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Steven J. Bruzonsky

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Gilbert, AZ 85234
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Please note that Attorney Bruzonsky has been doing this regular “Liens Corner” column since April 2006. His last “Liens Corner” article was for the November/December 2017 issue of The Advocate, having stepped down from this regular column, as he now works part-time (and is part-time retired) exclusively handling large subrogation/lien claims in very large personal injury and medical malpractice cases for other attorneys. However, attorney Bruzonsky may add notes to this website under the subject lien article headers from time to time. (Please keep in mind that this site contains general information for educational purposes only. It is not intended to provide legal advise, which can only come from a qualified attorney who is familiair with all the facts and circumstances of your specific case and relevant law.) 

 

 

2008-11: Hold Harmless & Indemnity Provisions

January 17th, 2011 02:36:52 pm


This article has been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, November 2008 issue, @2008 by Steven J. Bruzonsky, Esq.


HOLD HARMLESS & INDEMNITY PROVISIONS


Usually when we settle a personal injury claim, we have our client's authority, and we orally agree with the claims adjuster or defense attorney on the settlement amount, with no discussion of whether any hold harmless & indemnity provision will be inserted into the Release by the insurer or defense attorney. The purpose of a hold harmless and indemnity provision in the Release is to assure the insurer and defendant(s) that plaintiff, through counsel, takes care of all liens, and if the defendant(s) are sued in any manner concerning a lien, that plaintiff will be liable for not only the lien itself but defendant(s)' attorney's fees and costs as well.


If the subject of a hold harmless and indemnity clause isn't even mentioned during the oral settlement agreement, then plaintiff may sue for breach of the settlement agreement if the insurer or defense attorney insist on including such a clause. Though depending on the precise circumstances of the settlement agreement and the Judge, results may perhaps vary.


Ethics Opinion No. 03-05 (August 2003) (an advisory opinion) states that a claimant's attorney may not ethically enter into any settlement agreement that would require the attorney to indemnify or hold the Releasee harmless from any lien claims against the settlement proceeds. Doing so would constitute financial assistance by the attorney to a client by paying, or advancing, the client's medical expenses before or during litigation, in violation of ER 1.8. However, the client may still do this.


I have devised and use certain clauses in my initial letter of representation to the insurance carrier to discuss the subject of the hold harmless and indemnity clause, which, for your use, are set forth below:


LAW OFFICES OF STEVEN J. BRUZONSKY
1152 E. GREENWAY ST., STE. 5 MESA, AZ 85203 480-969-3003
FAX: 480-962-5879


[Date]
Mailed and Faxed to ____________


Re: Our Client:
Your Insured:
Date of Accident:
Claim No.:


Dear ___________:


If your company chooses to include in the Release a hold harmless and indemnity provision regarding liens, then we desire to both clarify that our firm is meeting all ethical requirements of Arizona law and ER 1.15 and also to reasonably protect our client(s)' interests by requiring that the insurer notify our firm and tender negotiation and defense of the lien claim to our firm promptly. To accomplish this we will handwrite the following short paragraph into the Release at settlement, if you include such a provision in the Release (you may want to briefly review the Memo below which discussed in more detail our reasons for this language):


*This applies to all legally valid liens under federal or Arizona law. Attorney agrees to protect such lien interests as required by ER 1.15. The insurer and insured are obligated under this agreement to promptly tender any claim or lawsuit to the Law Offices of Steven J. Bruzonsky to negotiate and litigate as appropriate. This agreement starts only when the above tender is made regarding indemnity/hold harmless obligations.


Thank you for your courtesy and assistance.


