The Top 5 Questions Answered on What Happens After Settling a Personal Injury Case in New Mexico?

Finally… it happened. Your case has been settled. What a relief. But now what? You’ve already figured out by now few things happen quickly in the legal world, but you want to know what to expect next, how long will it take, what has to be paid out, and more.  So, let’s jump in and tackle the five most frequently asked questions we get in our New Mexico personal injury practice. 

When Will I Receive My Settlement Funds?

We are leading off with the most frequently asked question we get about what happens after a settlement.  Hey, I get it…everything you have been fighting for has come down to this – when will I actually get my money. 

After settling your case, the timeline for receiving your settlement funds typically ranges from a few weeks to a few months. Here are the main factors that impact this:

• Paperwork Processing: Once a settlement is reached, you will be required to sign a release of liability, preventing you from pursuing further legal action related to the incident.  Depending on the complexity of your case this can be straightforward or quite complicated and contentious. For smaller claims, the release should only take a couple days at most, and often times it can be done same day as the settlement is reached. For larger claims, it can take weeks, if not longer.
   
• Insurance Company Payment: Once the release is finalized and you sign it, the insurance company will process the payment, which can take several weeks. Insurance companies may also require additional documentation before releasing the funds such as lien handling instructions and other issues related to the settlement proceeds.  More on that below.
  
  
• Deposit Into Trust Account:  When your check is mailed out from the insurer it will be sent to your attorney. The check will be made out to your attorney’s firm and to you personally.  That check will be endorsed (signed) by you personally and your attorney. It will then be placed in your attorney’s trust account where it will typically take three to five business days to clear.  This is required by law.  Once the check clears, the money can be disbursed. But that leads to our next bullet point. 
  
  
• Lien Resolution:  Any outstanding liens (e.g., medical liens) need to be resolved before you receive your portion of the settlement. Of all the variables, this step is the one most likely to delay when you receive your money. But the delay is worth it because you or your attorney can often use beneficial laws to obtain reductions (this is a good reason to hire an attorney) which puts more of your settlement money in your pocket.  

Once the check clears, and your attorney has resolved all the liens and bills, you will get your check.  Obviously, there can be other factors involved, but these are the primary issues impacting the timing of when you get your money.  

In general, for smaller claims, I would plan on it taking about three to four weeks after your settlement to have your money in your hands. For more complex claims, plan on it taking longer.

How Are Medical Bills Paid?

After settling a personal injury case, one of the most pressing concerns is understanding how your medical bills will be paid.

What Should I Know About Paying My Medical Bills?

Once your personal injury case is settled, the responsibility for paying your medical bills shifts to you. Your settlement funds are paid to you to cover these expenses, but there are different methods and sources of payment depending on your specific circumstances. The goal is to use every resource available to find the best way to maximize the amount you get to keep.  

Can I Use My Med Pay to Cover My Medical Bills?

Yes, Med Pay (Medical Payments coverage) is a valuable resource for covering medical expenses after an accident. If you have Med Pay as part of your auto insurance policy, it can be used to pay your medical bills regardless of who was at fault in the accident. That is one of the benefits of Med Pay – it is no fault insurance. Your attorney can help review your own auto insurance policy to determine if you have Med Pay coverage or other coverage that might be beneficial.

• • Example: If your medical bills total $12,000 and you have $10,000 in Med Pay coverage, Med Pay will cover $10,000 of your expenses, leaving you with only $2,000 to pay.

         (Note – Med Pay may want to be reimbursed though so keep that in mind)

How Does Health Insurance Factor In?

Health insurance can cover your medical bills, but if your health insurance has already paid for your treatment, they may seek reimbursement from your settlement. This is known as a lien, and it allows your health insurance provider to recover the costs they paid on your behalf.

• • Example: If your health insurance paid $15,000 for your medical care, they might place a lien on your settlement to recover that amount. Your attorney can often negotiate with the insurance company to reduce the lien amount, potentially allowing you to keep more of your settlement.

