How you receive settlement funds after the insurance company issues the check (New York)

Short answer: The insurance company will mail or deliver a check made payable to one or more named payees. If your attorney represents you, the check is often made to you and your attorney, or directly to your attorney. Your lawyer should deposit the payment into a client trust (IOLTA) account, pay valid liens and case expenses, deduct the agreed fee, and then send you the net proceeds with a written accounting. If you are a minor or legally incapacitated, a court order may be required before funds can be released.

Detailed answer — step by step under New York practice

1. Who is the check made payable to?

   The insurer chooses the payee(s). Common outcomes:

   • Check payable only to you (the claimant).
   • Check payable to you and your attorney or law firm (a joint check).
   • Check payable only to the attorney or law firm (less common, but it happens when the insurer is following defense counsel advice or a prior agreement exists).

   If you have an attorney, many insurers make the check payable to both client and attorney to protect their own exposure and to help ensure attorney fees and costs are collected appropriately.

2. Attorney trust account (IOLTA) and safekeeping property

   When an attorney receives settlement funds on behalf of a client, ethical and court rules require the lawyer to hold client funds in a client trust account (often an IOLTA) separate from the firm’s operating funds. The New York Rules of Professional Conduct govern safekeeping of client property, including trust account rules and recordkeeping. See New York Rules of Professional Conduct (safekeeping client property) for details: https://www.nycourts.gov/attorneys/rules/.

3. Payment of liens, medical bills, and other encumbrances

   Before the attorney distributes money to you, the attorney will typically pay valid third‑party claims out of the settlement proceeds. Typical deductions include:

   • Medical providers who assert liens (hospital bills, providers with written liens).
   • Medicare or Medicaid claims and subrogation interests (if federal/state benefits paid for treatment).
   • Workers’ compensation liens (if WC paid benefits).
   • Outstanding judgments or court-ordered liens (e.g., child support).
   • Case-related expenses advanced by the lawyer (expert fees, filing fees, investigation costs).

   Attorneys should verify each asserted lien before payment and should notify you about significant holds or negotiations with lienholders.

4. Attorney fee and written accounting

   If you agreed to a contingency fee or other fee arrangement, the attorney will deduct that fee from the gross settlement. New York attorneys must provide a written accounting or settlement statement showing the gross recovery, fees, costs, lien payments, and the net amount paid to you.

5. Distribution to you

   After liens, costs, and fees are paid, the lawyer issues the client a check or arranges an electronic transfer for the net proceeds. Timing varies depending on:

   • How quickly the attorney verifies and pays liens.
   • Bank processing time for deposited checks.
   • Whether someone (e.g., a guardian or the court) must approve the release.

   Typical time from insurer check receipt to client distribution is often 1–6 weeks, but complex lien negotiations or court approvals can extend that timeframe.

6. Special situations that change the process

   • Minor or incapacitated client: Settlements for minors or incapacitated persons commonly require court approval (Surrogate’s Court, Supreme Court, or other appropriate tribunal). A judge signs an order directing distribution and often appoints a guardian or approves a conservator’s actions.
   • Joint check to you and your attorney: If a joint check lists both you and your lawyer, the attorney still typically must deposit the funds in the trust account and follow the normal distribution procedure.
   • Payoff of liens not resolved: If a lienholder refuses to negotiate, the attorney may withhold disputed portions until resolution or ask the court to direct payment.
   • Tax holdbacks: Some settlements include punitive or special damages with tax implications. Your attorney may recommend talking to an accountant.

7. What you should expect to receive from your attorney

   A clear, written settlement statement that shows:

   • Gross settlement amount.
   • Attorney’s contingency fee and how it was calculated.
   • All case-related expenses paid by the lawyer and amounts charged back to you.
   • Any lien payments or reductions negotiated with lienholders.
   • Net amount delivered to you and the date of delivery.

8. What you can do if you have concerns

   • Ask your lawyer for a copy of the insurance check endorsement and the trust account deposit record.
   • Request the written settlement accounting in detail.
   • If liens appear incorrect, ask the attorney to provide documentation of the lien claims and to explain any negotiations.
   • If you believe your attorney is mishandling funds, you can contact the New York State Bar or the Attorney Grievance Committee for your judicial department. To learn about attorney rules: https://www.nycourts.gov/attorneys/rules/.

Practical timeline example (hypothetical)

Hypothetical facts: insurer issues a $50,000 joint check to you and your attorney for a motor vehicle case. Your attorney has a 33% contingency fee and advanced $2,000 in expenses. A medical provider claims a $6,000 lien.

1. Attorney receives and deposits the check in the client trust (IOLTA) account (day 0).
2. Attorney verifies the $6,000 medical lien and either pays it or negotiates (days 3–14).
3. Attorney pays expenses $2,000 and deducts contingency fee ($16,500 = 33% of $50,000) (days 7–21).
4. Attorney issues net payment to you: $25,500 with a detailed statement of the calculations (days 7–21).

Helpful Hints

• Keep a copy of any retainer or contingency agreement—fees and expense rules come from that agreement.
• Ask for a written settlement accounting before signing any release.
• If the insurer issues a check only to you, do not cash or sign away any attorney’s interest without consulting your lawyer if you have one—your lawyer may have an entitlement under your agreement or an equitable lien.
• Expect questions and documentation requests when resolving Medicare or Medicaid interests—these federal/state programs assert subrogation rights that must be resolved before final distribution.
• If you believe funds are being withheld unreasonably, ask for an explanation in writing and consider getting a second opinion from another attorney or contacting the appropriate regulatory authority.

Disclaimer: This article explains common New York practice and ethical rules about handling settlement funds and is for general information only. It is not legal advice and does not create an attorney-client relationship. For advice about your specific situation, consult a licensed New York attorney.