Letter of protection explained: how LOPs work in personal injury cases, pros and cons, how they affect settlement disbursement, and provider risks for 2026.
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A letter of protection (LOP) in a personal injury case is a written agreement where the plaintiff's attorney guarantees that a medical provider will be paid from the settlement or verdict proceeds. The LOP allows the injured person to receive medical treatment without paying upfront or using health insurance. The provider essentially extends credit, relying on the attorney's promise that the bill will be satisfied when the case concludes.
LOPs are widely used in personal injury practice, particularly when the plaintiff has no health insurance, when health insurance does not cover certain treatments, or when the attorney wants to establish higher "billed charges" for damages presentation. However, LOPs carry significant financial risks that every claimant should understand before agreeing to one.
| Factor | Treatment with health insurance | Treatment under LOP |
|---|---|---|
| Upfront cost to patient | Copay / deductible | $0 at time of service |
| Billed rate | Insurance-negotiated rate (often 30-60% of retail) | Full retail / chargemaster rate |
| Lien / subrogation risk | Insurer may assert reimbursement right | Provider holds contractual lien on settlement |
| Effect on net settlement | Lower medical charges but subrogation deduction | Higher charges reduce net more, but may inflate damages claim |
| Provider choice | Limited to in-network providers | Any provider who accepts LOPs |
| Risk if case is lost | Insurance paid; patient owes copay | Patient may owe full balance if LOP is unenforceable |
Hypothetical example only -- not a real case or prediction.
| Item | Insurance path | LOP path |
|---|---|---|
| Settlement | $100,000 | $100,000 |
| Attorney fee (33.3%) | -$33,300 | -$33,300 |
| Medical charges billed | $18,000 (negotiated rate) | $42,000 (retail rate) |
| Insurer subrogation / LOP balance (after negotiation) | -$12,000 | -$30,000 |
| Case costs | -$5,000 | -$5,000 |
| Net to client | $49,700 | $31,700 |
An LOP can be beneficial when you have no health insurance and need treatment, when a specialist who does not accept your insurance is critical to your case, or when you need treatment that your insurance plan does not cover. An LOP may be disadvantageous when you have good insurance coverage, when the anticipated settlement is modest relative to treatment costs, or when the provider's retail rates are substantially higher than negotiated insurance rates.
A letter of protection (LOP) is a written agreement between a plaintiff's attorney and a medical provider. The attorney promises that the provider's bills will be paid from the settlement or verdict proceeds. In exchange, the provider agrees to treat the patient without requiring upfront payment or billing health insurance.
At settlement, the attorney must pay all outstanding LOP balances from the proceeds before disbursing the net to the client. If LOP charges are high relative to the settlement, the client's net recovery can be substantially reduced. The attorney typically negotiates LOP balances as part of the closing process.
They serve a similar function but differ legally. A medical lien is typically created by state statute and gives the provider a legal right to recover from the settlement. An LOP is a contractual agreement between the attorney and the provider. Some states recognize both; enforcement mechanisms differ.
Yes. Using health insurance typically results in lower out-of-pocket costs because insurers negotiate discounted rates. However, the health insurer may assert a subrogation or reimbursement right against the settlement. Whether to use insurance or an LOP involves strategic considerations that should be discussed with your attorney.
The main risks are that LOP charges may be billed at full retail rates rather than insurance-negotiated rates, that accumulated bills can consume a large portion of the settlement, and that the defense may argue the plaintiff overtreated because there was no financial disincentive. The plaintiff should track all LOP balances throughout the case.
No. Providers accept LOPs voluntarily. Hospitals, emergency rooms, and some specialists may not accept them. Providers who do accept LOPs take on the risk that the case may settle for less than their charges or that the case may be lost entirely.
No. SettlementCalculator.xyz is operated by Mustafa Bilgic, a non-attorney individual operator. This page is educational research only and is not legal, tax, or financial advice.