Letter of Protection in Kentucky Personal Injury Cases

What Is a Letter of Protection?

A letter of protection is a written agreement that a doctor, hospital, or clinic will be paid out of an injury settlement or judgment. The provider treats the injured person now and waits for the case to resolve, instead of requiring payment at the visit or sending the account to collections. The lawyer handling the injury case signs the letter, and the provider accepts it before treatment continues.

Kentucky law does not supply the terms. KRS Chapter 376, the state’s statutory lien chapter, gives no medical provider a lien on an injury recovery, so a letter of protection is a contract. What the provider is owed, when it is due, and whether the charge can be reduced all come from the letter itself.

A letter of protection is one way a provider’s bill becomes a demand against the settlement. Medicare and Medicaid reimbursement, health plan repayment, and hospital balances follow their own rules, covered in our article on medical liens in Kentucky.

Treatment After PIP Runs Out

The first money for accident treatment in Kentucky is PIP, the basic reparation benefits on the auto policy. KRS 304.39-020 caps those benefits at $10,000 per person for all economic loss from one accident, and KRS 304.39-210 makes a payment overdue if the insurer has not paid within 30 days after it receives “reasonable proof” of the loss. Our article on how PIP works in Kentucky covers the coverage itself.

The at-fault driver’s liability insurer does not pay medical bills as they arrive. It pays when the case settles or ends in a judgment, and KRS 304.39-110 sets the minimum at $25,000 per person and $50,000 per accident for bodily injury, or a $60,000 single limit. Between the end of PIP and the end of the case, a person with no health insurance can face bills with no payer, and a letter of protection is one way a provider keeps treating through that gap. That gap shows up often after a traumatic brain injury, when neurology follow-up and rehab stretch well past the PIP benefit.

Health Insurance Before a Letter of Protection

Health insurance, Medicare, and Medicaid pay at their own rates while the case is open, and each can seek repayment from the settlement later. A letter of protection defers the provider’s own charge to the end of the case, unless the letter sets a different rate.

Two Medicaid rules apply. Under KRS 205.622, a provider in the Kentucky Medical Assistance Program has to bill a third party it knows may be liable before billing Medicaid. Under 42 CFR 447.15, a Medicaid provider accepts the Medicaid payment, plus any required copayment, as payment in full.

PIP can also be pointed at health coverage. Under KRS 304.39-241, an insured may direct PIP in writing to reimburse a health plan, Medicaid, or Medicare for related bills those payers already covered, which our article on directing PIP benefits explains.

PIP Fee Schedule Limits

For PIP coverage issued or renewed on or after July 15, 2026, KRS 304.39-020 ties PIP medical payments to the fee schedule set under KRS 342.035. KRS 304.39-210 bars a provider from collecting or trying to collect, directly or indirectly, any amount above that maximum for a PIP-covered medical expense, and from damaging the insured’s credit over it. Our article on Kentucky’s 2026 PIP reform covers the change.

KRS 304.39-245 adds a second limit. When a provider agrees to a reduction the PIP insurer requests, the provider cannot bill the injured person for the reduced amount. The same section does not stop a provider from billing the injured person for charges PIP left unpaid because the benefits ran out, and those later charges are the ones a letter of protection defers.

Terms to Read Before Signing

The letter is the whole agreement, so its wording controls what happens at settlement. These are the terms to find before treatment starts:

• Who signs the commitment to pay: the lawyer, the patient, or both.
• Whether the provider stops billing the patient and keeps the account out of collections while the case is open.
• Whether the charge is the provider’s full rate or a stated rate, and whether the provider agrees to consider a reduction at settlement.
• What happens to the balance if the case is lost or settles for less than the bills.
• Whether interest, finance charges, or a third-party medical funding company is part of the arrangement.

Trust Account Rules for Settlement Money

When a case settles, the money goes into the lawyer’s trust account. SCR 3.130(1.15) requires a lawyer to hold property of clients or third persons separate from the lawyer’s own property and to deliver promptly the funds a client is entitled to receive. A provider holding a letter of protection is paid from that account under the letter’s terms, alongside the other repayment demands described in our article on medical liens after a settlement.

The lawyer does not pay the bill out of the firm’s own money. SCR 3.130(1.8)(e) bars a lawyer from giving a client financial assistance in connection with pending or contemplated litigation, except for advancing court costs and litigation expenses, so a letter of protection points the provider to the settlement.

Provider Bills When a Case Is Lost

A letter of protection changes when, and from what money, a provider expects payment. Unless the letter says otherwise, it does not erase the patient’s debt, so a case that is lost or settles for less than the bills can leave a balance the provider may still bill. The terms on reductions and on an unsuccessful case are the ones to read before treatment begins.