Brian Schachter

What positives can come out of an unsuccessful mediation?

April 28, 2015 by Brian Schachter Leave a Comment

The ultimate goal of mediation is, of course, that the parties reach a settlement, which entails compromise on both sides of the case. With the help of a mediator, the plaintiff and defendant find a middle ground between the bid and the ask, and both parties walk away, feeling that they have benefited by avoiding the expense, uncertainty and stress of going to trial.

But while mediation usually enjoys a high success rate, even the best mediators don’t always produce a settlement. In a way, this can be disheartening and may feel like failure, particularly if you’ve invested significant time and money in preparing, paid fees to the mediator and maybe to produce your expert witnesses too, and still end up in the same place. It may feel like you have nothing to show for your efforts except now you’re a day closer to your trial date.

In fact, in our experience there really is no such thing as a completely unsuccessful mediation. Even when you don’t emerge from the session with a settlement in hand there are invariably significant benefits from participating in the process; it will typically better position you to obtain a successful outcome to the case, much more effectively than rushing headlong into trial.

Here are couple other tangible benefits we see emerge from mediation even when settlement itself remains elusive:

A good mediator starts off by encouraging both sides to put their cards on the table. The plaintiff and defense each presents their case. If nothing else, this means that you can get a sense of the defense lawyer’s strategy and theory of the case.
If all parties are present at the mediation, you’ll get some face-to-face time with the insurance adjusters. There is definitely something valuable about sitting across the table from the real party in interest, learning about the styles and personalities involved that stand between you and recovery for your client.
We all have experience dealing with clients who have developed unrealistic expectations about their prospects for their case. This can make your job is twice as hard because you end up having to negotiate with both the adjuster and your client. In that case, bringing your client to the mediation can provide a welcome reality check. A good mediator can help catalyze the process of bringing your client down to Earth by opening their eyes to the realities of what defense is actually willing to offer.
It’s also possible, particularly if you’ve been working on a case for a long time, that you might be seeing it through rose-colored glasses. We’ve seen a lot of lawyers fall in love with their cases, blinding them to potential flaws and weaknesses. The mediator is seeing it for the first time, through a fresh set of eyes, and may be able to help you better assess your chances at trial. A good mediator will provide you with feedback on your presentation and a more objective view of the strength of your case.
Even when mediation doesn’t produce settlement, any settlement offer is better than nothing and you should at least succeed in narrowing the gap between bid and ask. Typically (though not always) a settlement offer that gets made by the defense will remain on the table right up until the start of the trial. So, if nothing else, the mediation should establish a floor for your client’s recovery and leave open the opportunity for further progress as the trial date approaches. In our experience, the most successful mediations occur within a few months of the trial date, when all parties are keenly aware of the work that still needs to be done and risks entailed.
In many personal injury cases, the defendant will have multiple layers of insurance coverage, known as primary and excess. Mediation will sometimes establish the willingness of the primary coverage carrier to settle on acceptable terms, leaving you with a reduced cast of characters to negotiate with in order to resolve the case. Narrowing the field of your opposition often proves to be an important first step.

So when you go into mediation, you want to give it your best shot to reach settlement. But you also want to bear in mind that mediation is very different from trial itself. It’s not winner take all and both sides should emerge from it better positioned and closer to settlement than you were before heading into it.

How You Can Save on Taxes With a Legal Fee Structure: A Unique Opportunity for Plaintiffs’ Counsel

March 31, 2015 by Brian Schachter 1 Comment

With April 15^th approaching we wanted to take the occasion of this week’s blog post to remind our readers about the significant tax benefits available to plaintiffs’ counsel through the use of legal fee structures. Of course, it’s too late to do anything about the taxes you owe this year (other than pay them) but with a little forethought and advance planning, taking your fees through a tax-advantaged installment structure is an approach that can provide real benefits to you beginning with the very next case that you settle.

