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Infant settlement procedures get an overhaul in Fairfax

Peter Vieth//January 31, 2011

Infant settlement procedures get an overhaul in Fairfax

Peter Vieth//January 31, 2011

Some Northern Virginia judges and lawyers are taking a fresh look at what had been a routine procedure intended to protect the rights of children when settling their civil claims.

In Loudoun and Fairfax Counties, judges have decided that, in many cases where they are called on to approve tort settlements, they want to pick the lawyer to serve as a guardian ad litem for the child victim rather than have the GAL selected by the insurance company’s lawyer.

The policy change has shed light on an often-overlooked procedure in which the court gives its stamp of approval to settlements and payment plans that benefit plaintiffs under a legal disability.

The framework developed for a Fairfax Bar Association seminar last month can serve as a primer for lawyers all over the commonwealth who may be called on to serve as GALs for such supervised settlements.

In Fairfax, lawyers have been told to submit GAL appointment orders with the name left blank. Fairfax Chief Circuit Judge Dennis J. Smith said having judges select guardians ad litem from a court-maintained list will both spread the work around and ensure the integrity of the process. “We had some guardians who we thought were a little too cozy with the insurance companies,” Smith said. He said, in one case, the lawyer hired as the guardian ad litem prepared the settlement pleadings for all the parties.

“That kind of thing was just a little too close for comfort for us,” said fellow Fairfax Circuit Judge Jane Marum Roush. “We just want to have more confidence in the recommendations of a lawyer who is independent from the parties.”

Most lawyers welcomed the change. “I think it’s a good process,” said Michael L. Davis of Alexandria, an attorney for State Farm Insurance Co. “It does assure the court the issue is taken care of by an independent guardian ad litem.”

Smith said the court has compiled a list of people willing to serve as GALs for settlements. The change means “judges will have greater confidence in the recommendations of the guardians ad litem as to whether to approve a settlement if the guardians are selected by the judges rather than the parties or the defendant’s insurer,” according to the court’s announcement.

The Virginia Code contains no requirement for the use of guardians ad litem in infant settlements and other cases matters in which a child or disabled person is a beneficiary of the recovery. Nevertheless, especially in larger cases, courts generally seek a report from the independent GAL as to the fairness of the settlement and the proper disposition of the proceeds for the victims.

In practice, an insurance company or a lawyer hired by the insurer would petition the court to “approve and confirm” a compromise in a wrongful death case or a personal injury case involving a child. The insurer’s lawyer would normally prepare most of the settlement documents to be filed with the court.

Typically, the insurer’s lawyer also would locate a willing local attorney to serve as a guardian ad litem for parties or beneficiaries under a disability, including children. The GAL would be paid directly by the insurer at the completion of the process, although the fee might be subject to adjustment by the judge.

Change came first in Loudoun County. Loudoun County Chief Circuit Judge Thomas D. Horne said judges in that locale now are selecting GALs for settlements in about 60 percent of cases. In the other 40 percent of cases, the judges will defer to the attorneys involved.

The difference, he explained, was that lawyers from other parts of Northern Virginia often are involved in Loudoun County cases. It makes sense in those cases for the GAL to be from the same area as the parties’ lawyers. “In large measure, it’s based on who the attorneys are that are involved in the case,” Horne said.

Horne said his court does not maintain a formal list of available attorneys for GAL work. Nevertheless, the decision by the Loudoun court to have judges make the guardian selection in most infant settlements caught the ear of the Fairfax judges. “We borrowed a page from Loudoun’s book,” Roush said.

Arlington County maintains a similar practice, according to practitioners there. In Prince William County, the judge has the final say on selection of a GAL, but it’s common for lawyers to make a suggestion, said Manassas lawyer Tracy C. Hudson.

There have been pitfalls. Fairfax lawyer Ann LaCroix Jones said some judges in other jurisdictions believed they should appoint only lawyers who have been certified by the Supreme Court under the GAL program for children involved in family law cases, even though the training for that program has nothing to do with civil liability and financial issues.