Very truly yours,


Steven J. Bruzonsky
cc: client


LAW OFFICES OF STEVEN J. BRUZONSKY
1152 E. GREENWAY ST., STE. 5 MESA, AZ 85203 480-969-3003
FAX: 480-962-5879


MEMO RE HOLD HARMLESS AND INDEMNITY PROVISIONS


Please understand that our firm follows its ethical responsibilities to ensure that all legally valid liens (if any) against a personal injury settlement under Arizona or Federal law are satisfied from settlement proceeds. ER 1.15 requires the attorney to protect a lienholder's interest when the attorney has actual knowledge of a "matured legal or equitable" claim to all or part of the settlement funds and if the attorney has any "good faith doubt as to who is entitled to receive the funds." Ariz. Formal Op. No. 98-06. Please understand that as a plaintiff attorney,


Our firm finds that we are sometimes confronted by bonafide lien claims, but at times we are confronted with situations where a lien is claimed but does not actually constitute a bonafide and valid lien against personal injury settlement proceeds under Arizona or Federal law. A few examples are as follows: .G., An ERISA healthplan claims a lien, but plan documentation doesn't authorize a lien; an ERISA healthplan claims a lien, but the Form 5500 and plan funding documents verify that the plan pays a premium to purchase traditional health insurance, such that Arizona anti-subrogation caselaw clearly applies; a healthcare provider, non-hospital, fails to file any ARS 33-931 statutory lien, has no signed lien, yet attempts to balance bill; and I could tell you so many other situations that we deal with regularly. Also, our firm is concerned to ensure that if by chance the defendant or insurer were contacted or named in a lawsuit by an alleged lienholder, that the defendant or insurer would promptly tender the defense to our firm to handle because our firm would provide representation at no additional charge to our client.


Technically, if our oral settlement discussion and agreement does not mention any hold harmless or indemnity clause as part of the settlement, we could insist that no such clause be included in the Release; we could file a lawsuit, seeking an award of attorney's fees and costs, to enforce the settlement agreement; or we could simply file a lawsuit and litigate this claim seeking its full value as determined by a jury. Please note that if we hadn't settled this claim, but proceeded to litigate it and obtain a judgment, that the judgment wouldn't include any hold harmless and indemnity obligation (it would simply be understood that the plaintiff's attorney is required per ER 1.15 to protect the interests of legally valid liens in distributing settlement proceeds).


However, we are willing to be reasonable and permit a hold harmless and indemnity clause re liens which is not overbroad and meets our above stated concerns. We recommend that insurers utilize a hold harmless and indemnity clause as follows:


The undersigned hereby warrants that out of the proceeds paid herein, the undersigned will satisfy and pay all legally valid liens against a personal injury settlement under Arizona or Federal law. The undersigned will indemnify and hold harmless __________ and ____________ Insurance Company from any and all liability whatsoever, including, but not limited to costs, attorney's fees or judgments which might arise from an unpaid or unsatisfied legally valid lien against a personal injury settlement under Arizona or Federal law which applies to the proceeds paid herein or otherwise resulting from the involvement in the aforesaid incident. Undersigned counsel agrees in accordance with the requirements of ER 1.15 to satisfy all legally valid liens against a personal injury settlement under Arizona or Federal law and to hold sufficient funds in Trust to do so as required by ER 1.15. The insured and insurer are obligated under this agreement to promptly tender any claim or lawsuit served to the Law Offices of Steven J. Bruzonsky to negotiate and litigate as appropriate. This indemnity/hold harmless agreement starts only when the above tender is made.


However, our experience is that insurers tend to use their own hold harmless and indemnity provisions, which sometimes are somewhat overbroad, and which usually don't include a notice provision. Accordingly, our practice is to then add the following language to the Release which covers our above stated concerns:


*This applies to all legally valid liens under federal or Arizona law. Attorney agrees to protect such lien interests as required by ER 1.15. The insurer and insured are obligated under this agreement to promptly tender any claim or lawsuit to the Law Offices of Steven J. Bruzonsky to negotiate and litigate as appropriate. This agreement starts only when the above tender is made regarding indemnity/hold harmless obligations.




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Terms of Use: This site contains general information for educational purposes only. It is not intended to provide legal advise, which can only come from a qualified attorney who is familiar with all the facts and circumstances of your specific case and relevant law. If you use this site, or send information or e-mail the attorney, such action does not create an attorney-client relationship. For legal advise please personally consult with an experienced attorney like Steven J. Bruzonsky.