Given the general political climate and the various legislative initiatives in recent years, it’s hard to believe that this extraordinary tax benefit is uniquely available to members of the plaintiffs’ bar, and is of no effective use to other legal practitioners let alone to any other professions. That’s because the ability to use a fee structure really only becomes practical in connection with contingency fee arrangements.

At this point there is nothing speculative about using a fee structure. It is based on a tried-and-true tax structure that has been upheld in Tax Court and the 11^th Circuit Court and which the Internal Revenue Service itself has now come around to accept in the ordinary course, provided that the formal requirements have been fully satisfied. We help our lawyer clients implement these structures regularly in the course of our practice as settlement advisors. (The leading case on this issue is Childs vs. Commissioner which you can read by clicking right here.)

The only catch is that you have to decide to implement a fee structure before the case settles in order the meet the requirements under applicable law. In the view of the IRS, an attorney is only viewed as earning a contingency fee on the date that settlement documents are actually signed. In effect, this gives you right up until the day before settlement to implement a fee structure in order to realize substantial tax benefits.

And just what are the benefits? You can think of a fee structure essentially as a 401(k) plan that can be implemented without regard to the limitations on the amount of annual contributions. So this allows you to spread the payment of any sized contingency fee out over the course of time, which means the fee will only be subject to tax when and as you receive periodic payment, in accordance to whatever payment schedule is incorporated into the structure. Spreading the timing of payment out in this way can actually result in a lower tax burden, depending on a variety of factors. Not only that but it enables you to realize the further benefit of tax-free compounding on the portion of the fees that remain unpaid, as is the case with any 401(k) type vehicle.

It’s an opportunity that’s almost too good to be true. It provides you with incredible flexibility in scheduling the timing of the income you receive, which is essentially the Holy Grail for all tax planning. A fee structure can be implemented with respect to all or any portion of a contingency fee, which enables you to take a lump sum at the time of settlement to cover litigation expenses or address the differing desires of your partners, as need be, and only defer the balance. A lawyer can establish a fee structure with respect to a contingency fee even when the client chooses to take their recovery in the form of a lump sum.

In the words of Robert Wood, a prominent tax specialist, it’s an extraordinary benefit that is only available to plaintiffs’ counsel. As Wood wrote in the Los Angeles Daily Journal not long ago, “If a contingent fee lawyer structures say 15 percent of every fee and puts it away tax-deferred for a rainy day, he would have achieved retirement income stabilization, estate planning and tax-deferred advantage that most people — and even most lawyers — can’t achieve.”

So we’re sorry we can’t do anything this year to help ease the pain for you of dealing with the IRS. But in the course of attending to the cases open on your docket, we suggest you consider giving us a call when it’s time for settlement talks to find out more about how we can help reduce the pain in the coming years.

Caveat Counsel

March 24, 2015 by Brian Schachter Leave a Comment

As structured settlement consultants with expertise in Medicare and Medicaid related issues, we participate in hundreds of settlement negotiations for personal injury lawsuits every year. This gives us a very good sense of the latest trends and tactics being used by all the parties and mediators during the process. Every once in a while we come across the defense trying out a new line of attack that strikes us as questionable.

That’s exactly what happened in one of our recent cases. We were helping a client negotiate a settlement for a case involving a woman who had become quadriplegic in a car accident. As a result the plaintiff requires extensive medical care for the rest of her life. The woman’s income was below the poverty level so she was covered by Medicaid insurance providing around the clock home attendants/residential care. During the pendency of the case plaintiff started receiving Social Security Disability benefits as well, which eventually forced her into Medicare as her primary healthcare coverage.

As typically happens in the course of settlement discussions, plaintiff and defense counsel exchanged expert reports in order to flesh out their respective positions on the patient’s anticipated future Life Care Plan, which is the key factor in determining the appropriate level of damages. In this case the defense proffered three experts for exchange: a medical doctor, an economist and an health insurance expert.

