and deduct medical expenses directly from the settlement amount.[10] Plaintiffs consequently receive a lower net settlement amount, which can present financial challenges. If their settlement is lower than anticipated, plaintiffs may struggle to pay ongoing medical costs, living expenses, or other obligations resulting from their injury.
Limited Provider Assistance
Some medical providers may not accept a letter of protection agreement due to perceived risk.[1][10] With the potential complexity and duration of personal injury cases, medical providers may go uncompensated for extended periods of time. An inability to reach a letter of protection agreement with a provider can result in delayed medical treatment and less medical documentation of injury.
Best Practices for Letters of Protection
The following best practices are essential to properly use letters of protection and safeguard the involved parties.
Proper Documentation
All parties should maintain detailed and accurate records for treatments and services provided under a letter of protection. Keep records of expenses associated with medical treatment, including invoices, scheduling details, consultation records, and receipts. Document communication regarding balances and payment arrangements.
Clear Communication
The plaintiff, attorney, and medical providers should clearly communicate expectations, responsibilities, and potential risks regarding the use of a letter of protection. Monitor medical lien balances to maintain transparency and avoid unnecessarily high medical bills and liens. Provide regular updates to medical providers about the legal process, negotiations, and timelines.
Working with Experienced Attorneys
Legal counsel from attorneys experienced with letters of protection is important for minimizing risks. An attorney can provide advice to properly execute a letter of protection, ensure compliance with legal requirements, and protect the plaintiff’s rights.
Get the Support You Need
Whether or not you have a letter of protection, you may still require assistance to cover monthly bills and expenses. USClaims can help you with litigation funding to take some of the financial burden off your shoulders. Learn more about how pre-settlement funding works, read testimonials, and review our settlement funding FAQs for more information.
Contact us today at 1-877-USCLAIMS or apply now.
The availability of pre-settlement funding varies by state. Contact USClaims for more information.
Sources
- “What Is a Letter of Protection (LOP)?” Dolman Law Group, www.dolmanlaw.com/blog/letter-of-protection. 6 Jan 2023.
- “EMTALA Fact Sheet.” American College of Emergency Physicians, www.acep.org/life-as-a-physician/ethics–legal/emtala/emtala-fact-sheet. Accessed 20 June 2024.
- “How Medicare Works With Other Insurance.” Medicare, www.medicare.gov/health-drug-plans/coordination.
- “What Is a Letter of Protection in Personal Injury?” Muller Brazil, www.mullerbrazil.com/personal-injury-lawyer/blog/letter-of-protection. 13 June 2024.
- “Plaintiff.” Legal Information Institute (LII), www.law.cornell.edu/wex/plaintiff.
- “Defendant.” Legal Information Institute (LII), www.law.cornell.edu/wex/defendant.
- “What Is a Letter of Protection? – Legal Terminology.” Valiente Mott, valientemott.com/legal-terminology/letter-of-protection. 4 Mar 2024.
- “Legality and Ethics of Lien Uses in Medicine.” PubMed Central (PMC), www.ncbi.nlm.nih.gov/pmc/articles/PMC7431059. 1 Aug 2020.
- “What Can I Do About a Lien on My Minnesota Personal Injury Settlement?” TSR Injury Law, www.tsrinjurylaw.com/blog/lien-on-personal-injury-claim. 17 Apr 2024.
- “2010-F-154 – Require Plaintiff’s Attorney to Insure Payment of Medical Bills or Liens.” Board of Professional Responsibility of the Supreme Court of Tennessee, www.tbpr.org/ethic_opinions/2010-F-154.
