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Your MSA Notebook: Release Language Ethics: Plaintiff’s Lawyers May Not Personally Indemnify; Defendant’s Lawyers May Not Request or Require Personal Indemnification

November 30, 2011

In February, I suggested any attorney who plans to practice Personal Injury law in Florida to immediately start their collection of pertinent materials to prepare themselves for all of the coming mediation or other resolution issues arising from MSA (the Medicare Secondary Payor Act.  See, “Start your MSA Notebook Now”, February 14, 2011.

Since that time, dozens of pertinent bulletins, Medicare “letters” and other informative information have become available and are being generously shared by attorneys on both sides of the aisle.  I repeat my earlier suggestion that collection and retention for periodic review of these materials are critical to your avoiding the most recent  addition to potential administrative obstacles to full mediation resolution or other successful settlements of some personal injury claims.

As I warned, this predictable MSA “future exposure”  issue is now becoming even more prevalent in mediation resolutions as the formal deadline for “reporting“, a Federal regulatory obligation of those who pay monies on such settlements to notify the Federal Government of the details of such settlements, now formally approaches.  (For all intents and purposes, we are effectively already “in” the official required reporting period.)

And, even though the Defense Bar still seems “ahead” of the Plaintiff’s Bar in terms of trying to find and follow general, uniform means to deal with this common issue of “future exposure”  facing these reporting (and paying) entities, the reality is that until Medicare states with specificity exactly what steps attorneys on either side should/must take to fulfill Medicare’s requirements and thus escape future exposure, (so far their simply is no Medicare mechanism at all in place) the insurers and self-insurers are simply, for now, each creating their own guidelines as to what “protections” they must have to feel comfortable  with any payment they make  on any claim that has any possibility of future Medicare reimbursement exposure.

One such MSA “protection procedure” for resolution that is being proposed and is sometimes being required as a pre-condition to settlement, is to insist that the counsel for the Plaintiffs, individually, agree to hold harmless and indemnify a defendant from all third-party claims arising out of a defendant’s settlement, including any potential claim by Medicare resulting from liability under the Medicare Secondary Payor Act, including by co-signing a Defendant’s release.

As with any “required” condition precedent to settlement, this latest attempt at finding additional protection for the defendant who pays the Plaintiff,  by looking not only to the party receiving the money for the protection of indemnification, but also to the attorney of the Plaintiff, as you might expect,  is causing any number of legal, ethical and practical impediments to settlement, including resolution at mediation.

Fortunately, the Florida Bar has recently issued a very specific directive that this type of condition precedent for settlement, including regarding MSA,  is not only unethical for any Plaintiff’s attorney to agree to , it is unethical for any Defense attorney to request, or even permit his client to request, such a personal indemnification request of the Plaintiff’s attorney.

If you do not have a copy of this important Bar Staff Opinion, you should obtain one, immediately, for your own MSA  notebook. 

(And also carefully note that this ethical prohibition is to ANY personal indemnification!  Accordingly, such a request for indemnification of any lien or debt due would presumptively also be prohibited.   For example, be very cautious with the wording of any “letter of protection’ you execute.))

This advisory, Florida Bar Staff Opinion, 30310, published April 4, 2011, is extremely well written.  And, most interestingly, the crystal clear explanation takes its support not only directly from the Rules of Professional Conduct of the Florida Bar, but cites to almost identical findings and opinions from several other states,  including Ohio, Tennessee, Indiana,  specifically quoting their findings.  And, other states are also cited in support as having similar opinions, including North Carolina, Arizona, Illinois, Missouri, South Carolina and Wisconsin.

Accordingly, rather than quote extensively from the well-written opinion, I think it mainly important for my notice purposes, including updating your MSA notebook, merely  to call to your immediate attention to the opinion and to their specific ethical advisory stating:

A lawyer should not agree to personally indemnify an opposing party. … Furthermore, a lawyer should not ask or require that another attorney enter into an agreement to personally indemnify an opposing party.”

Simply re-capped, it is now clear that it is unethical for any Plaintiff’s attorney to agree to personally indemnify a defendant for any debt of his client, including any future debt.  But, equally important, it is also specifically unethical for any Defendant’s attorney to request such a personal indemnification, or even allow his client to insist upon such a requirement.

(And, therefore,  isn’t the very next question whether anything so clearly unethical thereby becomes illegal (and subject to sanctions?) by the very nature of the ethical impossibility of the act?  Stay tuned.)

My thanks to local Plaintiff’s attorneys, William Umansky and  Ramon Castillo, for providing me this insight and  Bar opinion to share with you for your future use.

Make sure you  obtain and put a copy of this opinion in your own MSA notebook, today!

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