Jeffrey P. Gale, P.A. // Does Florida Workers’ Compensation Statute 440.22 Ban Pre-Settlement Funding?

dollarsThe wheels of justice grind exceedingly slowly. It can take years for personal injury and workers’ compensation cases to reach final resolution. In the interim, accident victims often experience extreme financial pressure. The pressure can force victims to compromise their case.

An industry has developed to address the problem. Lawsuit funding companies loan money to victims with the promise of being repaid from proceeds recovered in the case. Some of these companies include:

Funding loans are not traditional loans which are subject to being repaid from any of a borrower’s assets. (This blog will not go into homestead laws and other properties exempt from creditors.) Rather, lawsuit funding loans are limited to being repaid from the case itself. The loan cannot be secured by a home mortgage. The lender cannot seize a bank account. Wages cannot be garnished. For the lender, it’s  the case or bust.

Because of this unique characteristic, lawsuit funding loans made in Florida are not subject to the state’s usury laws located in Chapter 687 of the Florida Statutes. Greater risk allows for greater return.

Our law firm is torn on the value of lawsuit funding loans. On the one hand, they provide temporary relief from the pressure to settle a case before its time. On the other hand, the relief is rather quickly counter-balanced by the concern with the steady and rapid increase in the payback amount due to high interest rates.

Cases are only worth so much, whether settled or resolved by jury verdict. While  funding loans can buy time for proper claim handling, they can also be an impediment to resolving the case at the proper time for the right amount. Understandably, clients expect to net a reasonable sum from their cases. Unfortunately, a large debt, secured by the case, can block the way to this satisfactory outcome.

Florida Statute 440.22 may make the issue of lawsuit funding moot with regard to Florida workers’ compensation cases. The statute provides as follows:

Assignment and exemption from claims of creditors.No assignment, release, or commutation of compensation or benefits due or payable under this chapter except as provided by this chapter shall be valid, and such compensation and benefits shall be exempt from all claims of creditors, and from levy, execution and attachments or other remedy for recovery or collection of a debt, which exemption may not be waived. However, the exemption of workers’ compensation claims from creditors does not extend to claims based on an award of child support or alimony.

While the language does not appear to criminalize workers’ compensation case loans, it could be construed as making them invalid. In essence, unenforceable.  If the agreement, secured by the case, is not valid, the lender cannot sue to enforce the agreement or pursue a claim based on fraud since the statute was there for all to see. That would be a swift kick in the pants. The lender might be able to recover under a theory of unjust enrichment.

Since funding companies are a relatively new phenomenon, no Florida appellate court has yet addressed the statute in this context. Moreover, Florida Bar Ethics Opinion 00-3 (March 15, 2002) is not instructive because it is limited in scope to personal injury cases. The appellate courts, however, have considered whether workers’ compensation proceeds can be seized to satisfy debts (other than for child support). The answer is No.

In Broward v. Jacksonville Medical Center, 690 So.2d 589 (Fla., 1997), the Florida Supreme Court ruled that a lump-sum workers’ compensation settlement was exempt from a hospital’s judgment based on an unpaid medical bill. In a passing reference, the court noted that assignments were prohibited. Its concern with both — assignments and creditor seizing — was that the moneys due under the Workmen’s Compensation Law will no longer be a fund for the support of the indigent and the helpless.

We would never counsel our workers’ compensation clients to try to take advantage of this seeming loophole.

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Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.

While prompt resolution of your legal matter is our goal, our approach is fundamentally different. Our clients are “people” and not “cases” or “files.” We take the time to build a relationship with our clients, realizing that only through meaningful interaction can we best serve their needs. In this manner, we have been able to best help those requiring legal representation.