Liens can take most of your personal injury settlement before you see a dime. Here’s what you can do to keep more of your injury compensation.
Most people are shocked to learn that a third party might have a right to part of your personal injury compensation.
If you’re about to settle your injury claim, or you’ve just settled it, you should be aware of any lien holders. A lienholder is an individual or organization to whom you legally owe part of your settlement compensation.
Here’s where we unpack why others can take part of your insurance settlement, and what can be done to help you keep more of your injury compensation.
How Subrogation Affects Injury Settlements
Subrogation is a legal term that describes another party’s right to “stand in your shoes” to collect money from an injury claim settlement or court award. The party seeking subrogation has the right to place a lien against your injury compensation.
Types of legitimate lienholders in personal injury claims can include:
- Doctors, hospitals, clinics, or other health care providers
- Medicaid and Medicare
- Veterans Administration
- Workers’ compensation insurance
- Your health and auto insurance companies
- State child support agencies
The most common use of subrogation is by insurance companies, who seek subrogation to recover the money they paid for medical expenses on behalf of the injured person.
Example: Subrogation Lien on Bicycle Injury Settlement
Jerry was riding his bike to work when Marcia negligently turned her car in front of him. Jerry had no time to react before colliding with the car.
Marcia called 911 for help. Jerry was transported to the hospital where he was evaluated for a head injury and treated for a broken arm. Jerry provided the hospital with his medical insurance information to cover the bills.
During his recovery, Jerry got a call from his healthcare insurance provider. Jerry confirmed that his injuries were caused by a collision with a car.
Marcia’s insurance company settled Jerry’s injury claim for $10,000 to compensate for $5,000 in medical bills, $900 in lost wages, and $4,100 in pain and suffering.
Within a few weeks, Jerry received a lien notice from his healthcare insurance company, demanding repayment of the $5,000 that had been paid to medical care providers on his behalf.
Subrogation Prevents “Double-Dipping”
Insurer rights to subrogation and liens on injury settlements are intended to keep down the rising cost of medical insurance.
Sometimes an injured person has their medical bills paid by a “collateral source,” like their health insurance provider, and then is paid money by the at-fault party for their injuries.
The injured person would be “double-dipping” if they had the benefit of getting their medical bills paid, and then also got to keep settlement funds that were meant to cover the medical bills.
The rationale is that injured persons should be paid for their losses, but should not profit from their injuries.
Can You Ignore the Lien?
Most insurance companies, as well as Medicare and Medicaid, have fine print that requires you to let them know when you’ve been injured in an accident. When you sign up for health care coverage, you also agree to their rules.
Health insurance companies handle thousands of medical claims every day, and each claim is coded to define the type of service provided. Injuries commonly caused by car crashes and other types of accidents are “flagged” for further investigation.
Don’t be surprised to hear from your health insurance company if you’re treated for broken bones or other traumatic injuries. They are always on the lookout to see if another party should bear the financial responsibility for your medical treatment.
Ignoring medical liens or trying to “hide” settlement funds won’t work, and can cause serious trouble, ranging from added penalties and fees to possible criminal charges.
If you’re worried about liens against your injury settlement, talk to a personal injury attorney as soon as possible about your claim.
Government Liens Against Your Settlement
Government liens against your settlement proceeds may come for Medicare, Medicaid, or the Veterans Administration.
Government liens are often referred to as “super liens” because of their precedence over all other liens. If they are not paid, you will be subject to penalties under federal law. The penalties can be as severe as requiring you to pay back double the original amount of the lien.
Medicare and Medicaid Services
When Medicare or Medicaid covers medical treatment for your injuries, federal law provides a right to subrogation for recovery of your treatment expenses.
Part of the Federal Code requires:
“The United States shall be subrogated … to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan… to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.”
Reimbursements for Medicaid and Medicare are administered by the Centers for Medicare and Medicaid Services (CMS). If there is a CMS lien on your settlement proceeds, it takes precedence over all other liens.
CMS is part of the federal government, and as such, it can move slowly. It may be several months before you receive a notice to reimburse. It’s a good idea to set that money aside from your settlement, so you have it available when they send the notice.
Veterans Administration Benefits
If you received the Veterans Administration (VA) benefits in connection with your injuries, you would also have to satisfy their statutory lien before all others.
A federal law requiring subrogation for VA benefits states in part:
“[T]he United States has the right to recover or collect from a third party the reasonable charges of care or services so furnished or paid for to the extent that the recipient or provider of the care or services would be eligible to receive payment for such care or services from such third party if the care or services had not been furnished or paid for by a department or agency of the United States.”
