Where the Money Goes in a Successful Birth Injury Suit

Damages are often awarded to the child, sometimes in a trust

By S.M. Oliva

Every day, dozens of children are born with birth injuries caused by the negligence of a health care provider. The most common injuries involve the brain itself and include cerebral palsy, Erb's palsy and Klumpke's palsy, all of which can seriously and permanently affect a child's development.

When medical malpractice is to blame for a birth injury, the parents can sue the negligent doctors, hospitals and nurses for damages. Birth injury awards are often substantial, especially when they must compensate a child who will never be able to live a “normal” life. But how exactly do such damage awards work? Are they paid directly to the child, the parents or a third party?

How Washington Courts Handle Settlement Funds for Minors

The Washington State Courts have a special administrative rule known as SPR 98.16 that apply to these situations. Essentially, SPR 98.16 requires court approval for any settlement involving the “beneficial interest” of a minor (i.e., a person under the age of 18 who has not been declared legally emancipated). This rule covers any birth injury settlement proceeds that are attributed to the child's damages (as opposed to that of the parents).

Under SPR 98.16, the court appoints a settlement guardian ad litem to investigate the proposed birth injury settlement and file a written report recommending approval or rejection. Among other items, the report must contain a description of the birth injury, the child's diagnosis and prognosis, and a discussion of the potential liability of any responsible parties and the damages potentially recoverable. In some cases, the court may dispense with the settlement guardian's appointment if the child is already represented by a guardian or “independent counsel.”

Once a birth injury settlement is approved, the damages awarded to the child are deposited with the court, which then deducts certain costs such as legal fees and medical expenses. If the remaining funds are $25,000 or less, the court can do one of three things:

  1. Deposit the money in a bank account for the child's benefit, with the stipulation that no money can be withdrawn without the court's consent.
  2. Give the money to the child's guardian or limited guardian.
  3. Place the money in a trust.

The options are similar if the remaining settlement funds exceed $25,000. If the court does not place the money into a trust, it will appoint a guardian to assume custody of the funds, subject to court approval for any withdrawals.

If a trust is established, SPR 98.16 requires that at least one non-family member must serve as co-trustee. This is to help ensure money is not misappropriated by family members for their personal use. In many cases, the court will name a licensed and bonded professional fiduciary to serve as an independent trustee.

Ultimately, the rules exist to protect a child's settlement proceeds until he or she reaches the age of 18. If you have any further questions or concerns about the settlement process, you should consult with a qualified Washington medical malpractice attorney.

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