What is LOP in Legal Definition?
"LOP" is an acronym for the phrase "letter of protection." It is a term commonly used in the legal field, particularly in injury related claims where a lawyer represents a victim with an insurance company. The victim will get medical treatment from the hospital or doctors, and the lawyer will send a letter of protection to the provider with the promise that when there’s a settlement of the claim pending and the case resolves, the provider will get paid out of that settlement. In other words, the provider agrees to defer the payments and the lawyer agrees to satisfy them once there’s a case settled and money to disburse to all parties.
In Georgia, the Civil Practice Act allows lawyers to use letters of protection. The statute has been on the books since 1976 and comes from the more general allowance in the Georgia Constitution for contract generally as well as the statutory powers allowing the execution of a valid assignment. A letter of protection requires that there be a valid contract between the lawyer and the client, usually in the form of a written contingent fee agreement. Lawyers have a legal duty to honor the contracts they enter into, and the letters of protection are simply a form of contractual consideration of an assignment for a future payment.
As such, a letter of protection is a common request made by a lawyer representing a client with an injury claim. You will commonly see them used in personal injury claims, and much more rarely in professional liability or property damage claims. Letters of protection are not a common request made by lawyers who are not representing clients and simply trying to recover money that’s owed.
If you are dealing with a lawsuit or other collection matter, then it’s only natural that you would see a letter of protection come up. However, if you’re just involved in a dispute about something that doesn’t involve a contingent fee lawyer, then it’s unusual for you to be seeing any letters of protection at all.
Specifically, in the context of Georgia’s medical payment statutes, "LOP" is used to describe how a letter of protection to a hospital or other provider is a contractual promise by the lawyer representing an injured person to make sure that those medical bills get paid out of a settlement or judgment from the case . Since the 1970s, the legislature and the courts of the state of Georgia have recognized the validity of a lawyer’s promise to make sure medical bills are paid out of a settlement or judgment. This is an area of contract law intersecting with the constitutional right of contract to recognize the validity of assignments by a future promise to pay to secure an existing debt.
You can find the Georgia statutorily enacted letters of protection codified at O.C.G.A. § 10-6-1.
The format or form of a letter of protection varies by lawyer or firm, but in general the following provisions are prudent to include:
CLAIM NUMBER: _________
DATE OF ACCIDENT: _______________
DATE OF THIS LOP: ______________
THIS LETTER OF PROTECTION (LOP) CONFIRMS OUR UNDERSTANDING THAT:
You are the attorney for ____________________________.
The above-referenced Family Member is being treated and has incurred unreimbursed bills.
The above-referenced Family Member has asked you to intervene on this matter and has assigned to you, and you have accepted, the authority to execute a Letter of Protection, pledging any and all settlement proceeds in the above-referenced matter as security for the payment of the above-referenced medical bills.
This LOP extends to both wrongful death and Injury Liability Coverage of the above-referenced motor vehicle / trucking insurance carrier.
You, ___________________________, agree to honor our LOP upon receipt of our directive to your office to pay any outstanding medical bills.
You agree to provide us with an itemization and copies of any associated bills.
This letter should be honored for the above-referenced persons, as well as for any person(s) who reside in their household or who do hereinafter reside on their household.
We look forward to hearing from you to arrange a disposition of this matter.
PLEASE MAKE PAYABLE TO: _____________________________
Your Prompt Attention Is Appreciated.
Signed: ______________________________
Attorney for Accidental Injury Claim
The Use of Letter of Protection
A letter of protection, or ‘LOP’, is an agreement between a law firm and the medical provider that states the medical provider agrees to hold off on collection procedures while the matter is pending litigation or settled. An LOP can help provide a plaintiff access to appropriate health care. It also helps medical providers obtain involved in the litigation process with the plaintiff’s lawyers paying the medical bills directly. When the LOP is signed, medical providers agree to write off their balance into the settlement proceeds. By doing so, medical providers are not forced to collect on the bills while the matter is still pending. This can benefit the plaintiff by allowing them to receive the treatment necessary for their recovery. Also, many medical facilities no longer take insurance but will accept an LOP as payment in full. Though beneficial for both the health care provider and the injured party, a letter of protection does not absolve the plaintiff from seeking recovery from other liable parties and insurance companies. An injured party may still engage in other efforts to recoup the costs of their medical care through litigation or settlement. It may be used as an additional recovery method should other avenues fail. The plaintiffs’ attorneys are responsible for exchanging information with the medical provider, such as sending a portion of the settlement, or the full amount owed depending on the circumstances. As part of that process, attorneys will typically negotiate self-achieved lien amounts to get a final lien amount to release incoming funds. In addition to providing access to necessary medical care, letters of protection can streamline the settlement process. When a plaintiff reaches a settlement or judgment in their favor, they can send the newly acquired LOP to the medical provider for payment in full. This eliminates the need for time-consuming negotiations over treatment costs down the road. While LOPs are not considered direct legal fees, those issued by a law firm as part of litigation allow personal injury lawyers to obtain necessary medical care for their clients. A plan is in place to allow for the return of services at a previously agreed-upon price once the client receives a lump sum payment.
