The business practice of “protected accounts” in personal injury litigation is about to face its most serious test to date.
March 26, 2021
Late paying clients are a headache for virtually all businesses. Few face greater payment uncertainty than treatment and expert assessment providers who service the plaintiff personal injury market. In the absence of pre-approved insurance benefits, these service providers are expected to wait potentially years, until settlement of the underlying litigation, as a condition of getting the work.
Charging interest on protected accounts is a pipe dream. And after carrying an account for years, most providers are just happy to get it paid.
In essence, protected accounts are interest free loans provided by service providers. They’re a great solution for the plaintiff, who is able to access necessary treatment in a timely manner; for the lawyer, who doesn’t have to pay up front for an expert’s assessment or trouble themselves fighting an insurer over a denied benefit or tort advance; and finally, for the insurer who continues to generate a tidy return on funds they might have paid much sooner. In fact, the only party who suffers under the protected account arrangement is the service provider, who in attempting to accommodate the best needs of their client, has unwittingly become the source of free financing.
Regardless of the clear downside, protected account arrangements have long been accepted as the cost of doing business in the personal injury market. But times are changing.
Even before the pandemic, personal injury claims were taking longer to settle, and were settling for less due to a variety of regulatory and other influences. The resulting financial squeeze on law firms has affected service providers, whose proportion of protected vs. pre-paid work has been increasing – as are instances where account abatements are required “to make the settlement numbers work”. A bigger storm now looms on the horizon.
The impact of the Covid-related lockdown has yet to be fully felt as personal injury firms continue to resolve their maturing file inventory. Yet with far fewer new accident cases in the pipeline to replenish them, more firms than ever will be seeking deferred payment arrangements as a way to preserve their cashflow.
How can service providers better shelter themselves from the coming storm?
BridgePoint Financial has created specific financing solutions that are designed to balance the service provider’s need for immediate payment with the law firm’s preference to defer payment until settlement.
For Treatment Providers:
BridgePoint’s Treatment Financing Program provides an alternate source of funds for treatment-related products and services where benefits have been denied, exhausted or are otherwise unavailable. Unlike traditional pre-settlement loans used to cover a plaintiff’s personal living expenses, the lawyer administers the treatment loan or credit line on the plaintiff’s behalf, drawing funds to pay the provider as services are incurred and thus avoiding the need for protected accounts.
Importantly, as treatment financing is undertaken in order to fulfill a plaintiff’s “duty to mitigate” damages, there is valid basis to recover the financing costs incurred.
“Treatment financing has been an essential part of our clients’ recovery programs. A client of ours suffered a severe crush injury to her legs in an MVA, and was restricted to medical benefits of $50,000 from the auto insurer. Due to the seriousness of her injuries she exhausted these benefits in approximately 9 months… BridgePoint stepped in and financed additional treatment without which….her recovery would have been delayed. In my discussions with the tort insurer, I received little resistance to my argument that the interest costs were properly claimed in the tort action. Additionally, the threat of additional interest expense was instrumental in persuading the insurer to provide an advance payment to cover some of the ongoing treatment.
Partner at Graves & Richard Professional Corporation
For Assessment Providers:
Expert reports are the most significant disbursement investments in a plaintiff lawyer’s practice and play a vital role in substantiating a client’s damages. With insurers increasingly adopting scorched earth defence tactics, the amount plaintiff firms must invest in assessments to advance a client’s claim is increasing, as are requests for deferred payment arrangements with their experts.
BridgePoint’s Expert Access program offers a compromised solution for both sides of the equation. It offers immediate, upfront payment to the expert while transferring the timing and collection risk to BridgePoint. BridgePoint in turn offers the law firm a reasonable two-year time frame in which to pay the account - interest free, with financing available thereafter. Win win.
For Both Treatment and Assessment Providers: Legacy Receivables Purchasing
While both the Treatment Financing and Expert Access Programs above offer valuable solutions to the respective markets, BridgePoint has also created a solution that addresses the often more pressing question of service providers: can anything be done about an existing book of outstanding protected accounts? The answer is yes.
BridgePoint has developed a versatile, proprietary model that can quickly evaluate any outstanding protected account portfolio and offers the service provider an immediate payment of approximately half the portfolio value, with subsequent payments tied to the timing of payments from the law firms for the underlying accounts.
To learn more about these innovative funding solutions, and how BridgePoint can help you balance your law firm client’s deferred payment requests with the economic realities of running your business, contact us.All Blog Posts