Change in Illinois Code of Civil Procedure Results in Strict Payment Deadlines for Settling Defendants

by Wilson Elser
Contact

On August 26, 2013, Illinois Governor Pat Quinn approved a legislative measure designed to hold settling defendants’ feet to the fire in making timely settlement payments in those cases alleging personal injury, property damage, wrongful death or tortious conduct involving a claim for money damages.

The new law, which takes effect on January 1, 2014, requires the settling defendant to tender a release to the plaintiff within 14 days of written confirmation of the settlement. Written confirmation includes all communication by written means, including email and fax. Additionally, the law defines “tender” as “personal delivery or delivery by a means providing a return receipt.”

The defendant then has 30 days from the date of tender of the signed release and lien protection letters to pay the agreed-upon sum in full. In cases where court approval of the settlement is required (such as in a minor’s case), the plaintiff must timely obtain the court order and tender it to the defendant before the clock starts to tick on the defendant’s payment obligation.

Third-party Right of Recovery
Furthermore, the law provides for added protection in cases where there is a known third-party right of recovery or subrogation interest, including attorney’s liens, health-care provider liens, or Medicaid or Medicare liens. Under the new statute, the plaintiff can protect the third party’s rights by tendering to the defendant the following:

  1. A signed release of the attorney’s lien
  2. One of the following: (i) a signed release of the health-care provider lien; (ii) a letter from plaintiff’s attorney agreeing to hold the full amount of the claimed lien in the plaintiff’s attorney’s client fund account pending final resolution of the lien; (iii) an offer that the defendant hold the full amount of the claimed right of recovery pending final resolution of the amount of recovery; (iv) documentation of any other method of resolution of the liens as agreed to by the parties
  3. One of the following: (i) documentation of the agreement between the plaintiff and Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and Family Services, or the private health insurance company as to the amount of the settlement that will be accepted in satisfaction of its right of recovery; (ii) a letter from plaintiff’s attorney agreeing to hold the full amount of the claimed right to recovery in the plaintiff’s attorney’s client fund account pending final resolution of the amount of the right to recovery; (iii) an offer that the defendant hold the full amount of the claimed right to recovery pending final resolution of the amount of the right of recovery; (iv) documentation of any other method of resolution of the liens as agreed by the parties.

While the statute provides for protection of the third-party lienholder's rights to reimbursement, it does not specifically address the situation where the plaintiff's counsel fails to preserve the settlement funds in a trust account as represented. The statute, therefore, should not alter in any way the standard “hold harmless” and “indemnity” provisions inserted in releases to protect against such an occurrence. Ultimately, the safest way for a carrier to protect the lienholder (and defendant/defense counsel) is for the defense counsel to hold the full amount in trust or for the carrier to cut a separate check to the lienholder, assuming the amount of the lien is certain.

Deadlines and Exemptions
A defendant faces strict consequences if it fails to abide by the deadlines set forth in the new law. Failure to pay a plaintiff within the mandated 30-day time frame will result in a judgment against the defendant for the amount set forth in the executed release plus costs incurred in obtaining the judgment and interest calculated from the date of tender of the signed release. The current statutory interest rate is 9 percent.

The new law does not apply to the State of Illinois; any state agencies, boards or commissions; any state officer sued in his of her official capacity; any person or entity represented by the Attorney General; or any municipality or unit of local government. Class action lawsuits are also exempt.

Opt-out Provisions and Releases
Parties to a lawsuit may choose to opt out of the new law by agreement. As a matter of practice, defendants would be expected to seek such an accord early on in the settlement negotiations but also anticipate resistance from plaintiffs eager to receive their money and reticent to give up the leverage provided by this new provision.

Indeed, the plaintiffs’ bar likely views this new legislation as a victory of sorts for their injured clients who often perceive an undue delay in obtaining their funds. However, while this new law may provide plaintiffs with more certainty as to when they will receive their money, once the settlement agreement is inked, the statute does not account for the frequently arduous and lengthy negotiations that can occur between the parties over release language, especially with structured settlements and those involving multi-party, high-stakes and/or complex litigation.

Unlike the 30-day payment provision of the new code section, there is no similar penalty provision for violation of the 14-day time limit placed on defendant to tender a draft release. In those situations where the parties contemplate multiple issues with or extensive dickering over the provisions of the release, it may be prudent for them to seek court intervention to expand the statutory 14-day time frame.

Nor does the statute address the situation where a plaintiff, eager to receive his or her settlement check, tenders his or her own signed release to the defendant well within the defendant’s 14-day deadline to do so. Presumably, the defendant would have a strong argument that the terms of the agreement were not negotiated and therefore the clock had not started to tick on defendant’s payment obligation.

It is likely this new legislation will spawn a rise in motion practice under the often-used Code Section 2-1007 and Supreme Court Rule 183 that allow a party to obtain an extension of time for the doing of any act prior to judgment for good cause shown and in the discretion of the court.

Takeaways
In sum, defense counsel and their clients/carriers must keep in mind the provisions of this new statute and the deadlines it imposes throughout the settlement process and seek court intervention in a timely fashion to avoid possible penalty for late payment.

The new law can be found in the Illinois Code of Civil Procedure at 735 ILCS 5/2-2301.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wilson Elser | Attorney Advertising

Written by:

Wilson Elser
Contact
more
less

Wilson Elser on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.