Why you should use your health insurance to 
pay your medical bills if possible

Do I Need to Pay My Medical Providers Directly?

If you have outstanding medical bills that weren’t covered by health insurance or Med Pay, you will need to pay these bills from your settlement. Your attorney can assist by negotiating with medical providers to try to reduce the amount you owe, ensuring that you maximize the funds you retain from your settlement.

Getting the medical bills paid out of a settlement is always the priority so you don’t have any lingering debts owed.  But the best way to get those paid will very for each case based on the types of medical treatment received, the availability of insurance, and even the location can impact the strategy you should use. 

What Are Liens, and How Do They Affect My Settlement?

You will often hear the term lien used in a personal injury case.  Liens are legal claims that health insurers, Medicaid, Medicare, hospitals, and some medical providers can place on your settlement to recover the costs of your medical care.  Technically, some of these entities don’t have a lien in the true legal sense, but they do have a right of subrogation (or a right of reimbursement in some situations). The term “lien” gets used more broadly to refer to a situation in which a medical insurer or entity has a legal right to part of your settlement for medical services provided or paid for on your behalf.

Liens are a big deal and must be dealt with. They can’t be ignored. 

These liens must be resolved and paid out of your settlement before you can receive the remaining settlement funds.  The good news is that there are provisions in the law that your attorney may be able to use for your benefit in negotiating the resolution of these liens to your benefit.  The goal is to maximize the amount you get to take home after paying everything you owe, and reducing liens is an important tool in that process.

• • Example: If Medicaid pays $10,000 of your medical expenses, they will place a lien on your settlement to recover that amount they paid on your behalf.  Remember, the insurance company is paying you money that is to be used to pay your medical bills. If you get paid by the insurance company for the medical bills that Medicaid paid for you, then the settlement money has to be used to reimburse Medicaid.  Your attorney will try to negotiate to reduce the lien,   ensuring you retain as much of your settlement as possible.

What If My Settlement Doesn’t Cover All My Medical Bills?

We often talk of the great outcomes on personal injury cases, but the reality is that there are times when the available insurance and settlement recovery does not cover all the bills. 

If you can prove someone acted negligently and that as result of that negligence you suffered damages, then that person is legally liable for your damages, which can include medical bills, lost earnings, pain and suffering, and more. In other words, the key language is “legally liable”, which is not the same thing as damages that you will collect on.

Here is why “legally liable” differs from “how much you can collect.” 

Outside of very rare circumstances, how much of your damages you can recover will be based upon the availability and sufficiency of insurance. Yes, it is true, you can sue someone and there are means for trying to collect a judgment ordered against someone, but it is very difficult (closer to almost impossible if you are seeking damages from an individual) to ever collect on that judgment because each state has laws that restrict what assets you can go after to satisfy a debt.

Thus, how much you may recover in a personal injury claim will be largely impacted by insurance. Specifically, by 1) the availability of insurance and 2) the sufficiency of insurance. Some people make the mistake to believe that just because someone has insurance, that insurance will pay for all your damages.  That is incorrect.  The insurance will pay for a claim the policy covers, but only up to the policy limits.

The question then, is what you do if you find yourself in this unenviable position of more damages than available insurance. Don’t panic, because there are some strategies you can use to try to improve your outcome.

Use Your Health Insurance to Pay Your Medical Bills

If you have health insurance, Medicaid, or Medicare you should use it to pay your medical bills.  Insurance companies often have contract rates that will pay a lower amount than what was billed to you. That alone will help significantly.  Watch my video here for a more in-depth explanation. Link.

While you do still have to reimburse your health insurance for what they paid out, there is favorable case law in most states, including New Mexico, called the made-whole doctrine that allows you to negotiate down what you have to pay back to your health insurance if the person that hit you didn’t have enough insurance to cover your damages. 

