TORT CLAIMS, SOCIAL SECURITY AND OTHER NON- EARNED INCOME

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1 TORT CLAIMS, SOCIAL SECURITY AND OTHER NON- EARNED INCOME Barry M. Barnett LaCroix, Levy & Barnett, LLC Alexandria, LA TORT CLAIMS The proceeds of a tort claim or lawsuit are always subject to seizure, but there may be a question of the ranking of privilege. The handling attorney comes first. He or she has a lien or privilege for fees, expenses for litigation, and paid or guaranteed medical expenses. Next, would generally come medical liens. Finally, whatever is left- the injured persons portion is subject to seizure. Dupuis v. Faulk-, 91, 1139 ( La App 3 Cir. 12/09/92), 609 So. 2d 1190 Attorneys privilege applies to litigation expenses and advances for medical and living expenses. We do not believe any bar disciplinary rule can or should contemplate depriving poor people from access to the court so as effectively assert their claim Cf, Canon 2: A lawyer should assist the legal profession in fulfilling its duty to make a legal counsel available. Nor do we see how a lawyer s guarantee necessary medical treatment for his client, even for a non-litigation related illness, can be regarded as unethical, if the lawyer for reasons of humanity can afford to do so. * * * it is apparent under the clear wording of the statue that the medical and living expenses advanced by Sonnier, Hebert & Hebert are now included as part of the fee for privilege purposes. Ragas v. Ragas, (La. App. 4 Cir. 3/19/97), 690 So. 2d 1112 Attorney s privilege applies to litigation expenses, both advanced and guaranteed. Theodile v. R.P.M. Pizza, Inc (La. 3 Cir. 2/4/04), 865 So. 2d 980 Attorney s privilege applies to litigation expenses, both advanced and guaranteed. Disbursement Statement

2 In a tort case the handling attorney will prepare a statement which is signed by the person injury client at the time of the actual disbursement of the settlement of judgment proceeds. This statement shows the fee, the expenses and the payments being made from the settlement. This is something that may be subject to challenge. Generally, clients will want to pay all associated medical expenses, regarding of whether a lien has been perfected or the amount guaranteed. If there is no lien or guarantee of a particular medical expense, then a privilege or assignment for child support should be paid first. II. LOUISIANA WORKERS COMPENSATION CLAIMS - Weekly wage benefits- La. R.S. 46: Settlements- just like tort settlements - Third-Party claims- just like tort claims III. MEDICARE SET-ASIDE ACCOUNTS What is a medicare set aside? Technically they are called Medicare Set-Aside Arrangements and most often referred to as Workers Compensation Medicare Set-Aside Arrangements (WCMSAs). These are monies that are set aside out of a worker s compensation settlement which are to be used to pay for future medical care related to the original workers compensation injury. The applicable law is called the Medicare Secondary Payer Act and purpose of that Act is to make sure that workers compensation insurers pay for workers compensation injuries and that these costs are not shifted to Medicare.

3 Any workers compensation settlement consists of two primary components, future medical expenses and future indemnity payments. It can get a lot more complicated, but these are the two basic parts. Future medical expenses extend over the injured worker s lifetime and can be significant, especially when you have a brain injury or even a very bad back injury. If the present value of future medical expenses is projected to be $500,000, an insurer will usually be glad to pay $200,000 in order to close the file. The worker can accept this amount knowing that Medicare must approve the amount and that he will have Medicare coverage if the amount is ever used up. A settlement of the projected value of the future indemnity payments is generally made at the same time. Thus, when a workers compensation settlement is made, the total settlement is apportioned between future indemnity payments and future medical expenses. When an injured worker is already a Medicare recipient or has a reasonable expectation of becoming a Medicare recipient within 30 months of the date of the settlement, a Medicare Set-Aside Arrangement must be created and approved by the Centers from medicare and Medicaid Services. What this means is that the portion of the settlement that is allotted to the future medical expenses must be put into a separate, internet-bearing, checking account and used by the injured worker only for work related medical expenses. One last wrinkle in this arrangement is that the settling insurance company. If the worker agrees, is allowed to fund the MSA with an annuity. For instance, a recent

4 Medicare Set-Aside account in our office was fixed at $68,000. The insurer, with the agreement of the worker, elected to purchase an annuity which would pay approximately $11,000 up front and then a fixed amount per year for the injured worker s life. The insurer also agreed to pay an additional fee and guarantee a payment even if the worker died prematurely. At the time of the settlement, we received a check for the $11,000 which went immediately into a separate, interestbearing checking account to be administered by the worker himself. Every year for the rest of his life he will receive a check to be added to that account. If he spends all the money in the account on work related medical expenses, then Medicare will begin paying the bills until new money is received next year. Now, this WCMSA just looks like a checking account with $11,000 in it. The account is in the injured worker s name and under his social security number and may or may not say Medicare Set-Aside Account. My clients are admonished never to use the money for anything other than work injury related expenses, but the only thing stopping him from doing this is that Medicare will not pay work injury related expenses until the account is exhausted and the worker can demonstrate that he only used the money as intended. In some states it appears that the funds in a Medicare Set-Aside Account are not subject to garnishment or seizure because they are somehow subordinated to Medicare. However, I can find nothing in Louisiana law or jurisprudence that makes these exempt from garnishment or seizure by third parties. Additionally, an