All this might sound like exactly what counsel should expect to encounter in the course of settlement discussions, with expert witnesses offering testimony and rebuttal evidence on the estimated future costs of the proposed Life Care Plan. But we immediately noticed a red flag in the witness disclosure filed for the defense, “a health insurance expert.” This health insurance expert testimony was being offered up to rebut the plaintiff’s proposed Life Care Plan and analysis of expenses on the grounds, among others, that such expenses would largely be covered by procurement of health insurance under the Patient Protection and Affordable Care Act of 2010, otherwise known as Obamacare.

We’ve heard of this particular line of argument being thrown out at mediation by defense but we always shot it down for our clients. What concerned us was how the defense in this case took it further with the exchange of a 3101(d) expert. The gist of the expert’s proffered testimony was that due the availability of coverage under Obamacare, the plaintiff would be able to purchase private insurance since the law now prohibits denial of coverage based on pre-existing conditions. As a result, the defense expert disputed the Life Care Plan costs as unreasonably high on the grounds that a healthcare insurance plan with a market cost of about $550 per month would provide adequate therapy, prescriptions and hospital costs and a supplemental home health care plan for attendants would run about $475 per month.

This is a completely disingenuous line of argument. First of all, given the pending Supreme Court litigation and all the political uncertainty regarding the future status of Obamacare, it strikes us as extremely problematic to base an assessment of one’s anticipated future medical costs on the continued availability of Obamacare mandated insurance coverage. Even more egregious, this line of argument is actually in contravention of current legal requirements inasmuch as the plaintiff, as a recipient of Medicare and Social Security Disability benefits, was completely ineligible for coverage under an Obamacare policy. It simply would be illegal for anyone to sell her such a policy. In addition, New York State is a “collateral source” state so none of the defense’s arguments could ever get in front of a jury and would only be introduced in a post trial collateral source hearing.

Settlement negotiations for plaintiffs who are covered by Medicare and Medicaid can be very tricky. I hope the defense bar doesn’t start a trend with Healthcare experts. There are a lot of nuances involved in the regulations and requirements for both the past (subrogation of liens) and preservation of one’s government eligibility (Special Needs Trusts or Set- Asides). In fact, plaintiff’s attorneys not only should be aware of what defense is trying to do but also should be using Medicare and Medicaid issues as a sword to maximize their settlements and protect their clients.

Caveat plaintiff’s counsel. Beware of health insurance experts proffering bogus expertise!

The Value of Partnerships

March 3, 2015 by Brian Schachter Leave a Comment

We at ESS Settlement Services are extremely careful about identifying and selecting the companies we choose to partner with. When we partner with someone, we make sure they are the best at what they do and also that they share the same client centric culture that is core to our mission. One of our partnerships makes us so happy that we want to shout it from the top of a mountain! Actually, we did. Atop Mt. Keystone in Colorado we couldn’t help laughing about living our motto “Above and Beyond,” literally.

It was to the mountaintop we went last month to meet (and enjoy ourselves) with Providio Medisolutions, our partner that provides our clients with expert lien resolution services. As many of you know, lien resolution can be a problematic and painful process that many lawyers would prefer to avoid handling themselves. So we made it a priority to find the best possible lien resolution partner, enabling us to help our clients deal with this time consuming but critical process.

As a growing business, we’re focused on forging partnerships that add the most value to our clients. We know our strengths and where we excel. Issues outside our core competencies are better handled by partnering with “best in class” providers like Providio. Throughout our week in Colorado, we spent a significant amount of time in meetings with Providio’s sales and service experts, cementing the relationship. However, it was in a more informal setting, where we really felt the synergy between our two companies. We discussed our shared values over beers at dinner, and then enjoyed some live music on Thursday night. Friday ended up our most productive day; we spent it skiing! Without our phones and other distractions, we talked and worked nonstop, while having fun! As far as business trips go, this one went “above and beyond” our expectations.