This is by far the best way to avoid owing money to medical providers if your settlement isn’t enough to cover your medical bills.

Helpful tip: Use your health insurance to pay the medical bills right away.  Don’t wait until the end of your case and then attempt to have them paid. Some health insurers have deadlines for when bills must be submitted for payment and if you wait too long you could be denied for untimely submission.

Negotiate with Medical Providers

If using health insurance is not an option for you, consider negotiating directly with medical providers.  Many offer self-pay discounts that can reduce the bills by as much as 50%.  Most medical providers are willing to be reasonable, but it will greatly help your chances if you are honest and show a desire to work with them to make sure they get paid.  It can also be helpful to communicate the circumstances that led to the unpaid bill.  

Whether you are working with a medical provider directly or with a collection agency, you can also consider offering a payment plan to pay off your bill over time.  This takes some of the financial pressure off you and helps the provider start to recover some of the amount owed.

Look to Your Own Auto Policy – Uninsured/Underinsured Motorists, Med Pay, PIP 

If your injuries are a result of an auto accident, you should also look at your own auto policy to see whether some of your coverage could help.  Here are the coverages that would provide the most help if you are in the situation of insufficient insurance as a result of an auto accident.

• Uninsured/Underinsured Motorists (UM/UIM) Coverage – provides coverage to you if someone injures you and they don’t have enough insurance to cover your damages.  This coverage is your best bet for helping in the situation of insufficient insurance.  I made a short video explaining the importance of carry UM/UIM coverage which you can watch here. (Insert link to UM video).
  
  
• Medical Payments (Med Pay) – This helps pay your medical bills if you’re injured in a car accident, regardless of who is at fault. It is optional coverage.
  
  
• Personal Injury Protection (PIP) – This is similar to med pay but it offers even more coverage because it will not only pay for your medical care, but it will cover your lost wages, and other related expenses.

Look for Additional Policies from the Other Driver

It is not uncommon for some insured drivers to carry multiple insurance policies.  For example, some might have auto insurance with difference carriers such as State Farm or Allstate depending on the vehicles they have.  Additionally, some may carry an umbrella policy that might be an option. 

You can find out if they have other policies through a lawsuit, but that may not appealing to you just to find out if they have more coverage. 

Alternatively, one helpful way of ensuring they don’t have additional insurance coverage is by obtaining an affidavit from the negligent driver through their insurance.  If their insurer is offering their policy limits, you could ask the insurer to have their insured provide an affidavit swearing no other insurance coverage.

Evaluate Other Claims

As part of evaluating your personal injury claim, you should consider all contributing factors to an accident. For example, was there a contributing factor beyond just the other driver's negligence?  If there were other motorists involved, consider whether  they had any comparative fault. Additionally, consider whether the conditions of the roadway played a role, or maybe even the signage.  These are tougher claims to prove but as part of your evaluation of your claim, you want to consider all contributing factors.

Conclusion

You can and should consider each of the steps outlined above.  The great majority of the times, these steps will ensure you are not left with medical bills to pay even if your settlement is less than your medical bills.

What Has to Be Paid out of My Personal Injury Settlement (How much am I getting?)

I have often said the biggest mistake personal injury claimants make is focusing solely on the settlement amount.  The settlement amount is only half the equation.  The other half of the equation, and equally important, is what must be paid out of the settlement.  The settlement amount, combined with what must be paid out, combine to give you your take home amount (the amount you walk away with after all bills and expenses have been paid). The take-home amount is the most important number you should focus on and, ultimately, is the only number you should care about. 

Here is the equation:

• • Settlement amount - Amount paid out = Client Take Home Amount
  • Example: $25,000 Settlement  - $10,000 Expenses = $15,000 to the client

There are three main expenses that must be paid from your settlement:

• • Legal Expenses
  • Medical Bills
  • Liens

To best demonstrate how these expenses work, let’s use a fact pattern that will provide an example we can use to show how each of these works.

