Liens Against Your Accident Settlement

In any personal injury case, medical providers, insurance companies, and other third parties may claim some of your settlement money with a lien. Here's how they work.

Personal injury settlement liens are growing in popularity. Lawsuits can last several years, and multiple individuals and entities can try to get their "piece of the pie" by establishing claims on the eventual settlement award in a personal injury case.

What is a Settlement Lien?

In general, a lien is a court order placed on one party's personal property to satisfy debt owed to a third person or entity. In the context of a settlement, the personal property is the settlement award, or at least the portion that the lien holder is asserting a right to. The third party seeking to place a lien on a settlement must file a lawsuit through the court system. In the personal injury context, liens can be filed by any entity that paid any of the injured party's bills.

Who May Have a Lien on Personal Injury Settlements?

Healthcare Providers. Some of the most common personal injury settlement lien holders are healthcare providers. In many cases, the injured party does not have health insurance or the party's health insurance does not cover all medical bills. Healthcare providers will seek to recover all medicals bills with a settlement lien. However, when the injured party has a HMO or no insurance at all, he or she may be able to repay only a partial lien. Partial repayment involves negotiations with the healthcare provider, usually facilitated by the plaintiff's attorney.

Liens can also be created by prior agreement. The injured party with no or minimal health insurance may sign an agreement -- called a consensual lien or a Letter of Protection in some states -- with the healthcare provider at the time of receiving care or treatment. This agreement is often signed by the plaintiff and the plaintiff's attorney and it is an agreement to pay back the healthcare provider with funds received from the settlement in the case or from the final judgment in court. These agreements are often vaguely worded and ambiguous and it is advisable for the plaintiff's attorney to draft the agreement.

Health Insurance Carriers. Personal injury settlement liens may be embedded into the health insurance plans of certain employers. These plans create rights to assert a medical lien on the injured party's settlement. Valid liens include government employee insurance plans, ERISA plans, and workman's compensation.

Medicaid and Medicare. Under Medicaid, the Medicaid applicant is required to assign his or her rights to payments for medical care from a third party to the state. Even if an individual on Medicaid does not pursue a claim, the state has the power to do so. In a personal injury case in which Medicaid has paid for medical bills, the state is statutorily required to be paid from the proceeds of the case, and will impose a lien on any settlement. However, it must be made clear that Medicaid liens only apply to Medicaid payments related to the injury.

The federal government has a statutory lien for Medicare payments. Under the Medicare Secondary Payor Act (MSP), Medicare should not pay medical bills when payments are made or expected to be made under workman's compensation or under insurance plans or policies. Where there is a conditional payment, the United States can bring an action against the primary plan responsible for payment of expenses.

Automobile Insurance Carriers. Under automobile insurance plans providing medical payment coverage in personal injury cases, the insurance company may be entitled to reimbursement from a settlement for payment of services exceeding $5,000.

The Future of Personal Injury Settlement Liens

Statutes and case law in many states are strengthening the rights of lien holders. In large personal injury cases in particular, there will most likely be at least one settlement lien is place. Every plaintiff involved in a personal injury case must be cognizant of settlement liens and prepared to navigate the complicated settlement lien process. Further, it's important to consider the repayment of the lien when negotiating the settlement amount.

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