The Advocate, the Journal of the Nevada Trial Lawyer’s Assoc., October 2007 issue.

Back in the late 90’s, the state of the law on ERISA Liens was even more unsettled than it is now, and many employers and insurance companies took the position that the law allowed them to be repaid in full without any discounts. Of course, I and other plaintiffs’ attorneys did not agree with this position. Also, during the 90’s we experienced the rapid growth of various companies that contracted out to employers and insurance companies to do the subrogration work for them. My information is that these companies work on a contingent fee basis, getting a percentage of what they collect.

We were able, on a case-by-case basis, to generally work out lien issues with these various "recovery" companies. Then in the late 90’s some of them got greedy. They decided that if they went directly to the tort feasor or the tort feasor’s insurance company, they could cut the claimant’s attorney out of the loop, collect a bigger amount of money, and thus collect a bigger contingency fee for themselves. They started sending out letters to the tort feasor insurance companies making various threats that they wanted to be paid directly; they would call the tortfeasor adjustors and try to directly "negotiate:" they wrote letters demanding that their name be placed on any settlement checks, etc.

I started to complain to these companies that what they were doing looked a lot to me like the practice of law. They were representing someone on a contingent fee basis, and they were not licensed in the State of Nevada to do so. Their general response to my letters was "go jump in a lake," claiming that they were not practicing law, but were rather "authorized agents" of the

insurer. I said that everyone who tries to practice law without a license claims the old "I’m an authorized agent, not an attorney" bit, but when you start collecting contingent fees for making personal injury damages claims directly against a tort feasor, it’s hard to see how that isn’t the practice of law.

Certain of these companies were so persistent that eventually our office complained about the matter to the State Bar. The State Bar issued a Cease and Desist Order dated February 22, 2000, stating that this was the unauthorized practice of law and that the companies doing it were "hereby put on notice to cease and desist engaging in the above-described activity."

This was seven years ago. Our office made sure that the Cease and Desist Order was widely circulated to the various companies doing these sorts of things, and I also made effort to make sure many plaintiffs’ attorneys had a copy of the Cease and Desist Order, as I included it with some seminar materials I put out at the time. It seemed that after a few months passed, the various "authorized agents" pursuing the subrogation liens got the idea and quit trying the "put my name on the settlement check" scheme. I hadn’t seen it done much, absent the rare case, for several years, until now.

In the last approximately three or so months, I have noticed that this idea seems to be catching on again. At first I got word from an adjuster that they were going to have to put the subrogation company on the check because they had received a threatening letter. Then, in the last two weeks, I have probably received communications from adjusters on four different cases

involving three different of these "recovery" outfits that they, too, have received the threatening "pay me directly or put me on the check" letters.

Obviously, the tort feasor insurance adjuster isn’t going to be all that sympathetic towards your pleas not to put the "recovery agent" name on the check; she is going to tell you to get a letter from the "recovery agent" saying it’s okay to remove their name before she does so. The problem here isn’t that the tort feasor adjustor is concerned by such a letter, they’re not attorneys; the real problem is that the "recovery agent" has no business practicing law without a license and going directly to the tortfeasor/third party.

Interestingly, recently our office called one of these places to try to work things out, and we were put on hold . We waited through some loud clicks on the line. Then the person who answered the phone, who had a heavy accent, turned out to be in India. Trying to talk to this person in India was a complete fiasco.

The February 22, 2000 Cease and Desist Order from the State Bar states in relevant part: "It came to the State Bar’s attention that Health Care Recovery Systems operates debt collection services in Nevada upon subrogation from a third-party creditor, specifically insurance companies. This is often in relation to pending litigation in Nevada. It is the unanimous opinion of the committee...that you are, as a matter of practice, engaging in the practice of law in certain aspects of your business. The specific points identified by the committee and I are discussed below.

"A third party may act as another’s agent in attempting to negotiate an undisputed debt, as is the practice of agencies such as Consumer Credit Counseling Services. A non-Nevada licensed attorney may not represent another in disputed negotiations concerning the debtor’s liability.

"As such, an insurance carrier may subrogate its claim to you only after the third party recovers. You...you may not attempt to collect until after the client’s claim upon which a subrogation is based is settled and the monies remitted. (Emphasis added.)

"You are hereby put on notice to cease and desist engaging in the above-described activity."

In other words, as I understand the Cease and Desist Order, these subrogation places are practicing law without a license if they try to go around counsel, directly to the tort feasor, or insurance company, and negotiate their subrogation liens directly. These subrogation places can only lawfully assert their subrogation lien to you, plaintiff’s counsel, after the case has been settled and the money is in your trust account.

For many years now, our office has been successfully negotiating and handling liens with these subrogation places after the case is settled. They put me on notice of their lien, and in accordance with Nevada Law, I have to make sure that their lien is accounted for one way or the other before I cut up all the money in my trust account.

I don’t know how many of you are old enough to remember, but back in the days when I first started to practice law, there were these people that kept popping up calling themselves "public adjusters." These were former claims adjusters who wanted to switch sides and do plaintiffs’ work on a contingent fee basis. The only problem was that they did not have a license to practice law. They claimed that they weren’t practicing law, but instead were "public adjusters." They stated that the insurance companies had adjusters for their side; why couldn’t the "public" have adjusters for their side? The State Bar had no difficulty in seeing through this ruse, and putting a stop to this practice of law without a license.

In the same way, when some out-of-state (or now, out-of-country) subrogation place, working on a contingent basis (or, as no doubt they now call it, a "bonus" system), goes directly to the tort feasor or the tort feasor’s insurer, or tort feasor’s attorney, and tries to handle its lien that way (by either negotiating directly or trying to get its name put on the check), this is not allowed in the State of Nevada. Maybe they get away with it in other places, but not here.

I know that many people that read this article are going to say "where can I get a copy of that Cease and Desist Order?" I am going to mail a copy of it to the NTLA office, with a request that they post it to their website. If you are a member, you can access the website and download it from there.