A settlement or verdict figure is not the amount that lands in a client’s hands, and misunderstanding that gap is a common source of frustration. Between the gross recovery and the net payment sit attorney fees, reimbursed case expenses, and any medical liens that have to be satisfied. Knowing what comes out of a recovery, and in what order, gives a clearer picture of what a case actually delivers.
What costs arise during litigation?
Litigation generates two kinds of costs: the attorney’s fee and the case expenses. The fee in most Georgia malpractice cases is a contingency percentage of the recovery, owed only if the case succeeds. The case expenses are the out-of-pocket costs of building and trying the case, which the firm typically advances. These include court filing fees, the cost of depositions and transcripts, expert witness charges, the retrieval of medical records, and the preparation of exhibits. In a case that goes to trial, expert fees alone can be considerable, because experts are paid for their preparation and their time testifying.
How is compensation distributed after a recovery?
When a case resolves, the gross recovery is reduced by several items before the client receives the remainder. In general terms, the order looks like this:
- Attorney’s fee, the agreed contingency percentage of the recovery.
- Case expenses, reimbursing the costs the firm advanced.
- Medical liens and subrogation claims, repaying health insurers or government programs that paid for the patient’s care.
- The net amount to the client.
The exact sequence and how fees are calculated relative to expenses are governed by the representation agreement, which is why understanding those terms in advance matters.
What are medical liens and subrogation?
When a health insurer, Medicare, or Medicaid has paid for treatment related to the injury, it often has a right to be reimbursed out of any recovery. That right is asserted as a lien or a subrogation claim. These claims can significantly affect the net amount a client receives, and they frequently can be negotiated down, which is part of the work involved in finalizing a settlement. Government claims such as Medicare and Medicaid follow their own rules and generally have to be resolved before a settlement is complete, so they are addressed carefully rather than left to chance.
Georgia also has a distinct hospital lien statute that works separately from insurer subrogation. Under O.C.G.A. § 44-14-470 and the sections that follow, a hospital, nursing home, physician practice, chiropractic practice, or traumatic burn care provider that treated the injury can place a lien on the injured person’s claim itself for the reasonable charges of that care. The lien attaches to the cause of action, not to the patient’s home or bank account, and it ranks behind the attorney’s lien. To be enforceable it has to be perfected: written notice to the patient and the parties claimed to be liable, plus a statement filed in the clerk’s office of both the provider’s county and the patient’s county, within set deadlines (75 days after discharge for a hospital, 90 days from first treatment for a physician or chiropractic practice). Since a 2023 amendment, a provider treating a patient who has health insurance must first submit the charges to that insurer and have them rejected before the lien can be enforced. Once perfected these liens are hard to defeat, and unlike some reimbursement claims they are not blocked by the rule that a plaintiff must be fully compensated first, though the amount claimed must still be reasonable and can be challenged.
Are malpractice settlements taxable?
This is a tax question rather than a legal one, and the answer depends on the type of damages. As a general rule under federal tax law, compensation for physical injuries and the medical expenses and losses flowing from them is typically not taxed, while certain components, such as punitive damages or interest, can be taxable. Because individual circumstances vary, anyone resolving a claim should consult a tax professional about how a specific settlement or verdict will be treated rather than relying on a general rule.
Is there a limit on what can be recovered?
Compensatory damages are not capped in Georgia, so the medical expenses, lost income, future care costs, and pain and suffering that make up most recoveries are not subject to a statutory ceiling. The exception is punitive damages, capped at $250,000 in most cases under O.C.G.A. § 51-12-5.1, with narrow exceptions such as conduct involving specific intent to harm or impairment by alcohol or drugs. Punitive damages are uncommon in malpractice cases, however, because they require egregious conduct rather than the ordinary negligence that underlies the typical claim, so most recoveries consist entirely of uncapped compensatory damages.
This guide offers general information and is not legal, financial, or tax advice. How a recovery is distributed depends on the representation agreement, the liens involved, and individual circumstances. Anyone with questions about a specific case should consult an attorney admitted in Georgia, and a tax professional regarding tax treatment.