Detailed answer — how settlement funds are issued and distributed in Michigan

When an insurance company issues a settlement check, several different outcomes are possible. Which one applies depends on whether you have an attorney, whether there are medical bills, liens, subrogation or public benefits involved, and how the insurer chooses to make the check payable.

1. Who the check is payable to

• Payable only to you: If you negotiated and settled the case yourself, the insurer may mail a check directly to you.
• Payable to you and your lawyer or your lawyer’s firm: If an attorney handled your claim, the insurer often makes the check payable to both you and the law firm. That prevents the attorney from being blocked from negotiating liens or handling disbursement.
• Payable to a provider or lienholder: Sometimes a medical provider, Medicare, Medicaid (or another entity) has a lien or statutory recovery right and the insurer will issue a check directly to that entity or require a joint check.

2. What your attorney does with the check

If you have an attorney, the firm will usually deposit the check into a client trust account (sometimes called an IOLTA or escrow account) first. Attorneys must keep client funds separate from firm operating funds and follow professional rules for safekeeping client property. The attorney will then:

1. Obtain and verify pay-off figures for medical bills, provider liens, and any subrogation claims (for example, from Medicare or a private health insurer).
2. Pay agreed attorney fees and costs in accordance with your fee agreement.
3. Resolve outstanding liens or negotiate reductions when possible.
4. Prepare a settlement distribution statement showing how the gross settlement was allocated and what net amount you will receive.
5. Issue your net payment via check, wire, or direct deposit after all approvals and payoffs are complete.

3. Medical bills, liens, and government recovery

Medical providers, health insurers, Medicare, and Michigan Medicaid may assert a right to be repaid from your settlement. Those parties can include:

• Private medical providers or hospitals with an unpaid bill.
• Health insurance plans that paid for treatment and seek subrogation.
• Medicare or Medicaid, which have statutory recovery or repayment interests when they paid benefits related to an injury.

Medicare and Medicaid recovery follow federal and state recovery rules. If Medicaid (or other public benefits) paid for care, Michigan’s state agency handles recovery procedures. For general information on Michigan Medicaid recovery, see the Michigan Department of Health and Human Services: https://www.michigan.gov/mdhhs. For Medicare coordination of benefits and recovery rules, see the Centers for Medicare & Medicaid Services: https://www.cms.gov.

4. Timing — when you’ll actually get money in hand

Timing varies. Typical timeline elements include:

• Insurer issuing the check: often within days to a few weeks after the signed release is returned.
• Attorney processing: your lawyer may wait to deposit the check until replacements for any outstanding conditional payments or final lien figures arrive. That can add days to several weeks.
• Lien resolution: if medical providers demand payment or negotiation, resolution can take additional time, especially if government programs (Medicare/Medicaid) are involved.

5. Ways you can receive the money

After all obligations are satisfied and any required releases are signed, you’ll usually receive your net proceeds by:

• Personal check from your attorney’s trust account
• Certified or cashier’s check
• Bank wire or direct deposit (if your attorney offers that option)
• Cash (rare; not common for large settlements)

6. What if the insurer made the check payable the wrong way?

If the insurer issues the check in the wrong name (for example, payable only to you when you have an attorney, or to an incorrect payee), do not sign away your rights hastily. Options include:

• Ask the insurer to re-issue the check with the correct payee line.
• If asked to “sign over” the check, consult your attorney. Endorsing a check to a third party can create complications and may be refused by banks.
• If you have no attorney and the insurer insists on paying a provider first, request a written breakdown and get independent advice before endorsing anything.

7. Taxes and reporting

Whether settlement money is taxable depends on the claim type and how damages are allocated (e.g., bodily injury vs. lost wages or punitive damages). Consult a tax professional before assuming the settlement is tax-free.

8. Documentation you should receive

After distribution, you should get a written settlement distribution statement showing:

• Gross settlement amount
• Attorney fees and itemized costs
• Payments to medical providers, lienholders, or public benefits
• Net amount paid to you

If you have questions about how the funds were handled, request this statement in writing from your attorney or the insurer.

Resources and where to learn more

• Michigan Legislature (search statutes and laws): https://www.legislature.mi.gov
• Michigan Department of Health and Human Services (Medicaid questions and recovery): https://www.michigan.gov/mdhhs
• Medicare information (federal coordination/recovery rules): https://www.cms.gov

Helpful hints — getting your settlement money with fewer delays

1. Get everything in writing. Ask your attorney and the insurer for a written settlement statement and a timeline for disbursement.
2. Ask about liens early. Ask your lawyer to identify potential medical bills, subrogation, or government recovery claims as soon as settlement is likely.
3. Request itemized lien payoff figures in writing. Demand final figures before your attorney disburses funds so you know what will be paid from your settlement.
4. Consider negotiation for liens. Experienced attorneys often negotiate reductions with providers and subrogation claimants.
5. Do not endorse or sign away your check without advice. If the insurer asks you to assign your check to a third party, get counsel first.
6. Confirm how you will receive your net proceeds and provide bank details early if you prefer a wire or direct deposit.
7. Keep copies. Save the release you signed, the insurer’s settlement letter, and the settlement distribution statement.
8. Ask about taxes. Talk with a tax advisor about whether any portion of your settlement may be taxable.
9. If you are on public benefits, notify the agency. Public benefits programs can have recovery rights; your attorney should protect your benefits while resolving claims.
10. If something seems wrong, ask for a clear accounting. If your attorney or the insurer will not explain the distribution, consider a second opinion or contacting the State Bar of Michigan for guidance about attorney obligations.