Attorneys liable for client’s medical bills

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“An attorney should not assume that he or she can ignore an assignment that he or she has agreed to honor simply because a client changes his or her mind about the assignment.” Hon. Daniel P. Anderson Wisconsin Court of Appeals

An attorney who signs a “letter of protection” to a medical provider, stating that payment will be made when a case is settled or judgment is obtained, is jointly and severally liable for the bill, the Wisconsin Court of Appeals held on March 17.

On July 15, 1997, Eric J. Krieg was involved in a work-related automobile accident. He retained Warshafsky, Rotter, Tarnoff, Reinhardt & Bloch, S.C., to represent him in his personal injury claim.

Paul D. Riegleman, D.C., provided chiropractic treatment to Krieg for approximately three years after his accident, and the total treatment bill exceeded $19,000. On March 7, 2000, the second to last day Krieg received treatment from Riegleman, Krieg signed a letter of protection.

The letter provides in relevant part, “I do hereby authorize the above doctor to furnish you, my attorney, with a full report of his case history, examination, diagnosis, treatment, and prognosis of myself in regard to the accident in which I was involved in. … I hereby give a lien to said doctor on any settlement, judgment, or verdict as a result of said accident, and authorize and direct you, my attorney, to pay directly to said doctor such sums as may be due and owing him for service rendered me, and to withhold such sums from such settlement, judgment, or verdict as may be necessary to protect said doctor adequately.”

Krieg’s attorney, Victor C. Harding, also signed the document, underneath a passage that read, “The undersigned, being attorney of record for the above patient does hereby acknowledge receipt of the above lien, and does agree to honor the same to protect adequately said above named doctor.”

In October 2001, Krieg’s personal injury case settled in mediation, pursuant to which the insurance company only reimbursed Riegleman for $13,210, denying payment of $5,641 that was perceived to have been incurred after Krieg’s healing date.

The balance of the settlement was deposited into the Warshafsky firm’s trust account. Krieg refused to release the balance to Riegleman, and directed Harding to pay the money directly to him.

The Warshafsky firm notified Riegle-man that Krieg’s case had settled and that based on the evidence, the firm was not obligated to pay the balance. The notification informed Riegleman that it would hold the money for 30 days for Riegleman to take action to recover the money.

Over the next 10 weeks, counsel for Riegleman and the Warshafsky firm engaged in negotiations, during which the Warshafsky firm gave Riegleman several deadlines to “start the appropriate legal action to protect his lien.”

No legal action had been taken by Jan. 31, 2002, and on that date, the Warshafsky law firm disbursed the funds held in trust to Krieg. On Feb. 8, 2002, Riegleman filed an action against Krieg and the Warshafsky law firm.

After a trial, during which two chiropractors testified the care was reasonable, and a doctor testified it was excessive, Washington County Circuit Court Judge David C. Resheshke held that Krieg and the Warshafsky firm were jointly and severally liable for $5,000 (the maximum, because the suit was filed as a small claims action).

Krieg and the Warshafsky firm appealed, but the court of appeals affirm-ed in a decision by Judge Daniel P. Anderson.

Reasonable Bills

The court first held that the circuit court did not err in finding the medical expenses reasonable and necessary. The court stated, “The court balanced the testimony of two chiropractors against the report of an orthopedic doctor and concluded that the chiropractors’ testimonies were more credible. We are obligated to give due regard to the trial court’s ability to judge the credibility of the witnesses and weigh it against other evidence. See Wis. Stat. § 805.17(2). In so doing, we cannot say that the trial court’s determination upon this record is clearly erroneous.”

Protection Letter

The court then held that the “letter of protection” that both Krieg and Harding signed is a valid contract, conveying an assignment of rights.

Because no published Wisconsin case has previously considered the validity of letters of protection, the court looked to cases from New Jersey and New Mexico for guidance.

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Adopting the reasoning of those cases, the court concluded as follows: “the document before us is an unambiguous contract creating an assignment that is enforceable under contract law. It shows in clear language its intent: Krieg authorized ‘my attorney, to pay directly to said doctor such sums as may be due and owing him for service rendered me, and to withhold such sums from such settlement, judgment, or verdict as may be necessary to protect said doctor adequately’; the Warshafsky law firm agreed ‘to honor the (lien) to protect adequately said above named doctor.’ The document also communicates that Krieg and the Warshafsky law firm received consideration for entering into the agreement because Riegleman agreed to furnish medical records and a report regarding the case, which could be used in pursuing the claim; in addition, Riegleman agreed to provide continued treatment to Krieg, with the expectation that his bills would be paid at a later date.”

The court then placed the burden of commencing a declaratory judgment action to determine the reasonableness of the bill squarely on the attorney, rather than the medical provider.

The court instructed, “If an attorney and client have signed an assignment in favor of a medical provider and a dispute arises over whether the amount owing is reasonable and necessary, and if the attorney does not want to hold funds indefinitely, he or she should bring an action for declaratory judgment pursuant to Wis. Stat. sec. 806.04 and seek guidance from the court as to who is entitled to the disputed funds.”

The court added the following caveat, as well: “An attorney should not assume that he or she can ignore an assignment that he or she has agreed to honor simply because a client changes his or her mind about the assignment — to make such an assumption is contrary to rules of professional conduct, which require that disputed funds be held in trust ‘until the dispute is resolved.’”

Accordingly, the court affirmed that the Warshafsky firm was jointly and severally liable for the $5,000 judgment.

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David Ziemer can be reached by email.