Important clarifications regarding Medicare Liens

February 25, 2015 by Brian Schachter Leave a Comment

As most lawyers know, lien resolutions can be messy and confusing. While long waits and difficulty dealing with Medicare are almost inevitable, simply knowing the difference between certain programs can help lawyers expedite the process. Many lawyers often confuse the Medicare Advantage Plan and Medigap, so we’d like to set the record straight on what each one covers.

The Medicare Advantage Plan, for example is a Medicare health plan offered by a substitute private company, contracted by Medicare and funded by the government. Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans. Since it serves the exact same function as Medicare, the same rules apply and, in NY, money must be paid back.

Medigap, also known as Medicare Supplement Insurance, is a separate program. Private companies sell Medigap coverage. It is additional insurance that covers co-pays and out of pocket expenses that Medicare does not. Medigap is classified as private insurance so funds do not need to be reimbursed in NY.

Clearing up the confusion and clarifying the distinctions between these programs is key for lien resolution because it can have a dramatic impact on lawyers and their clients getting access to the funds of the settlement. These resolutions are often frustrating and drawn-out because communicating and obtaining information from the Medicare and Medicaid offices can take a long time. Even if everything is handled promptly on the lawyers end, Medicare lien resolutions can still take more than 100 days to resolve.

What has been your experience in dealing with Medicare and Medicaid liens? Would a service that provides assistance in handling these liens be desirable? What other services would you be interested in getting help with? Please share your comments with us and let us know.

How can we insure a steady life-long income stream for a catastrophically injured client?

February 10, 2015 by Brian Schachter Leave a Comment

“Above and Beyond.” We take our motto seriously here at ESS and we’d like to share one way we do just that for clients. We usually meet people after they’ve come into a large sum of money after a catastrophic accident or under drastic circumstances and we do everything in our power to ensure their financial security.

A structured settlement, also known as a qualified structured annuity is an important tool, but it’s not the only tool.

We always say that the two biggest mistakes you can make in setting up a structured settlement and settlement plan are not putting enough money into the structure or putting too much money into the structure. Most clients should have enough money in cash for immediate wants, needs and expenses. We can help determine this amount by analyzing the clients’ situation in terms of family, income, education, retirement, health care and government eligibility for needs-based programs, such as Medicaid.

But we often found when we revisited our clients several years later that all of that up-front money was gone and the client was relying exclusively on the money in the structured settlement. This was troubling because it meant that while most of their living expenses were taken care of, they didn’t have any security to cover emergencies or rising costs.

That is why we partnered with Excelsior Wealth Management, an elite asset management group from Morgan Stanley that helps high net worth individuals, including celebrities, to manage their assets. This partnership combines our structured settlement expertise with their financial management resources. We set up the structured settlement and Excelsior advises our clients on how to manage that up-front portion to preserve their principal and build wealth.

Working with Excelsior provides tremendous value to our clients — most of whom have never managed large sums of money — by surrounding them with the best team possible. Many people who abruptly attain a lot of money for the first time have no idea what to do with it and some fall victim to consumer predators and other schemes. Others simply deposit the money at the bank, where the branch financial manager, typically someone who does not have experience with the catastrophically injured, advises them.

Craig Pastolove, a member of the Excelsior team, wrote in an article for Worth Magazine, “Although the work is not pro bono, it feels as though we are making a real difference in these parties’ lives by providing services that historically have been unavailable to them.

“This is very different than planning for ultra-high net worth families because planning for injured parties can potentially impact whether or not they can pay for proper medical care or educate their children,” he added.

The feeling is mutual. We, at ESS recognize this important need for our clients and this partnership is just one of the many ways we go “above and beyond” to better serve our clients and the law firms that represent them.

How Personal Injury Lawyers can Expedite Getting Paid for their Services

January 27, 2015 by Brian Schachter 1 Comment

We know that most lawyers are aware of EPTL 5-4.26, but some lawyers just aren’t taking advantage of it and we don’t understand why that is.

