One of the most important questions a defense attorney can do at a deposition is to detect liens against compensation.
Liens against compensation are one of the key things workers’ compensation practitioners should be wary of when settling a case, and often, the parties can get ahead of that by asking about them at an applicant’s deposition.
By “lien against compensation,” this means that when the injured worker gets an award or a settlement, the lien holder is entitled to a part of that settlement or award. Liens against compensation can include:
- Employment Development Department (EDD)
- Child Support Services (CSS)
- Alimony
- Loans to the applicant against their workers’ compensation recovery
- Prior applicant’s attorney fee liens (liens filed by a prior applicant’s attorney)
- Some group health liens
The way one negotiates and resolves of these liens varies quite differently. But one can’t resolve a lien against compensation that one is unaware of.
Sometimes asking about these types of liens at depositions gets a little awkward – I noticed an applicant with two adult children smirk when I asked her if she owes any child support or alimony, despite having confirmed that a) her kids are adults and b) that she’s only been married to two people in her life. That being said – if I don’t ask, she could have an ancient child support lien that I am unaware of.
As far as the undersigned is concerned, my role is to sniff out these liens and determine the merits of them, even if it means asking a few extra questions that make me appear to be naïve.
On rare occasions, I will learn about a loan that was made to the applicant. About 8-10 years ago, there would be the occasional lien from a financial institution with a predatory interest rate. If I recall correctly, the applicant received about $4,000-$5,000 but the lien was worth two to three times that due to the unusually-high interest rate.
Having covered predatory lenders early in my journalism career, it’s safe to say that your humble blogger is not a fan of this practice.
On rare occasions, we find applicant’s attorneys who loaned money to applicants. If they are charging interest, then one could argue that puts a conflict of interest between the applicant’s attorney and the applicant, because the applicant’s attorney is literally making money off of the applicant, simply with the passage of time. This could be considered predatory.
Generally speaking, if the loan is near the value of the case, then even an interest-free loan could create a conflict of interest because that could influence the applicant’s attorney’s approach to resolution. In that scenario, it’s plausible that there could be a settlement offer that would benefit the applicant that might not benefit the applicant’s attorney, depending on the circumstances of the loan.
Fortunately, there is a deterrent to that practice that most applicants’ attorneys are all-too-aware of – and that is the threat of a malpractice lawsuit. Wise applicant’s attorneys already take countermeasures to ensure their applicant clients are on board with tentative settlement agreements, which in the long run can deter malpractice litigation. It follows that wise applicants’ attorneys are fully aware that evidence of a predatory loan against compensation could look really bad in malpractice litigation.
Not all applicant’s attorney loans to applicants are predatory – your humble blogger has seen some that were simply an interest-free advance to an applicant who was related to their attorney.
This was presumably a family-friendly way to help out an applicant through a tough time, and it served its purpose. It didn’t impact settlement negotiations either.
WHAT TO DO
When a defense attorney does find a lien against compensation, it’s most important to figure out how much the lien holder wants from a tentative settlement, and to negotiate a resolution on how the lien will be discharged before signing off on any settlement documents. Why is this? Because that lien holder could be legally-entitled to take a chunk out of that settlement.
So contact the lien holder, and discuss with the applicant’s attorney, and figure out how that lien is going to be resolved with the settlement agreement. Sometimes the applicant’s attorney may have better standing than the defense attorney to argue with the lien holder – so if that’s the case, we defense attorneys can help expedite things by connecting the applicant’s attorney with the lien holder.
QUOTES
Over the years, a few folks have shared their wisdom with your humble blogger about liens against compensation.
One defense attorney told me the following about child support liens, “Always make sure those kids get their money.” And it’s true – it feels good to help resolve a child support lien, because you are literally putting food on the table of some kids who probably need it.
A longtime applicant’s attorney also had a memorable quote about EDD, and would tell whoever that would listen, “It’s YOUR money. It’s not EDD’s money. YOU paid for that with your payroll taxes and deductions.” He had no hesitation about negotiating EDD liens, because he felt strongly about that money (mostly) coming from the applicant. (Note: Employers also pay taxes that go to EDD.)
CONCLUSION
When at a deposition, ask about those liens against compensation to prevent complicated settlement proceedings later on. Ask who has loaned the applicant money, if they are receiving checks in the mail, and if there are any outstanding child support or alimony bills. You’ll be much happier that you did!
Got a question about workers’ compensation defense issues? Feel free to contact John P. Kamin. Mr. Kamin is a workers’ compensation defense attorney and partner at Bradford & Barthel’s Woodland Hills location, where he monitors the recent legislative affairs as the firm’s Director of the Editorial Board. Mr. Kamin previously worked as a journalist for WorkCompCentral, where he reported on work-related injuries in all 50 states. Please feel free to contact John at jkamin@bradfordbarthel.com or at (818) 654-0411.
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