Facts: You were in a car accident caused by a negligent driver. You suffered injuries that required an ER visit, some physical therapy, and a visit to your primary care doctor. You had medical bills of $6,000. You hired an attorney who obtained a $15,000 settlement for you. 

Legal Expenses

Under the category of legal expenses, you will typically see three numbers:  the attorney fees, the sales tax on attorney fees, and the case costs.

• • Attorney Fees: If you have had the assistance of an attorney, you will pay a contingency fee that you agreed to when you hired the attorney.  That fee is often a one-third contingency fee (33.33%) of your total recovery.  That means that you will owe one-third of your settlement amount. 
    
    
  • Sales Tax (Gross Receipts Tax) on Attorney Fees: You will have to pay the state sales tax on the attorney fees. That tax does not go to the attorney but is paid to the state for the sales tax on the legal services. It tends to be around 7-8% of the amount of your attorney fees (not the amount of your settlement).
    
    
  • Legal Costs: You will owe the attorney costs on the case. These are the expenses your attorney has paid out of pocket for you in the prosecution of your case.  This will typically be expenses like costs of obtaining medical records/bills charged by medical facilities, expert witness fees (if your case required hiring expert witnesses), court costs, and any other expense where your attorney paid an expense for you to prosecute your case.  These are different from attorney fees. 

Medical Bills

Your medical bills for treatment related to your accident, must be paid from the settlement.  In some situations, your health insurance (or some other insurance) may have paid some or all your medical bills. Any medical bills that have not been paid (i.e. they are outstanding), must be paid out of the settlement.   

Liens / Subrogation / Reimbursement

Liens are legal claims that health insurers, Medicaid, Medicare, and some other insurance providers can place on your settlement asserting a right to be reimbursed out of your settlement proceeds for expenses paid out on your behalf.

• • Example: Your health insurer Blue Cross Blue Shield paid your ER bills for your hospital, radiology, and ER physician treatment. Your health insurance also paid for your physical therapy.  The total amount paid out by your health insurance was $3,000. (Remember your health insurance often pays a contract rate so it will usually be less than the amount charged to you by the medical provider).  Thus, the health insurance has a lien for $3,000 that you must pay out of your settlement.

In most situations, your attorney can negotiate a reduction with the lienholder to reduce what you must repay.  A one-third reduction is often achievable.\

• • Example: Your attorney secured a $1,000 reduction off the $3,000 lien amount, reducing your lien amount down to $2,000.

Now that we know all the amounts that must be paid out, we can calculate your take-home amount. Your distribution would look like this:

Settlement Amount: $15,000.00

Legal Expenses

• • Attorney Fees: $5,000.00
  • Sales Tax: $350.00
  • Case Costs: $125.00
  • Total Legal Fees: ($5,475.00)

Medical Expenses

• • Primary Care Doctor ($200.00)

Liens

• • Blue Cross Blue Shield: ($2,000.00)
  • Total Amount Paid out of Settlement: ($7,675.00)
  • Money to Client: $7,325.00

In this small hypothetical, you can see exactly what your expenses were and the specific breakdown of the settlement funds. The client would receive a check for $7,325.00. Nothing else must be paid out of that amount.

That is the client's take home amount.

While each case will differ, these are the same categories of expenses in almost every case, so you can use this sample to understand what must be paid out and more importantly, calculate how much you will receive.

Our New Mexico Personal Injury Attoneys Are Here For You

There you have it… the five most frequently asked questions about what happens after a personal injury settlement answered. I have written longer answers about each of these FAQ’s and posted them to our website if you want even more information about one of these questions.

Our dedicated personal injury team here at The Injury and Disability Law Center is here to help you if you have any questions about these topics or any other issues after an accident. Schedule your free initial consultation today by calling our office at 575-300-4000, starting a chat, or filling out our online form.

If you want even more information, feel free to download my free book, Car Accident Cases Made Simple(r), where I discuss this topic and more.