Normally, when we settle a case on behalf of a deceased person, the surrogate court must approve a death compromise order before the heirs or beneficiaries can receive any money. The same holds true for the lawyers who spent many hours working on the case. It is quite possible that the court could take months or even years before they approve the settlement.

That is why Section 5-4.26 was enacted a few years ago. Section 5-4.26 enables lawyers to ask the Supreme Court to expedite this process. Once the Supreme Court approves the amount, a lawyer can, upon meeting certain conditions, take their fee while holding the distributees’ settlement monies in an escrow account until the surrogate court approves the death compromise order. Although the family cannot receive their money earlier, their funds will earn interest in the escrow account.

Here is an example of sample of language of what we seen used at Supreme Court while preserving the right to structure with the Surrogate Court still having to do final allocations:

“ORDERED, that plaintiffs and defendants anticipate that some portion of the remaining settlement monies shall be used to fund structured settlement annuities for the benefit of the distributees of the Estate of Plaintiff, with the terms subject to Decree of the Surrogate’s Court, Kings County regarding the distribution of the settlement proceeds”

This order also ensures that the client is protected in case the insurance company liquidates in the interim and cannot pay the claim. .

This law is also important because some surrogates don’t approve structured settlements; we presume that this is because some Surrogate Court judges don’t understand structured settlement as well as judges in the Supreme Court. But having the Supreme Court judge approve the structured settlement in the EPTL order opens the door to getting into the death compromise order. Either way, using Section 5-4.26 provides an extra layer of protection for clients and enables lawyers to get paid soon after the case has been settled. It’s a win-win scenario from our vantage point and something all lawyers should be taking advantage of.

Have you taken advantage of Section5-4.26? Did this enable you to receive your legal fee in an expedited manner? Please share your story with us. We would love to hear of your experience.

Are you operating a S.M.A.R.T. law firm?

January 19, 2015 by Brian Schachter Leave a Comment

It’s January! With 2015 off and rolling it’s time to plan for the rest of the year. It’s time for businesses to set goals and implement strategies to achieve them. At ESS Settlements, we are setting our S.M.A.R.T. goals for the year. If you’re a law firm, don’t tune out because in 2015, you’re also a business. Law isn’t just a profession anymore. The practice of law has become the business of law. Success is not just about winning cases, it’s also turning a profit, earning a living and dealing with budgets, revenues and costs. We see many lawyers not thriving financially, not because they are bad lawyers but because they are poor at running a business.

In order to succeed lawyers should be smart and set S.M.A.R.T. goals. This means that goals should fit the following characteristics:

Specific: General goals are hard to work toward and achieve in any tangible way. For example, if the goal is “to network more,” what does that even mean? It’s too vague. A specific goal would be to join a networking group and attend events twice a week.

Measurable: There must be concrete criteria for evaluating progress. Making three new contacts a month would be a way to quantify success. At the end of a month, you can ask yourself “did I make three contacts this month?” and if you did, you’ve achieved your goal!

Attainable: If you just wander the streets blindly without a plan or never actually leave your office because you’re swamped with work, there’s no way for you to actually network with three new people every month. It’s nearly impossible! Make sure your goal is something that you’re both willing and able to work for within the constraints of your job, relationships and other responsibilities. Also, don’t be afraid to aim high, but keep your goals realistic. It’s reasonable to expect to make three new contacts in a month, but aiming for 20 might not work.

Relevant: How does your goal drive your business or firm forward? What are you trying to accomplish? Your goal should contribute to the success of your business in some way, otherwise it may not be a good use of time and resources or you may not be motivated to work for it. By networking at events, you promote your firm, generate leads which may become clients or referral sources and meet people you may want to hire, if the need arises.

