Practice Pointer: Payment of Attorneys Fees

An order for the payment of attorneys’ fees is a lien on the claimant’s benefits. This means that the order requires payment if the claimant is receiving benefits or becomes entitled to benefits again sometime after the attorneys’ fee order is received. The procedure for the payment of attorneys’ fees is longstanding and well-established. Yet, carriers still sometimes fail to follow the statute or rules.

The rules relating to the payment of attorneys’ fees set out the process and ground rules for obtaining Division approval. The statute requires that an attorney’s fee to be based on the attorney’s time and expenses and analogous issues and requires written evidence to support the claimed fees. Texas Lab. Code Ann. § 408.221 requires the claimant’s attorney’s fee to be paid from the claimant’s recovery. Both the statute and the rules provide for a payment from unpaid claimant benefits. This payment should be made without regard to the date of service contained in the fee application. Even if the date of service falls outside the range of the dates of accrued benefits being paid, attorneys’ fees should be deducted if benefits are owed at the time the order is received.

When the rules relating to the payment of attorneys’ fees were amended in 1994, the agency explained that one purpose of the amendments was “so attorneys are more likely to be paid before all benefits due the claimant have already been paid.”

Although it is important to pay all fees that are due when the benefits accrue, a carrier may not withhold some benefits that are due in anticipation of the future approval of attorneys’ fees. The preamble to the 1994 rule amendments noted a comment from one carrier pointing out the dilemma faced by a carrier, especially with regard to lump sum payments of benefits, when benefits have been ordered paid to a claimant who is represented by an attorney, but the carrier has not yet received an order to pay the attorney’s fee. The carrier suggested a rule amendment to provide for withholding a portion of a claimant’s benefits pending resolution of the issue of attorney’s fees.

The agency disagreed with the proposed solution because the statute requires benefits to be paid when due, and strictly limits liens against benefits. The statute provides that an attorney’s fee owed based on a Division order to pay does not become a lien until the carrier has received written notice of the lien. The Division interpreted this as requiring carrier receipt of the Division order to pay attorney fees. (sec.408.203)

The rule provided that a fee becomes a lien when the carrier receives the Division order. “To require a carrier to hold benefit payments in essence creates a lien against the benefits before the attorney fee request has been processed, or perhaps even received, by the [Division]”, wrote the agency in response to the comment. The agency went on to observe that it had attempted “to improve the likelihood of benefits being available from which to pay the attorney fee [by requiring carriers] to begin payments to the attorney within seven days after receiving the [Division] order, instead of the 14 days proposed.” The Division offered the following suggestions to assist carriers and attorneys in coordinating the payment of benefits to claimants and fees to the attorneys:

Finally, [Division] staff will be advised to consider whether attorney fee requests are outstanding when setting a date by which a lump sum payment of benefits must be made. This will give the attorney time to file a fee request and have it processed by the [Division]. Attorneys are encouraged to file applications for fee approval frequently and to be prepared to request and prove attorney fees at any benefit review conference or contested case hearing, so attorney fees may issue when benefits payment orders are issued. The procedures set by the [Division] and urged on attorneys will each reduce delays in having attorney fee requests approved and paid, so income benefits are more likely to still be due out of which they are paid.”

Timely and appropriate payment of claimant’s attorneys’ fees is important to avoiding the issuance of administrative violations and fines.