How Does LOP Work in Legal Terms?
Issuing an LOP is a process where an interested party files a petition under Idaho Code 55-1305, requiring an interested party to file a petition with the Court, with notice issued to those who are material partied. Once the petition is filed, notice must be published for a period of time prescribed by the Court before the issuing of a LOP to the Landowner is final. Again, this process is one that is almost exclusively limited by Idaho Code 55-1301 et. seq. Idaho Code 55-1306 specifically notes situations when a petitioner may request a LOP. In all cases of transfer of real property or any estate or interest therein where there has not been a determination of record of the same company or companies as that company or companies whose record title appears upon the abstract, a certificate in the form hereinafter described, shall be obtained upon applications for a "letter of possession" in accordance with the provisions of section 55-1305, Idaho Code. There is a requirement that the application for a letter of possession be received by the company at least 30 days before the date of the issuance of the letter. The procedure for the issuance of a letter of possession is the same as that stated above in "Successor Affidavit." In order to issue a letter of possession, the company must receive: (1) the 30-day notice and an application for "letter of possession" giving the specific date the "letter of possession" is to be effective, and (2) a copy of the conveyance in which the applicant asserts a legal claim to the property described in the application for "letter of possession upon which the deed, mortgage, encumbrance or other instrument of writing offered for record does not expressly or necessarily extinguish the prior company’s rights." In Idaho, the statute that applies when filing for a LOP is specific as it permits any of the following: (a) The owner of record of any estate or interest in land other than the company; (b) The owner of a deed, mortgage, encumbrance, or other instrument of writing which conveys or reserves any title or interest in real property; (c) Any successor company to the company owning an estate or interest in land prior to a conveyance, which company’s record title appears in the same or prior chain of title; (d) The owner of record of a company having an estate or interest in land; (e) Any person claiming an estate or interest in land from, through, or under the company, who, prior to a conveyance of land, desires to obtain a "letter of possession" for the protection of his interest in the land so conveyed. Idaho Code 55-1306. If a LOP is issued, the LOP shall be filed not only in the office of the recorder of the county where the property is situated but also "in the office of the secretary of state and in the office of the secretary of state and likewise shall be indexed in the name of the company and in the names under which the company’s record title appears in the abstract.
Pros and Cons of LOP Agreements
Benefits and Risks of Taking a Letter of Protection from Medical Providers and Patients
Like any other contract, a LOP is a negotiating tool that can further the interests of those in the business of providing health care, thereby making it advantageous to their bottom line. While a LOP may provide a patient with access to health care, it may also create a liability. Furthermore, a LOP can be a device for transferring liability from some insurers onto a different source, such as a liability or uninsured motorist insurer. Beneficially, an LOP protects a patient from having the medical provider bill an insurer directly in order to receive payment. The LOP allows a provider to avoid lower rates negotiated with insurers and to keep its price for services at retail price. On the downside, a LOP is not insurance — the patient is responsible for payment in accordance with the LOP’s contractual terms. When the LOP is made part of a verdict, the provider may be receiving payment on a secured basis. If the verdict goes up on appeal, the patient may have to repay the LOP amount from the verdict first, before receiving his or her share. Further, if the case goes to verdict with a lesser amount awarded than that owed under the LOP, the medical provider will still look to the patient for the difference. Worse yet, the provider may sell the debt to a collection agency that can pursue a cause of action against the patient. A LOP also ties up the right of the provider to file suit directly against the insurer. For example, if a medical provider has a direct contract with a liability insurer, the provider’s LOP with the patient stops the provider from pursuing its own cause of action against the insurer, as well as any possible bad faith claim. Because LOP’s are often structured such that the patient agrees to indemnify the provider as to any liability incurred by the provider due to any recovery by the insured individually, a reduction of the verdict may not relieve the patient of the responsibility to pay the full amount provided for by the LOP. Although a LOP may also benefit a patient by allowing him or her to defer payment for services and have a claim presented in tort litigation, there are instances when it is not in the patient’s best interest to enter into such an agreement. If a patient is in need of immediate treatment, but the health insurer denies the existence of coverage, a LOP can defer payment until trial. However, if a LOP is entered, the patient may lose his or her right to challenge the carrier’s coverage position in a declaratory judgment action. Similarly, if a patient does not have insurance coverage and lacks the funds to pay for emergency treatment, the emergency room physician will often demand that the patient enter into a LOP prior to treatment. Then, when the patient gets better, the physician can sue the patient who must, due to the LOP, either settle the case or go to trial. Alternatively, if the patient is sued, the physician can intervene to collect on the LOP.
Misconceptions About LOP Agreements
A. A common misconception is that LOPs place an enormous risk on the plaintiff. The opposite is often true. LOPs require a plaintiff to use attorneys who will work on a contingent basis, often because they have been injured in an accident and may no longer be able to work, to work with these letters. Attorneys won’t want to be left with a piece of paper that cannot be collected upon. This protects plaintiffs.