Timely: Your goal must be grounded by an actual timeframe. “Someday” is not a deadline, but by May 1, for example works. Deadlines motivate people to take action immediately, while vague end points enable people to stretch even the simplest tasks out indefinitely. Being successful means actually getting stuff done.

We wish everyone the best for the rest of 2015 and encourage S.M.A.R.T. business!

The Affordable Care Act and its Impact on Settlements

December 19, 2014 by Brian Schachter Leave a Comment

It’s a crazy world and people get hurt constantly. Car accidents, assaults and other catastrophes hurt people physically and emotionally but they don’t have to hurt financially on top of everything else.. The Affordable Care Act has removed lifetime limits on benefits and makes it illegal to deny people based on a pre-existing condition, like disabilities. As such, we are advising our colleagues and other lawyers to brush up on some of the specifics, especially now since the current enrollment period ends in February, and how the Act may impact their clients.

For example, our client Mr. Williams was a promising high school football player until his football career came to a devastating halt when he was shot nine times in his right leg. His 13-year-old sister called to tell him that a group of men were harassing her so he came to protect her. The men dispersed but one of the assailants shot Williams as he turned into a hallway in his building. He lost 40 lbs of blood, but he survived the encounter.

Williams woke up in the hospital 11 days later, happy to be alive but distraught by the realization that his leg was amputated and he would never walk again, much less play football. He was paralyzed from the waist down and spent several months in the hospital recuperating and receiving physical therapy.

In 2007, he was enrolled in New York State Medicaid, a “needs based” program that insures anyone below a certain income and asset threshold. However, his seven-figure settlement from his assault would have disqualified him from Medicaid, so we would have had to create a Special Needs Trust to oversee the funds. A Special Needs Trust allows a personal injury victim to receive a settlement without losing out on public benefits. The settlement money can also be used to pay for things that Medicaid does not cover, like extra therapy or rehabilitation.

Using the Affordable Care Act exchange, we were able to enroll Mr. Williams in a private plan health insurance plan from United Healthcare with no deductible, which provided for better health care and means that Williams no longer needs the Special Needs Trust which had a number of drawbacks in addition to adding an extra barrier to his money.

Federal law mandates that after the death of the beneficiary, any funds remaining in the trust must be used to repay Medicaid for all costs incurred while the trust was active. After Medicaid is reimbursed, the remaining funds can be passed on to the family of the beneficiary. Private insurance does not have this stipulation so the entirety of the settlement can go to the beneficiary’s family in the event of his or her death.

At ESS we help our clients assess their needs and figure out how to best deal with their situation. Many people are often caught between a rock and a hard place when it comes to dealing with settlements and insurance. We help our clients figure out how to receive the care they need to sustain them while at the same time be able to support their financial needs.

How else has the Affordable Care Act affected your clients? Are there other significant implications of the Act on settlements that you are aware of? Please share your thoughts with us.

How to Use an MSA to Maximize Case Value

September 12, 2014 by Brian Schachter Leave a Comment

By now, you’ve surely tried navigating the perilous waters of the Medicare Secondary Payer Act (MSP) as it pertains to protecting Medicare’s future interests vis-à-vis a Medicare Set Aside (MSA). You’ve surely heard arguments on both sides of the issue of ‘Do You Or Don’t You Need An MSA On A Liability Case’.

What we do know (and what YOU should know) for sure is that Medicare is secondary to all insurance including no fault and liability insurance, and that payment “may not be made under Medicare for covered items or services to the extent that payment has been made or can reasonably expected to be made under a liability insurance policy plan” (MSA= 42 U.S.C. sec 1395y(b)(5))

For liability cases involving future medicals, The Centers For Medicare & Medicaid Services (CMS) has issued very little guidance other than the requirement that the parties reasonably take Medicare’s interest into account. Forgetting for the sake of this discussion whether an MSA is the required means to take Medicare’s future interests into account, or even whether it is the best or preferred means of doing so, I think most anyone would agree that it is at least one way of achieving this requirement. [Read more…]

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