Protected accounts - the deferred until settlement payment arrangements offered by treatment and assessment providers - has long been an accepted cost of doing business in personal injury litigation. However, "over time the issue got away from itself," says Amanda Bafaro, Chief Risk Officer & General Counsel at BridgePoint Financial Services, and "the volume of cases where service providers must wait many years until settlement has become financially unbearable for many of them".
"Protected account arrangements have always been the go-to for lawyers where insurance benefits are denied or unavailable since most claimants don't have the funds themselves to cover their treatment costs independently" says Bafaro. Similarly, plaintiffs' counsel often negotiated deferred payment terms with experts to defray the heavy disbursement burden they are required to carry in their contingency fee-based practices. But the market has been disrupted. "Service providers could afford to wait for payment on 5% or 10% of their work, so long as there was steady cashflow coming in for the balance. However, that's no longer the case as they're now expected to carry protected accounts for 20% to 30% or more of their work as a condition of getting business from law firm clients".
Several factors in the personal injury market are contributing to the problem and exacerbating the issue for service providers, including court delays coupled with the increasing tendency of insurers to take claims much closer to trial before settling. This has resulted in a rapid increase in the proportion of protected account work required of service providers and the resulting financial strain many are facing.
The situation has left a growing number of service providers pushing back against the status quo in a fight for survival. Most simply can't afford to wait for payment given the cashflow challenges they are experiencing. "Treatment and assessment providers incur the same immediate staffing and overhead expenses as any other business" notes Bafaro, "and those expenses can't be paid with protected accounts. Something's got to give."
Savvy law firms are recognizing the liquidity crisis their service providers are facing, and the need for a solution that's mutually beneficial.
"If deferred accounts are a growing problem for experts and treatment providers, they are also a problem for the law firms who depend on them." Bafaro says. "Lawyers must be sensitive to the situation and look for solutions to assist their supporting service providers. You can only leverage the market for free financing so much before it has to push back to survive and we're pretty much at that point in the cycle. How many businesses out there could afford to wait years for payment?
BridgePoint's Expert Access is one such solution, combining the ability for lawyers to source expert witnesses from anywhere in Canada for medical legal assessments with the ability to defer payment for their reports until settlement with no interest (for the first two years). BridgePoint's proprietary Portal is a sophisticated online platform lawyers can use to connect with and browse the profiles, CVs and sample reports of hundreds of candidate experts across all specialties and regions in Canada.
Essentially the portal provides additional tools to help law firms build their case, allowing users to mine the service for expert referrals that best suit their needs without the expense up front.
"If law firms are strategic about when they retain their experts relative to mediation and the anticipated settlement, they should rarely if ever incur any interest which only commences in the third year from the invoice date of the report," Bafaro notes. "And if not, there's still a tremendous cashflow benefit to the firm and the client as they've deferred payment for a full two years. Meanwhile, the expert is equally happy to have avoided carrying the protected account - a win, win."
While treatment providers face a different dilemma than expert witnesses - tied to the availability of insurance benefits - BridgePoint also offers strategic funding alternatives that avoid those service providers having to hold protected accounts.
"Right now, the arrangement is weighted in favour of the law firms at the experts' expense and that's no longer a sustainable practice in this environment," says Bafaro. "It's better long term for all parties if law firms embrace a more equal model. BridgePoint's Expert Access balances all interests and protects those necessary relationships."
Originally Published by Canadian Lawyer Magazine
Originally published August 31, 2022
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