B. There are a lot of myths associated with medical providers. Often they will argue that there owns are superior to those of other physicians. This is false. All doctors and hospitals must have a lien. This is just a way for the state to keep track of who gets paid first, and has nothing to do with the level of protection.
C. Often people will tell you that they owe 2.5 times what the services are worth. This is false. The law governs this and you will only owe the medical providers what the fair and reasonable cost of similar , customary services.
D. Medical practice acts have no application to letters of protection. The rights established in case law are far clearer and override statutes that might suggest otherwise.
E. Do not believe insurance adjusters who tell you that you owe them money. They are not the one’s to decide this, and the insurance company will often keep striking the letter of protection from the record and then refusing to pay providers until a lawsuit is actually filed, so getting an LOP with an insurance company rarely creates a better outcome.
F. The belief that you can orally assign the money like other contracts is false. There may be some cases where this has been done, but in order to have the protection of the law, the contract must be signed.
LOP Cases: Examples of Use
Case 1: Motor Vehicle Collisions (MVC)
In this case, the plaintiff sought treatment from a chiropractor for her spinal and neck pain that was caused by an MVC. Plaintiff was not represented by an attorney until the 3rd party tort defendant’s insurance company denied liability. Despite 12 months post accident treatment and a referral to an orthopedic surgeon for an MRI, plaintiff was never told by her chiropractor that there are missing components with her treatment including a LOP.
The plaintiff subsequently retained counsel to pursue her claim against the third party. Before the plaintiff signed an LOP for her additional treatment with the orthopedic surgeon, the defense counsel sent a letter to plaintiff’s counsel inquiring as to the "medical necessity" of the additional treatment and the "future medical treatment" that was being recommended by the orthopedic surgeon.
Defense counsel cited their concern that future treatment would only be offered if plaintiff agreed to "pay those bills out of the proceeds of any settlement." Because the plaintiff did not have an LOP, she was unable to receive treatment that was recommended by her orthopedic surgeon.
Unfortunately, after 12 months of treatment, plaintiff continued to have neck pain, migraines, and upper extremity radiating symptoms. At the recommendation of the orthopedic surgeon, plaintiff underwent an MRI which ultimately resulted in a C4-5 and C5-6 herniation.
If the plaintiff had been given the opportunity to sign a LOP when she was seeing her chiropractor, the matter could have had a much better outlook.
Case 2: Workers’ Compensation Case
In another case involving a worker’s compensation situation, a temporary employee injured her neck while at work. Following the accident, the plaintiff began treatment with a local chiropractor. After confirming that the plaintiff’s attorney was handling the workers’ compensation claim, the attorney spoke with the chiropractor’s office to see if they would be agreeable to setting up an LOP for the plaintiff so that she could also receive treatment with an orthopedic surgeon. The chiropractic office told the plaintiff and her attorney that they do not do LOPs, and that the chiropractor only treats personal injury matters when a LOP is in place with plaintiff’s attorney.
The chiropractor indicated that, without a LOP in place, they are "afraid we will never get paid for our services on the PI claim".
The plaintiff continued to treat with the chiropractor, even obtaining an MRI at the insurance company’s request. However, once again many of the issues with the plaintiffs pain and discomfort could have been avoided if she had access to LOPs.
In this case, the plaintiff was trying to pursue both the workers’ comp claim and a third-party claim against the alleged tort-feasor. In Iowa, the plaintiff has up to four years to file a third-party negligence action against a tort-feaor. Unfortunately, the plaintiff in this case did not have access to LOPs to treat her pain and discomfort that she should have been able to receive. However, without LOPs in place, the plaintiff was forced to continue to go to the chiropractor, and did not receive the recommended orthopedic treatment.
Given the fourth year deadline to file a third-party negligence action in Iowa, the plaintiff may not have enough time to allow for the treatment to take place before filing against the tort-feasor.
Conclusion: LOPs and Legal Strategy
It is typical for a claimant to have no idea that they have to deal with a LOP, or that it even exists as a part of a case. It is important to be aware and understanding of how a lien impacts any potential settlement recovery, before a settlement agreement is reached. The duty often falls on the claimant to do their own research regarding a LOP.
Once a potential settlement has been discussed, but prior to finalizing any settlement terms, it is open for discussion with the insurer whether a reduction in settlement terms can be made by the claimant if they pay the outstanding medical bills from their own pocket. As mentioned earlier, there are no hard and fast rules and each case may have unique facts that require different considerations .
In the event that a claimant declines to pay the outstanding medical bills, due to them being inflated by the medical provider, if a lien is placed against the settlement recovery, some LOP agreements are created only after the responsible party agrees in writing to honor the lien.
It is important to be cognizant of the facts and the corresponding LOPs associated with a case, and to make sure that all parties can agree in writing to the proper steps needed to complete the task. Unwritten and verbal agreements can be misleading (and often are). Therefore, having everything agreed to and signed by the involved parties is extremely important.