Letter of Protection (LOP)

A letter of protection is a written agreement, typically issued by the injured claimant's attorney to a treating medical provider, in which the attorney promises to pay the provider directly out of any settlement or judgment proceeds in exchange for the provider treating the claimant without requiring payment — or insurance — at the time of service. The LOP creates a lien against the eventual recovery, giving the provider priority to be paid from the proceeds before the client receives a net distribution, and it functions as the foundational document that makes medical lien financing possible, since the finance company is ultimately advancing against the payment right the LOP creates. Providers accept LOP arrangements because personal injury cases, particularly those with clear liability and identifiable insurance coverage, present a reasonably predictable — if delayed — path to payment, and many practices specialize in LOP-based treatment as a business line. Because there is no insurer negotiating rates in an LOP arrangement, providers frequently bill at a higher rate than they would accept from an insurance company or Medicare, a practice that has drawn scrutiny from defendants and courts assessing whether the billed amount reflects the reasonable value of the services for purposes of calculating recoverable medical damages. The LOP itself does not guarantee payment — if the case fails or settles for less than the total liens against it, providers holding an LOP have no independent right to collect from the claimant absent a separate agreement, though many provider agreements include such a fallback.

Because LOP billing frequently runs well above negotiated insurance rates, defense counsel routinely challenges the reasonable value of LOP-based treatment at trial or in settlement negotiations, which means the discount a medical lien financing company embeds in its advance has to account for the real possibility that a court or adjuster reduces the billed amount before it is ever paid.

Attorneys building a settlement demand around LOP-billed treatment have to weigh the higher face value of the medical specials against the credibility cost of relying on rates a defendant can plausibly attack as inflated relative to what any insurer would actually pay.