Receiving Settlement Funds in Colorado: How Settlement Payments Are Delivered and Distributed

Detailed Answer

This article explains how settlement funds typically reach an injured person in Colorado once an insurance company issues payment. It covers the common paths funds take, who may hold or endorse the check, what steps an attorney must follow, and special situations (minors, liens, joint payees). This information is educational only and not legal advice.

Who the insurance company makes the check payable to

Insurance companies can issue a settlement check in several ways:

• Payable directly to you (the claimant).
• Payable jointly to you and your attorney (for example: “John Doe and Jane Attorney”).
• Made out to multiple payees, such as you plus a medical provider, mortgage company, or lienholder.
• Payable to a guardian, conservator, or trustee when the claimant is a minor or incapacitated person.

If the insurer makes the check payable directly to you and you are represented by counsel, your attorney usually asks the insurer to reissue it to the attorney or to the claimant and attorney together. If you are unrepresented and the check is made out to you alone, the insurer will mail it to you unless you arrange otherwise.

What happens when an attorney receives a settlement check

When an attorney is named on the check or receives the funds on your behalf, Colorado rules require the lawyer to handle client funds properly. Most Colorado lawyers deposit client money into a designated client trust account (commonly an IOLTA or similar trust account) separate from the lawyer’s operating funds. The lawyer then:

1. Confirms the check clears the bank before distributing funds.
2. Pays outstanding medical liens, subrogation demands, and court-ordered obligations.
3. Deducts agreed attorney fees and case-related expenses (only after providing you an itemized accounting).
4. Disburses the remaining net recovery to you, typically by check or by electronic transfer, with a final distribution statement.

Colorado’s rules on attorneys’ safekeeping of client property and trust accounts are found in the Colorado Rules of Professional Conduct. See the Colorado Judicial Branch rules page for details: Colorado Rules of Professional Conduct.

Timing: when you can expect the money

Timing depends on several steps. Typical timeline after the insurer issues a check:

• Mail delivery: a few days to a week if sent by regular mail.
• Deposit and clearance: banks may place holds; a cleared check can take several business days.
• Lien resolution and accounting: if there are medical bills, Medicare/Medicaid liens, or subrogation claims, resolving these can add days to weeks.
• If court approval is required (for minors or protected persons), distribution waits until the court signs an order.

Because of these factors, you should expect at least several business days and sometimes several weeks between the insurer’s issuance of the check and your receipt of net funds.

Common issues that delay your net payment

• Third-party payees: if other parties must endorse the check, distribution waits for all endorsements and lien releases.
• Lien and subrogation claims: healthcare providers, Medicare, Medicaid, and private health insurers often assert liens or demands for reimbursement.
• Outstanding legal fees or case costs that must be paid from the settlement.
• Bank holds on large checks or out-of-state checks pending clearance.
• Disputes about who is entitled to what share of the settlement (e.g., multiple claimants, divorce, creditor claims).

Special situations

Minor or incapacitated claimants: If the claimant is a minor or under a legal disability, Colorado courts may require a guardian, conservator, or a court-approved settlement procedure (for example, a guardianship or a court hearing approving a settlement). Distribution follows court orders and often requires establishing a protected account or structured settlement.

Liens and government benefits: If a government program (Medicare/Medicaid) paid for treatment, it may seek reimbursement. Your attorney should notify and negotiate with lienholders before disbursing funds.

Multiple claimants: When several people share a recovery (for example, two injured parties), the settlement agreement should specify each person’s share. An attorney usually obtains signed releases and disburses each person’s net share separately.

What you should receive from your attorney

• An itemized closing statement showing gross settlement, attorney fees, costs, lien payments, and net amount paid to you.
• Copies of lien waivers or payoff letters showing any liens were satisfied or resolved.
• The net settlement payment by check or electronic transfer and any necessary paperwork (releases).

What to do if you don’t receive expected funds

1. Contact your attorney or the claims adjuster and ask for the payment status and timeline.
2. Request a copy of the insurer’s check and the deposit/endorsement records if appropriate.
3. Ask for an itemized accounting from your lawyer under the rules that require safekeeping and accounting of client funds.
4. If disputes remain, consider getting an independent consultation about your rights; if you believe a lawyer misused funds, Colorado has complaint processes through the Colorado Supreme Court disciplinary counsel (information at the Colorado Judicial Branch website).

Tax and reporting note: Settlements can have tax implications. Portions for wage replacement, punitive damages, or interest may be taxable. Speak to a tax professional before making tax-related assumptions.

Practical example (hypothetical)

Hypothetical: An insurer issues a check for $50,000 payable to “Jane Claimant and John Attorney.” The attorney deposits the check into a client trust account, negotiates a $5,000 medical lien, deducts a $12,500 contingency fee and $1,200 in case costs, then issues Jane a net payment of $31,300 with an itemized statement and a copy of the lien resolution. The bank hold clears before distribution.

Helpful Hints

• Ask before settlement: confirm who the insurer will make the check payable to and where it will be mailed.
• Get everything in writing: signed settlement agreement, fee agreement, and an explanation of how liens will be handled.
• Request an itemized closing statement showing how the net was calculated.
• Ask for direct deposit or wire transfer if you prefer faster payment and the attorney offers it.
• Keep copies of all documents and endorsements related to the settlement check.
• If the claimant is a minor or incapacitated person, consult your attorney early about likely court approval requirements and timing.
• Make sure Medicare, Medicaid, or other lienholders know about the settlement promptly; delays in notification can create extra complications.
• If you represented yourself, be prepared: insurers sometimes issue checks payable to multiple parties, and you may need signatures or releases from others before cashing the check.

Disclaimer: This content is educational only and does not constitute legal advice. For advice specific to your situation, consult a licensed Colorado attorney familiar with your case.