Hudson said he had heard of a case where such a lawyer was named as a GAL for an infant settlement and was unable to help because of a lack of knowledge about tort cases.

Other problems can arise from simple inexperience. “There’s always a risk a guardian ad litem won’t do a sufficient investigation and won’t give a sufficient report to the court,” Hudson said. Judges appreciate a written report in advance, he said.

Hudson points out that GALs have a duty to review all aspects of the case, including medical records and liability information. “Make it easy on them,” he urged. “Give them the documents. Give them the phone numbers. Tell the people to get in touch with them.”

Changes in procedures could bring new issues, including the amount of the fee. Lawyers picked by a judge to review a settlement might decide to charge a fee that’s out of proportion to the amount of the settlement, Davis warned.

Another issue could be avoidance. Since any circuit court can approve a settlement, defense counsel might seek out jurisdictions where they have more say in who will serve as GAL and how much the fee will be.

The Fairfax court’s heightened oversight led Fairfax lawyers to stage a seminar on infant settlements last month to advise lawyers of the new policy and provide education on issues that arise in the process.

Jones, who organized the FBA seminar, said the business of getting an infant settlement approved is not simple and not to be taken lightly by a plaintiff’s attorney. “The truth of the matter is really good lawyers often don’t know what to do once they get their settlement,” she said.

“It’s been a long time since this issue was revisited,” said Davis, another speaker at the Fairfax seminar. “It’s been a subject no one has talked about.”

Jones points out one of the first roles of the GAL is to be the “gentle bad guy” who tells the parents they can’t just take the money and use it for the child as they see fit. They need to understand that the GAL will not recommend – and the judge will likely not approve – any plan that puts a large part of the child’s money in the control of the parents. “You have to just walk them down the path slowly,” she said.

Roush agreed a GAL needs to have done the investigation and the explaining before the day of the settlement hearing. “We want all that worked out before they’re standing in front of me,” she said.

Jones said a GAL should explain to the child and parents exactly what to expect at the hearing for settlement approval. She cautioned that a hearing in a wrongful death case can be like a second funeral, so GALs need to be prepared to deal with all the emotion involved.

The settlement seminar included remarks from judges, lawyers, the Fairfax commissioner of accounts and structured settlement specialist Henry L. Strong.

Strong said the most common mistake for lawyers representing children in personal injury or death settlements was failing to be familiar with the basic choices for holding the child’s money. Those are placing the money with the clerk, appointing a parent or a corporate fiduciary to manage the funds, and setting up a structured settlement providing for future payments.

Issues involve taxes, flexibility, and the hassles for fiduciaries who have to maintain bonds and file accountings.

“It’s a good subject to pay some attention to because a lot of attorneys are not familiar with the statutory requirements in Virginia,” Strong said. “You really don’t want to be surprised at the courthouse.”

The infant settlement process gave rise to ethical concerns that led to an unusual Legal Ethics Opinion in 2006. The question arose in LEO 1831 whether a GAL could ethically accept fee payment from the insurer while representing the child. Normally, a client could consent to such a conflict, but the child is deemed incapable of consent and the parent might have conflicting interests regarding use of the settlement money.

“We have finessed that somewhat with a rather nuanced interpretation,” said James M. McCauley, Ethics Counsel for the Virginia State Bar.

The Ethics Committee pointed to the court as a “gatekeeper” to protect against possible wrongdoing. “[T]he issue of the payment of the GAL’s fee is … a matter that should be disclosed to and approved by the court,” the opinion reads. The panel also cautioned that any attorney being paid by a third party should be mindful of the need to maintain professional independence from that third party payor.

A footnote indicates the Ethics Committee made no finding as to whether the child is the “client” of the guardian ad litem. “It’s an intractable problem because the child is never capable of giving consent,” McCauley said.

Davis said the recent seminar helped reinforce the message about a GAL’s duties. “These people are independent reporters to the court. They’re not pawns of the insurance companies or the plaintiffs’ lawyers,” he said.

Jones said she hopes the infant settlement program can be polished and presented elsewhere. “I think we need more training. What we did at Fairfax was a nice beginning. I think we could improve the program,” she said.

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