After being injured in a car accident, reaching a settlement with an insurance company can feel like the finish line. However, many accident victims have another important question: What happens to the settlement money, and how much of it will I actually receive?
Once a personal injury claim settles, the settlement funds must be properly distributed. Before the injured person receives their portion, several financial obligations may need to be addressed, including attorney fees, case expenses, outstanding medical bills, and medical liens. Understanding the settlement distribution process can help you know what to expect and avoid surprises when your case comes to an end.
In this article, we explain how personal injury settlements are distributed in Florida, how attorney fees are calculated, who may be entitled to a portion of the settlement, and what ultimately determines how much money an injured person takes home.
Where Does the Settlement Money Go?
When an insurance company agrees to settle a personal injury claim, it typically issues a settlement check to the appropriate payee, often the attorney for the benefit of the injured person. In cases where the attorney represents the injured person under a contingency fee agreement, the settlement check is generally deposited into the attorney's trust account. The money is not immediately distributed to the client. Instead, the attorney must first account for the settlement proceeds and address any outstanding financial obligations.
Generally, settlement proceeds are distributed among the following:
Attorney fees.
Case costs and litigation expenses.
Outstanding medical bills.
Medical liens and health insurance reimbursement claims, when applicable.
The injured person's remaining settlement proceeds.
The exact distribution depends on the terms of the attorney-client agreement, the outstanding obligations associated with the case, and any applicable lien or reimbursement rights.
How Are Attorney Fees Calculated in Florida?
Most personal injury attorneys represent accident victims on a contingency fee basis. A contingency fee means the attorney receives a percentage of the recovery rather than charging the client an hourly fee. In other words, the attorney's fee is generally dependent on successfully recovering money for the client.
In Florida, contingency fees in personal injury cases are subject to Rule 4-1.5 of the Rules Regulating The Florida Bar. The applicable fee limits generally depend on the stage of the case.
Before a lawsuit is filed or an answer is due:
Under the standard Florida contingency fee schedule, the attorney may receive up to 33.3% of the recovery up to $1 million.
After an answer is filed or the time for filing an answer expires:
The standard maximum generally increases to 40% of the recovery up to $1 million, through entry of judgment. Different percentages apply to amounts exceeding $1 million, and certain exceptions and court-approved arrangements may apply. It is important to understand that these are maximum standard fee percentages under the applicable rule, not mandatory fees. An attorney and client may agree to a lower percentage.
The signed contingency fee agreement controls the actual fee arrangement, including how expenses are handled and whether they are deducted before or after the attorney's fee is calculated.
What Happens to Outstanding Medical Bills?
One of the biggest considerations when distributing a personal injury settlement is determining what happens to outstanding medical bills. After an accident, an injured person may receive treatment from several different medical providers, including:
Emergency rooms and hospitals.
Orthopedic specialists.
Chiropractors.
Physical therapists.
Pain management physicians.
Diagnostic imaging facilities.
Surgical centers.
Some providers may agree to treat an injured person with the expectation that payment for their services is deferred until the personal injury case resolves. When the case settles, those outstanding balances may need to be addressed before the remaining settlement proceeds are distributed to the client.
However, the amount originally billed by a medical provider is not necessarily the amount that must ultimately be paid. Depending on the circumstances, an attorney may be able to negotiate outstanding balances and medical liens for less than the original amount owed. For example, a medical provider may have an outstanding balance of $8,000 but agree to accept $4,000 as payment in full.
Negotiating these balances can make a significant difference in the amount of money the injured person ultimately receives.
What is a Medical Lien, and Who Has a Right to Get Paid?
A medical lien is a legal claim against settlement proceeds that may give a medical provider or another entity the right to receive payment for services or benefits provided to an injured person. Not every medical bill creates a lien, and not every entity claiming reimbursement automatically has an enforceable right to settlement proceeds. Depending on the case, potential lienholders or reimbursement claimants may include:
Medical providers: Certain hospitals and healthcare providers may have statutory, contractual, or other legally recognized lien rights.
Medicare: If Medicare paid for accident-related medical treatment, it may have a federal reimbursement claim against the settlement.
Medicaid: Medicaid may have reimbursement rights for certain accident-related medical expenses.
Private health insurance: Depending on the applicable plan documents and law, a health insurance company may have a contractual reimbursement or subrogation claim.
Letters of protection: Medical providers who treated the injured person under an LOP may be entitled to payment pursuant to their agreement.
An important distinction in Florida is that personal injury protection (PIP) insurers generally do not have a lien against an injured person's tort recovery for PIP benefits paid. Florida Statute § 627.736(3) specifically addresses this issue.