5 aggressive attorney could also garnish the future yearly payments coming from the insurer which is paying the annuity. IV. LONGSHORE AND HARBOR WORKERS COMPENSATION These benefits not subject to seizure: Title 33 U.S.C Assignment and exemption from claims of creditors No assignment, release or commutation of compensation or benefits due or payable under this chapter, except as provided by this chapter, shall be valid, and such compensation and benefits shall be exempt from all claims of creditors and from levy, execution, and attachment or other remedy for recovery or collection of a debt, which exemption may not be waived. BUT, longshore claims are like workers compensation claims. Usually, the handling attorney is looking closely to see if there is a negligence claim out there, either under 33 U.S.C 905 (b) Negligence of vessel, or 33 U.S.C Compensation for injuries where third persons are liable. And these claims should be seizable. AND-maybe settlements of the LSHW claims themselves V. SOCIAL SECURITY BENEFITS There are primarily 3 types of benefits in which we will be interested: Retired worker Disabled worker

6 Supplemental Security Income (SSI)- Not subject to seizure In general monthly Social Security benefits are exempted from execution, levy, attachment or garnishment, except (1) The Secretary of the Treasury can make levies for the collection of delinquent Federal taxes and under certain circumstances delinquent child support payments; and (2) garnishment or similar legal process brought by an individual to enfore a child support or alimony obligation. Title 42 U.S.C 207 (Part of the Social Security Act) provides: The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law. However, section 6331 of the Internal Revenue Code of 1954 (26 U.S.C. 6331) which was enacted into law on August 16, 1954, after the enactment of section 207, gives the Secretary of the Treasury the right to levy or suize for collection of deliquent Federal taxes, property, rights to property, whether real or personal, tangible, or intangible and the right to make successive levies and seizures until the amount due, together with all expense, is fully paid. SSR 79-4: SECTIONS 207, 452(b), 459 AND 462 () (42 U.S.C. 407, 652(b), 659 AND 662(f) LEVY AND GARNISHMENT OF BENEFITS 20 CFR SSR In addition, section 6305 of the Internal revenue Code of 1954 (26 U.S.C. 6305) authorizes the Secretary fo the Treasury, upon receiving a certification from the Secretary of Health, Education, and Welfare under section 452(b) of the Social Security Act as to the amount of an individual s delinquent child support obligation. Id.

7 However, the Social Security Administration limits the garnishment amount to the lesser of the State maximum or the maximum under the Consumer Credit Protection Act (CCPA) (15 U.S.C (b) ) and is based on the law of the State where the beneficiary resides. The CCPA limits garnishment to: -50% if the beneficiary is supporting a spouse and/or child other than the spouse and/or child whose support has been ordered. - 60% if the beneficiary is not supporting another spouse and/or child. - 55% or 65% respectively, if the garnishment order or other evidence submitted indicates the original support ordered is 12 or more weeks in arrears. And it does not matter that a State s law may allow more. See A. PR State of Utah Notice of Lien-Levy for Past Due Child Support. Finally, attachment can be sent even before the claim for benefits is approved. If the claim is pending- and it can take 1 ½ years to get a hearing before an ALI, - the SSA will let you know and will honor the claim is eventually approved. See NL Notice to Court- Garnishee s Claim for Monthly Benefits Pending. Supplemental Security Income claims- Not Subject to Seizure SSI benefits are not only based disability. Instead, theses benefits are intended to supplemental the receipt s income based upon his/her need. SSI benefits are only intended to give the recipient that level of income which the federal government believes is the minimum necessary to live. Ancillary benefits for the child:

8 When a person becomes eligible for disability benefits, other members of his family may also be entitled to a benefit also if his monthly Social Security Disability is over the minimum, about $ a month. Specifically, his natural and legally adopted minor children can also be entitled to receive a benefit under that worker s Social Security account. The amount varies depending upon the amount of the disabled persons own benefit. So tell the custodial parent to apply for the child as soon as the child support obligor is found to be disabled. Actually, an application should be made as soon as it is learned that the obligor has filed for benefits. The child support obligor gets a dollar for dollar credit for these payments against his or her child support order. This is the stimulus for him/her to let you and the custodial parent know when he becomes eligible.

9 RECOVERY CHECKLIST Workers Comp Employer s Name _ Address Telephone Employer s Workers Compensation Insurance Carrier s Name Adjuster s Name Address Telephone Claim #: Policy # Payor s Attorney s Name Address Telephone Tort Suit Defendant s Name Address

10 Telephone Defendant s Insurance Carrier Adjuster Address Telephone Claim # Policy # Payor s Attorney Name Address Telephone Defendant s Insurance Carrier s Attorney s Name Address Telephone

11 Example of Disbursement Statement SETTLEMENT AGREEMENT V. ALLSTATE GROSS SETTLEMENT: $ 18, LESS LEGAL FEE: $ 6, NET SETTLEMENT PROCEEDS: $ 12, TO BE PAID FROM SETTLEMENT: Regional ER $ 2, Emergency Room Doctor $ Radiologist $ Chiropractor $ 3, EXPENSES ADVANCED: TOTAL $6, Depositions $ Court Costs $ Investigator $ Copies of medical records/ bills $ TOTAL $ 1, NET SETTLEMENT: $ 4, BALANCE DUE CLIENT: $ 4, I hereby approve of the foregoing settlement statement and authorize distribution of the settlement proceeds as set forth above.