What Do I Actually Keep? A New York Injury Settlement, Line by Line

The number in your settlement agreement is not the number on your check. Nobody is hiding this from you, but few people explain it before the day the money arrives, which is the worst possible time to learn it. Here is the arithmetic, in the order it happens, using a $100,000 settlement as the example.

First, the legal fee

Court rules cap contingency fees in New York injury cases. Your lawyer may use the sliding scale in the rules, or a flat rate of up to 33⅓ percent if you chose that option in the retainer, under 22 NYCRR 603.25 in Manhattan and the Bronx and 22 NYCRR 691.20 in Brooklyn, Queens and Staten Island. Medical malpractice follows a separate, lower schedule under Judiciary Law 474-a, starting at 30 percent of the first $250,000.

The detail that actually moves money is whether the percentage is calculated on the gross recovery or on the recovery after case expenses come off. The rules require the retainer to say which method applies. On a $100,000 settlement with $4,000 of expenses, the net method produces a fee of $32,000 and the gross method produces $33,333. Same headline percentage, $1,333 of difference.

Then the disbursements

Disbursements are the costs of building the case: court filing fees, deposition transcripts, medical record charges, expert reports, investigators, process servers. Most firms advance them and get repaid from the recovery. The New York City Bar notes that the client generally remains responsible for these expenses, and that the retainer governs what happens if there is no recovery at all. Ask that question before you sign, not after.

Then the liens

This is the part that surprises people. Whoever paid for your medical care usually has a right to be repaid out of your settlement.

Medicare. If Medicare covered accident-related treatment, those are conditional payments that must be repaid. The Benefits Coordination & Recovery Center issues a conditional payment letter and then a formal demand, and the money comes out of your settlement, as CMS explains. Medicare reduces its demand to account for what you spent obtaining the recovery, in proportion to your attorney fees and costs, under 42 CFR 411.37. In our example, a $12,000 conditional payment shrinks to roughly $7,500 after that offset.

Medicaid. A public welfare official may assert a lien for assistance furnished, up to the amount actually paid, under Social Services Law 104-b. That lien is subordinate to your attorney's lien.

Hospitals. A charitable or municipal hospital may file a lien for treating injuries from someone else's tort under Lien Law 189. It also ranks behind the attorney's lien, and it does not attach to workers' compensation recoveries.

Workers' compensation. If you were hurt on the job and also sued a third party, the compensation carrier has a lien on that recovery under Workers' Compensation Law 29, reduced by an equitable share of the fees and costs you spent to get it. You also need the carrier's written consent, or a court order, before settling.

No-fault. In a car case, the first $50,000 of medical bills and lost earnings is basic economic loss paid by no-fault regardless of fault, under Insurance Law 5102(a). You cannot recover those same dollars again from the driver who hit you, so the settlement covers what no-fault did not.

The document you are entitled to

When your lawyer receives settlement money, the rules require a closing statement filed with the Office of Court Administration and served on you, itemizing the gross recovery, the fee, the disbursements and the liens. Read it against your retainer. If a line is unclear, ask, because that statement is the accounting of your own case.

Run our example all the way down: $100,000 gross, a $33,333 fee, $4,000 in disbursements, about $7,500 to Medicare, and roughly $55,000 left. That is a real result, not a bad one. It is simply not $100,000, and you should hear that from your lawyer at the start rather than at the end.

When you compare firms, compare how they answer this question. A lawyer who negotiates liens aggressively and keeps disbursements disciplined can put more in your pocket than one percentage point of fee ever will.

Our firm rankings let you compare New York firms by published case results. Ask any firm you consider to explain its fees, expenses and approach to liens before you sign.

This article is general information about New York law, not legal advice for your situation.

Sources: 22 NYCRR 603.25 · 22 NYCRR 691.20 · Judiciary Law 474-a · NYC Bar, Contingency Fees · CMS, Medicare's Recovery Process · 42 CFR 411.37 · Social Services Law 104-b · Lien Law 189 · Workers' Compensation Law 29 · Insurance Law 5102