Additionally, Florida Statute § 768.76 addresses collateral sources and certain reimbursement rights. Before distributing settlement funds, an attorney should identify applicable liens and reimbursement claims, determine whether they are legally enforceable, and address them appropriately.
Can Your Attorney Negotiate Your Medical Bills?
Yes. In many personal injury cases, negotiating outstanding medical bills and reimbursement claims is an important part of maximizing the client's net recovery.
For example, consider a situation where an injured person has accumulated $25,000 in outstanding medical bills. After reviewing the balances, the attorney negotiates with the medical providers and reduces the total amount owed to $12,000. That reduction leaves an additional $13,000 available for the client's recovery, before accounting for any other settlement obligations.
This is one reason why the gross settlement amount does not necessarily tell the entire story. An attorney's job is not simply to obtain a settlement. It is also important to properly address outstanding obligations and help maximize the amount the client actually receives.
Florida Bar Rule 4-1.5 addresses the attorney's responsibilities concerning medical liens and subrogation claims, including reasonable efforts to identify and negotiate applicable claims as part of the personal injury representation.
Example: How Much Money Does the Client Actually Receive?
Let's look at a hypothetical example to better understand how a personal injury settlement may be distributed.
Assume an injured person settles their automobile accident claim for $50,000 before a lawsuit is filed.
The following is an example of how the settlement could be distributed under a hypothetical contingency fee agreement.
The law firm will take 33.3% which comes out to $16,650. The law firm spent $400 on costs. So, the total takeaway for the law firm is $17,050. The negotiated medical bills come out to $5,000. If you add all of that together, the total outstanding before going to the client is $22,050. The client’s net recovery is $27,950.
Note: This is an illustrative example only. It assumes the attorney fee is calculated on the gross settlement and costs are deducted afterward. The actual calculation depends on the signed fee agreement, applicable fee rules, and the particular medical obligations involved.
As you can see, even though the insurance company paid $50,000 to resolve the claim, the injured person ultimately receives $27,950. This is why understanding the distribution process is so important.
Does the Client Have to Approve the Settlement Distribution?
Yes. The client should understand and approve the settlement distribution before the funds are disbursed. The attorney should provide a settlement statement, commonly referred to as a settlement disbursement statement or closing statement.
This document should explain:
The total settlement amount.
The attorney's fee.
Case costs and expenses.
Outstanding medical bills and liens.
Payments being made to third parties.
The final amount being distributed to the client.
Under Florida Bar Rule 4-1.5(f)(5), when a contingency fee matter results in a recovery, the attorney must prepare a written closing statement itemizing costs and expenses and the fees received by participating attorneys or law firms. The closing statement must be executed by the client and participating attorneys, and each must receive a copy.
Clients should review this statement carefully and ask questions about any amounts they do not understand.
Why Your Net Settlement Matters More than the Gross Settlement
When evaluating a personal injury settlement, it is easy to focus exclusively on the total amount offered by the insurance company.
However, the gross settlement amount does not necessarily reflect how much money the injured person will actually receive.
For example, a $100,000 settlement with substantial outstanding medical bills may result in a smaller net recovery than a $75,000 settlement with significantly lower medical obligations.
This is why attorneys must consider more than just the settlement offer.
They should also evaluate:
The attorney's contractual fee.
Outstanding medical balances.
Applicable liens and reimbursement claims.
Case expenses.
Opportunities to negotiate medical balances.
The final amount the client will receive.
Ultimately, a successful personal injury settlement should be evaluated by considering both the total recovery and the amount the injured person takes home.
Questions to Ask Your Attorney Before Your Settlement is Distributed
If your personal injury case has settled, you should understand how your settlement proceeds will be handled. Here are several important questions to ask:
What is the total settlement amount?
What percentage is being charged for attorney fees?
Are case expenses deducted before or after attorney fees?
What outstanding medical bills or liens must be paid?
Have any medical balances been negotiated?
Are there any outstanding Medicare, Medicaid, or health insurance reimbursement claims?
How much money will I receive after all deductions?
Your attorney should be able to explain the settlement distribution and provide an itemized statement showing exactly where the money is going.
Receiving a personal injury settlement is an important milestone after an automobile accident. However, understanding how the settlement proceeds are distributed is just as important as obtaining the settlement itself.
Attorney fees, medical bills, liens, reimbursement claims, and case expenses can all affect the amount of money an injured person ultimately receives. If you have been injured in a Florida automobile accident, having an attorney who understands both the settlement process and the financial obligations associated with your claim can make a meaningful difference.
If you have questions about a personal injury claim or settlement in Florida, contact our office to discuss your rights and available legal options.
Legal accuracy note: The discussion of Florida contingency fee percentages is based on Rule 4-1.5 of the Rules Regulating The Florida Bar. The lien discussion also references Florida Statutes §§ 627.736 and 768.76.