Proceeds Intercept Act Creates New Hurdle for Payments in Injury Cases

Effective September 5, 2006, the Pennsylvania Insurance Proceeds Intercept Act creates a lien on proceeds in all personal injury cases, including workers compensation matters, in order to pay any outstanding child support obligations. It applies to settlements or judgments in all cases brought in Pennsylvania where the net amount received by the claimant is over $5000 and the claimant is 12 years of age or older. However, the Act does not apply to payments as part of structured settlement annuity.

Where the claimant is represented in a civil action, then claimant’s counsel is required to obtain a statement from the claimant with the claimant’s full name, mailing address, date of birth and social security number, and also obtain, within 20 days before delivery of the release to the insurer or its counsel, confirmation from the Pennsylvania Child Support Enforcement System web site, www.childsupport.state.pa.us, that there are no overdue child support obligations. If there are arrears the attorney must pay them to a designated state agency from the settlement or judgment proceeds. The Act also allows verification of liens through use of private judgment search companies or a state-approved “central reporting agency” that may be created, but it would seem that the state web site will likely be adequate for this purpose.

The Act states that an insurer of a defendant in a case cannot delay payment of a settlement or judgment due to compliance issues, and the Act also states that it creates no lien against an insurer by anyone owed child support obligations. However, we still advise that the following language be included in releases in order that insurers have taken reasonable steps to assure compliance with the Act: “Claimant and Claimant’s attorney certify compliance with the Pennsylvania Insurance Proceeds Intercept Act, Act 109 of 2006, 23 Pa.C.S. § 4308.1.” We also advise that the release contain the following language after delineation of the amount of the settlement payment: “The settlement amount paid to claimant could be reduced by any child support lien payments required to be made pursuant to the Pennsylvania Insurance Proceeds Intercept Act, Act 109 of 2006, 23 Pa.C.S. § 4308.1.”

If a claimant is not represented by counsel, then the insurer or self-insured defendant is obligated to obtain the identifying information from the claimant and verify that there is no lien or pay any lien that exists. This might be done by a defense attorney on the insurer’s of self-insured’s behalf. In workers compensation cases, the judge must obtain identifying information and verification of no arrears before making any award, or order payment of any arrears from the claimant’s award.

A copy of the marked-up Bill which was approved is attached and can be reviewed by clicking on the link below.