Health Insurance and Liens on Your Personal Injury Settlement

If your medical insurance has paid for treatment of your accident injuries, learn how that could affect your personal injury settlement.

By , J.D. · DePaul University College of Law

It's a fundamental principle of personal injury law that that if a person or business causes harm to someone, that person or business should, at minimum, be liable for paying all medical bills stemming from the injury. So it's no surprise that medical treatment is a common category of damages in a personal injury case.

But medical bills can raise some interesting questions. What happens if a health insurance company has already paid for the injured person's medical bills? Can the plaintiff sue the liable party for the amount of those medical bills anyway? If so, wouldn't that result in the plaintiff getting a "windfall"? But shouldn't the liable party have to pay for the harm it causes? Let's take a closer look at how health insurance comes into play in a personal injury lawsuit, and how medical liens work.

Can the At-Fault Party Be Sued For Medical Bills Paid by Health Insurance?

In short, the answer is yes, but the plaintiff probably isn't going to end up with all the money that was meant to cover those medical bills. To illustrate how this works, consider the example of a hypothetical construction worker named Jim, who suffers injuries at work when he is struck by an earth-mover being operated by a co-worker. Jim, who has health insurance, goes to the hospital. Along with numerous minor injuries, Jim's right shoulder is badly hurt, requiring surgery. Over the course of several months, doctors perform surgery and Jim regularly sees a physical therapist to strengthen the repaired shoulder. After deductibles, Jim's health insurance pays for all of his medical treatment stemming from the accident, which totals $25,000.

Jim hires an attorney and files a lawsuit against a construction company involved in the project. Jim's health insurance company files a lien against the lawsuit.

How Do Medical Liens Work?

A medical lien is a demand for repayment that may be placed against a personal injury case. By filing the lien in the above example, Jim's health insurance company is arguing, "Jim is the one who was injured, so it is his prerogative to sue. But Jim did not pay for the medical care he received for his shoulder. We did. So, if he receives reimbursement for the medical care that was provided, that money should go to us, not directly to him."

When a health insurance company issues a lien to recover any money it spent paying for your medical treatment after an accident, you (or your attorney) may be required to pay the lien under a process known as "subrogation." The extent and strength of a subrogation claim depends upon the language used in your insurance policy, and on the laws in your state. Talk to your personal injury lawyer for details on what to expect.

Hospital Liens

In certain states, hospitals are entitled to file a lien for repayment of any expenses related to care of a patient who was injured in an accident. Some medical providers may ask you to sign a lien letter, stating that you submit to a lien against any personal injury settlement. Medical provider liens must usually follow a strict statutory protocol in order to be valid.

Government Liens for Unpaid Medicare and Medicaid

If the government paid for any portion of your medical care after an accident, they usually have a right to get paid back if you later recover money for your injuries from another party, depending on the specific type of government program (Medicare and Medicaid Liens, Veteran's Administration, and so on).

Negotiating and Releasing a Lien

It's entirely possible to get a medical lien holder to accept less than the amount they paid, and still release you from the lien. Ask your attorney about the prospect of getting the lienholder's claim reduced.

Medical Liens and Attorney Fees

There's an important issue to keep in mind when it comes to the interplay between a medical lien and payment for your personal injury attorney's services. Returning to our example above, and assuming Jim had an attorney, he probably agreed to give the lawyer around 33 percent of any settlement he received. In many (but not all) states, an attorney's fee takes priority over a health care lien. So, if the amount of the personal injury settlement was $100,000, Jim's attorney might be able to take $33,333. The health insurance company might still be able to take $25,000 after that. That's why it's so important to understand how medical liens work, and to make sure you find the right personal injury lawyer who can get you the best personal injury settlement.

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