Detailed Answer
When an insurance company issues a settlement check after a Tennessee claim, the way you receive and ultimately access those funds depends on how the check is written and on steps your attorney must take before releasing money to you. Below is a clear, step‑by‑step explanation of the common paths funds take, what you can expect, and what rules guide your attorney’s handling of the money.
1) Who the check is payable to
Insurers commonly make checks payable in one of these ways:
- Payable only to the claimant (your name alone). The insurer chose to pay you directly.
- Payable to the claimant and the attorney (joint payees, e.g., “John Doe and Attorney Firm, PLLC”). Both payees must usually endorse the check before it can be negotiated.
- Payable to the claimant’s attorney only (less common). This usually happens when the insurer knows an attorney represents you and the attorney arranged the release.
2) How an attorney normally handles settlement funds in Tennessee
Most Tennessee attorneys follow the same basic process:
- Receive the check. The insurer may mail it to you, to your attorney’s office, or send a certified electronic payment (wire/ACH).
- Deposit to an attorney trust/escrow account (IOLTA or client trust account). Ethical rules require lawyers to keep client funds separate from firm operating funds. Tennessee’s Rules of Professional Conduct discuss safekeeping client property; see the Tennessee Courts rules page: https://www.tncourts.gov/rules/rules-of-professional-conduct.
- Clear liens, bills, and obligations. Before making a final distribution, the attorney typically identifies and pays medical liens, hospital bills, private liens, workers’ compensation subrogation, and any other valid claims against the recovery. If Medicare, TennCare (Medicaid), or a private health plan may have a recovery claim, the attorney will address subrogation or conditional payment issues.
- Prepare a settlement statement and secure releases. The attorney will provide you with a breakdown showing gross recovery, attorney fees (if any), costs, and net funds due to you. You will sign the release documents required by the insurer.
- Disburse funds to you. After liens and fees are satisfied and after any required hold period for check clearance, the attorney issues your net check or wires the net proceeds to you.
3) If the insurer mails the check directly to you
Do not sign or deposit a settlement check until you understand the release you signed (or will sign) and any instructions from your attorney. If you receive the check, contact your attorney immediately. In many cases your attorney must endorse the check as well or must deposit it into the firm trust account to satisfy ethical requirements.
4) Joint payee checks and endorsements
If the check is payable to you and your attorney, both payees must endorse it. The insurer often uses this method to protect against diversion of funds and to ensure the attorney participates in clearing liens and issuing proper releases. If you and your attorney disagree about how to handle a joint check, the payee bank may refuse to negotiate it without written direction from both payees.
5) Timing: how long until you actually get cash?
Timelines vary. Typical factors that affect timing include: whether the check must clear, the number and complexity of liens, Medicare/TennCare involvement, whether the settlement covered future damages or structured payment, and whether court approval is required (for minors or incapacitated persons). Typical timelines:
- Simple matters with no liens: often 1–3 weeks after the insurer issues the check.
- Matters requiring lien resolution or third‑party approvals: several weeks to a few months.
- Minor settlements, conservatorship or guardianship approvals, or complex subrogation issues: may take months and may require court action.
6) Special situations in Tennessee
- Minor or incompetent claimants. Settlements on behalf of minors or incapacitated adults often require court approval or establishment of a protected account. That process can add time and paperwork.
- Medicare/TennCare liens. If federal or state healthcare programs paid treatment related to the claim, reimbursement obligations may exist. Your lawyer will typically work to resolve those claims before distributing funds.
- Workers’ compensation subrogation. If the claim overlaps with a workers’ compensation claim, the employer or insurer may have a subrogation interest.
7) If something goes wrong (bounced check, lost check, insurer issued check incorrectly)
Contact your attorney immediately. If the insurer issued the check to the wrong payee or for the wrong amount, the insurer usually reissues a corrected check after the parties agree on the release. If the check bounces, your attorney will notify the insurer and take steps to collect. Save all correspondence and avoid negotiating a check that you suspect is incorrect.
8) Taxes and reporting
Some portions of settlements can be taxable (for example, non‑physical injuries or interest), while others (like compensatory damages for physical injury) may not be taxable. Attorneys cannot give tax advice unless they are also tax professionals. Talk with a tax advisor before filing tax returns for the year you receive the settlement.
9) What rules govern how an attorney handles and distributes client funds?
Lawyers practicing in Tennessee must follow the Rules of Professional Conduct, including rules about safekeeping client property and trust accounts. See the Tennessee Courts rules page for the Rules of Professional Conduct: https://www.tncourts.gov/rules/rules-of-professional-conduct. That page explains attorneys’ duties to hold and account for client funds separate from firm funds.
Helpful Hints
- Ask your attorney early: “How will the check be made out, and how long until I receive my net proceeds?” Request a written settlement statement showing fees, costs, and lien amounts.
- Keep copies of the release and all settlement paperwork for your records.
- If you receive the check by mail, do not sign or deposit it until you have spoken with your attorney and until you understand the releases you signed or will sign.
- If the matter involves Medicare or TennCare, tell your attorney about any government health benefits you received related to the claim. This helps them protect you from later recovery actions.
- If you are a minor, or if a court conservatorship/guardianship exists, expect additional court paperwork and delays before funds are distributed.
- If you need money sooner, discuss interim options with your lawyer. Do not accept or sign any offer the lawyer did not recommend without independent advice.
- Get tax advice before you spend settlement funds if any portion might be taxable.
Disclaimer: This article explains typical practices under Tennessee law and points to the Tennessee Rules of Professional Conduct for attorney obligations. It is general information only. It is not legal advice, and it does not create an attorney‑client relationship. For guidance tailored to your situation, consult a licensed Tennessee attorney.