What to expect when the insurer issues a settlement check in Hawaii
Short answer: The insurer may make the check payable to you, to you and your attorney jointly, or to your attorney alone. In most cases your attorney will deposit the check into a client trust account, clear any liens and fees, and then deliver the net proceeds to you by check or wire transfer after the funds have cleared. Timing and specific steps vary depending on who the payees are, any medical or other liens, bank holds, and whether the claimant is a minor or a decedent’s estate.
Detailed answer — step‑by‑step under Hawaii practice
Below is a practical, stepwise description of how settlement funds are usually handled in Hawaii once the insurance company issues a check. This explains common practice and relevant rules that govern attorneys handling client funds.
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Who is the check payable to?
The insurer decides the payee line. Common options are:
- Payable to you alone.
- Payable to you and your attorney (joint payees).
- Payable to your attorney (sometimes the insurer issues the check only to counsel when counsel has provided a lien waiver, assignment, or when practice in a case makes that preferable).
If the check is payable to both you and your attorney, many banks require both endorsements before the check can be negotiated.
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If your attorney receives the check
Hawaii attorneys must keep client funds separate from attorney funds and handle them according to rules about safekeeping client property. Typically the attorney will:
- Deposit the check into a client trust account (sometimes called an IOLTA).
- Wait for the check to clear (banks often place holds — timing varies by bank and the check amount).
- Pay outstanding liens, medical bills, subrogation claims, or other authorized disbursements.
- Deduct attorney fees and costs as set out in your fee agreement (most contingency-fee agreements describe the percentage and how costs are handled).
- Provide you with an itemized accounting showing gross recovery, fees, costs, lien payments, and net payment to you.
- Deliver the net proceeds to you by the method you’ve agreed on (client check, certified check, or wire transfer).
Attorneys follow rules about safekeeping client property; see the Hawaii judiciary rules on handling client funds for more detail: Hawaii State Judiciary — court rules and attorney conduct.
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Timing — when will you actually get money?
There are several timing points that commonly delay delivery to you:
- Bank clearing time. Even if the insurer issued the check immediately, your attorney may wait for the bank to clear it before disbursing funds. This protects against the check bouncing later.
- Medical and other liens. Negotiating and resolving liens (private medical providers, Medicare/Medicaid, ERISA carriers, health insurers) can take additional time.
- Court approval. Settlements for minors, incapacitated persons, or some types of structured settlements may require court approval before funds can be distributed.
Ask your attorney for an estimated timeline; attorneys often explain expected waiting periods in the retainer or settlement letter.
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Minors, incapacitated people, and estates
Special rules usually apply:
- Settlements for minors or persons under guardianship commonly require a court petition and court approval before funds may be released. The court may order funds deposited into a blocked or supervised account.
- If the claim belongs to a decedent’s estate, the estate representative handles the settlement through probate or an appropriate court process. The distribution follows probate rules for the estate.
If your matter involves a minor or an estate, your attorney should explain the court steps and likely timing.
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Liens, subrogation, and third‑party claims
Medical providers, health insurers, and government programs (for example, Medicare or Medicaid) may have paid medical bills and can assert liens or seek repayment from settlement proceeds. Your attorney will often: (1) determine which liens exist; (2) negotiate reductions when possible; and (3) pay those liens from settlement proceeds before giving you the net amount.
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Recordkeeping and client accounting
Your attorney should give you a clear, written accounting that shows:
- Gross settlement amount.
- Attorney fees and how they were calculated (refer to your fee agreement).
- Costs advanced by counsel and other disbursements.
- Payments made to satisfy liens or subrogation claims.
- Net amount paid to you and the method of payment.
Ask for this in writing if it’s not provided automatically.
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Taxes and reporting
Whether any portion of your settlement is taxable depends on the type of damages recovered (for example, emotional distress, lost wages, punitive damages). Attorneys do not give tax advice; they often recommend you consult a tax professional. For federal tax questions, speak with an accountant or tax attorney.
Relevant Hawaii authorities and resources
General insurance regulation and insurer responsibilities are governed by the Hawaii Revised Statutes; the state’s current statutes are available online: Hawaii Revised Statutes (hrscurrent). Rules that govern attorney handling of client funds and safekeeping are set by Hawaii court rules and the rules of professional conduct found on the Hawaii State Judiciary site: Hawaii State Judiciary. For matters involving guardianship, probate, or court approval of settlements, consult the Hawaii Judiciary pages for probate and family court procedures.
Note: The links above point to the official Hawaii government resources where you can look up statutes and court rules that may apply to your situation.
Helpful hints — practical tips to protect your recovery
- Read your fee agreement carefully. Confirm the percentage fee, which costs you are responsible for, and when the attorney will disburse net proceeds.
- Ask the insurer early who the check will be payable to so you and your attorney can plan ahead.
- Ask your attorney for an estimated timeline for receipt of funds and the likely bank hold period.
- Get an itemized accounting in writing when the settlement closes. Keep it for taxes and your records.
- If you expect a wire transfer, confirm the bank account and identity verification process before closing — wires require accurate bank details and may be subject to bank policies to prevent fraud.
- If you are a minor or the settlement involves a disabled person or a decedent’s estate, ask whether court approval is required and how that will change timing.
- Ask about liens (medical providers, ERISA plans, Medicare/Medicaid) early. Negotiating liens can increase your net recovery but takes time.
- Consider consulting a tax professional about possible tax consequences of your settlement proceeds.
Frequently asked procedural questions
Q: Can the insurance company force me to take a check payable only to the attorney?
A: Not typically without your agreement. If the insurer issues a check only to counsel, it usually means counsel will hold and account for the funds on your behalf and follow trust account rules. You should understand and agree to the disbursement process in writing.
Q: How long before I receive my net payment?
A: That depends on bank clearing, liens, and any court steps. It could be days to several weeks. Ask your attorney for an estimated schedule.
Q: Can I get my settlement by direct deposit or wire?
A: Yes — many attorneys will deliver net proceeds by check, certified check, or wire. Verify wiring details in advance and get any wire fees explained.
Disclaimer: This article explains general practice and provides educational information about how settlement checks are handled in Hawaii. It is not legal advice. For advice about your specific case, speak with a licensed Hawaii attorney who can review your facts and documents.