The law helps plaintiffs get timely settlement payments from "substandard" insurance companies, the chair of ISBA's Tort Section says.

The General Assembly has sent a bill to the governor's desk that would require defendants in most civil actions to provide plaintiffs with an executed release within 14 days of a written settlement agreement. [Editor's note: Governor Quinn signed the bill into law after the print version of the IBJ went to press. It is now P.A. 98-548 and takes effect next January 1. This article has been updated accordingly. For more, see the ISBA Statehouse Review for the week of August 29.]

The law requires such a defendant to pay all sums due under the settlement agreement to the plaintiff within 30 days of when the defendant tendered its release to the opposing party. If a defendant fails to timely pay the money damages, the plaintiff may obtain a judgment against the defendant in the amount set forth in the executed release, plus costs and interest.

P.A. 98-548 creates a new "Part 23" of the Civil Practice Law in the Illinois Code of Civil Procedure, to be titled "Settlement of claims; payment" (735 ILCS 5/2-2301).

The new procedural law applies to any "personal injury, property damage, wrongful death, or tort action involving a claim for money damages," except that it expressly does not govern cases in which governmental entities and state employees are defendants.

Pursuant to paragraph (a), when the parties agree to a settlement in such cases, an executed release must be tendered to the plaintiff by the settling defendant within 14 days of written confirmation of the settlement, and this "written confirmation" shall include "all communication by written means."

If the underlying litigation is of a nature for which the law requires court approval of settlements, then paragraph (d) requires the plaintiff to obtain such court approval and then provide the defendant with a copy of the court order certifying the settlement.

Pursuant to paragraph (e), if a defendant fails to timely pay all moneys owed within 30 days, the plaintiff may obtain a judgment against the defendant, after a court hearing to establish nonpayment, for the amount set forth in the executed release, "plus costs incurred in obtaining the judgment and interest at the rate specified under Section 2-1303 of this Code."

Eliminating payment 'headaches' for plaintiffs

Chicago-based defense attorney Michael R. Hartigan, a partner with Hartigan & O'Connor who chairs the ISBA Tort Law Section Council, said his section members unanimously supported the bill as a way to simplify procedures in cases that settle.

With only a couple of minor concerns about the law, Hartigan said he expects that it will help eliminate "headaches" that plaintiffs often encounter trying to obtain settlement payments from "substandard" insurance-company defendants, thereby helping streamline the work required to close the file on a case that has settled.

"There's frequently an issue with substandard insurance companies in terms of getting prompt payment when matters have been settled. You often find yourself having to follow up with defense counsel regarding the status of the payment check," Hartigan said. "The [Tort Law] Section Council believes this bill is an attempt to eliminate the need for that follow up."

Hartigan said motions to enforce settlement agreements have historically included prayers for court costs and attorney fees, so he was a little surprised to see that the bill expressly allows only costs and interest to be added to a defendant's liability when it fails to make timely payment under this proposed law.

"A motion to enforce can include attorney fees and, while judges are usually reluctant to issue those kinds of sanctions, the possibility of it still helps move along the process," Hartigan said. "I think the courts will have discretion as to whether to do that if the governor signs the bill."

Don't overlook liens

Hartigan said his only other concern with the bill is with the procedures it sets forth in paragraph (c), which applies to the relevant kinds of cases in which a known third party has a right of recovery or a subrogation interest, including liens by attorneys, healthcare providers and insurance companies.

Pursuant to the rule, in such cases the plaintiff "may" protect the third-party's right of recovery or subrogation interest by tendering to the defendant one of several different kinds of written communications defined in the legislation so as to put the defendant on notice of the third-party claims.

Such documents may include a signed release of a lien held by an attorney or healthcare provider; a letter from the plaintiff's lawyer agreeing to hold the full amount of the settlement funds in a client trust account pending final resolution of the lien; an offer that the defendant hold the full amount claimed by the third party pending resolution on that matter; or several other written promises with how the parties will handle the money properly.

"The number-one issue I think could be a problem is with the liens, particularly Medicare and Medicaid liens," Hartigan said. "A lot of times liens are overlooked by plaintiffs' attorneys. It happens, and cannot be accounted for in this [legislation]."