Why PI Attorneys Must Be Good Escrow Agents

November 1, 2018
7min read

When a medical provider or funder is deciding whether to provide services to plaintiffs, they are rarely just evaluating the plaintiffs or the plaintiffs’ cases: They are also evaluating the plaintiffs’ attorneys. They want to make sure they get the money for the services they performed if indeed the case is successful. In other words, they want to know if the attorney is a good “escrow agent.”

Let’s say we have two plaintiffs, Paul and Angie, who have really strong and identical cases, but with one important difference: Who acts as the escrow agent.

In Paul’s case, he gets the money from the defendant and pays lienholders. The money from the settlement is deposited into his personal bank account, and then Paul has to reimburse his attorney, doctor, and funder.

In Angie’s case, the plaintiff’s attorney pays lienholders. the settlement funds are directed to an “escrow account” held by Angie’s attorney, who is then responsible for paying each lienholder from that account.

Again, all facts of the cases are identical other than this. It doesn’t sound like big difference since their cases are otherwise strong, but the difference is indeed stark.

It is unlikely Paul would find ANY service provider -- doctor, funder, attorney -- to perform services on contingency. Conversely, it is highly likely MANY service providers would perform services on contingency for Angie.

The reason of course is obvious: service providers want to ensure payment and the best way to do that is to have someone reputable, responsible, and accountable to pay you. Thus the caliber of escrow agent is a highly important indicator of whether or not service providers will work with them.

The caliber of an escrow agent matters not only to lienholders, but to plaintiffs too. If plaintiffs hear from an orthopedic surgeon that they do treat on PI lien or LOP, but just “not for your lawyer because I don’t think I will get paid,” then that will make the plaintiff less likely to stick with their lawyer.

The stark difference between Paul and Angie is how stark the difference is between some lawyers.

Let’s imagine another archetype: Feckless Fred the lawyer. Feckless Fred uses paper files to store his liens and often forgets to print everything he needs out; he doesn’t have staff to provide lien acknowledgements and case status updates; and he forgets to tell lienholders when clients change attorneys -- which is pretty frequent since he’s a pretty bad attorney too. Feckless Fred may still be a tad more trustworthy as an escrow agent than a plaintiff, but he is still far off from the standard to which most people hold modern attorneys.

Feckless Fred is not good for law. He creates uncertainty, which costs plaintiffs, service providers, and ultimately himself. That’s why there are many mechanisms in place to  help Fred become less Feckless

One significant mechanism is local laws and bar rules. Some states and bar rules clearly lay out escrow agents’ duties and prescribe penalties if they’re breached. Georgia is a great example of bar rules dictating how attorneys must pay out PI liens. Not coincidentally, service providers tend to be willing to provide services in locales which require escrow agents to take their duties seriously.

Another factor is modern systems, processes, and procedures. Some law firms have thousands of service providers with liens or LOPs against their clients’ cases. Not only do they have to properly keep track and monitor their clients cases, but they have to keep track and monitor all of new and existing liens on plaintiff’s open cases. That requires a team -- or a third-party service -- to use the right technology, establish the right procedures, and maximize the trust the service providers have in them.

Reliable escrow agents are essential to ensuring that the entire contingency personal injury industry operates smoothly and efficiently so that plaintiffs can get the services that they need. Acting as an “escrow agent,” in short, is a duty that personal injury attorneys must take seriously.

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The Mighty Team

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