Private Liens on Injury Settlements
Doctor and Hospital Liens
If you were injured and don’t have insurance, you still need medical care even when you don’t have the money to pay for treatment. You may have bills from the hospital, emergency services, the doctors, and ongoing medical bills for treatments and therapy.
Emergency medical treatment cannot be denied regardless of your ability to pay. Once your condition is stable, meaning no longer life-threatening, the hospital and doctor have a right to refuse further services unless you make payment arrangements.
Letter of Protection
The medical provider may be willing to continue your treatment and wait to be paid if you or your injury attorney agree to provide a Letter of Protection, or LOP. This is a signed agreement stating you will pay the health care provider after your case settles.
The Letter of Protection is a contract between you and the health care provider. If you fail to honor that contract, the provider has the right to sue you. If that happens, you may be responsible not only for the money you owe them but also for their attorney’s fees and court costs.
State Lien Laws
Letters of Protection are helpful, but a provider doesn’t necessarily need one to be financially protected.
Many states have laws protecting health care providers who advance treatment to patients. In the states that don’t require LOPs, a lien is enacted when the provider sends a certified letter notifying the patient of their lien.
States give health care providers these financial protections as a matter of public policy. Without some guarantee of payment, many providers would refuse to treat patients. At a minimum, state lien laws help assure that injury victims will be stabilized before leaving the hospital.
Child and Spousal Support Liens
Many states have robust laws that allow delinquent child support, and sometimes delinquent spousal support, to be collected through liens against injury settlements.
For example, the Texas Child Support Lien Network encourages insurance companies to search for active child support liens before releasing settlement funds.
Private Insurance Subrogation
Your private health insurance company may also have the right to place a lien on your injury compensation. If your health insurance paid some or all of your medical bills before your claim is settled, you’ll probably have to reimburse them from your settlement proceeds.
Private health insurance carriers usually have the right to recover what they paid on your behalf.
Read your policy carefully. Although policies differ in the way they handle this issue, there’s probably a clause stating your health insurance carrier can place a lien on your settlement.
PIP and UIM Coverage
Your car insurance policy likely has a subrogation clause. Check your policy for language detailing how and when your auto insurance company can establish a lien on your settlement.
Traditionally, insurance companies could not establish liens on injury settlement proceeds when their insured purchased a separate policy rider for Personal Injury Protection (PIP) or Uninsured/Underinsured (UIM) coverage.
Many states are now passing legislation allowing insurance companies to put liens on the amounts paid out under optional policy riders. Make sure you check your auto policy language carefully.
Workers’ Comp Insurance Liens
If you receive workers’ compensation benefits for an on-the-job injury, you normally won’t have to reimburse the workers’ comp insurance company. There’s an exception, however, if you file a claim against anyone other than your employer.
If you file a third-party lawsuit in addition to a workers’ comp claim, the workers’ comp insurance company has a right to go after your injury settlement for reimbursement.
For example, if you were injured while on the job in a car accident caused by someone else, and you sue the at-fault driver, workers’ comp will initially cover your medical expenses. Once your third-party injury claim settles, you’ll likely have to reimburse workers’ comp for the money they paid for your treatment.
Workers’ compensation liens are statutory, which means they’re automatic. While you have the right to seek compensation from the at-fault driver, you aren’t required by law to pursue a third-party claim.
If you decide just to be treated for your on-the-job injuries without a claim against the at-fault party, workers’ comp won’t have a lien. There won’t be any settlement proceeds to recover from.
How to Keep More Compensation
You’ll be able to walk away with a larger portion of your injury compensation if you’re aware of potential liens from the start.
Whether you decide to handle your insurance claim on your own or hire an attorney, it’s critical that you base your demand on the full cost of all your medical expenses, not just your co-pays, or the reduced amount charged to the insurance company.
Calculations for personal injury compensation are largely based on your total medical expenses, so be sure you include everything.
How an Attorney Can Help
Liens against your settlement for medical expenses are often negotiable. Some lienholders won’t take less than the full amount owed, but many are willing to accept less than the full amount under certain circumstances.
“Super” lien holders are entitled to be paid from your settlement before you get anything.
Successful personal injury attorneys are experienced in negotiating large medical liens with Medicare, Medicaid, and the VA so that you end up with more money at the end of the day.
Don’t just assume that if you haven’t heard from worker’s comp, or your health or auto insurance company that they waived their claim against your settlement proceeds. Some states have a statute of limitations on medical liens that can last for years after your settlement.
Find out where you stand. Most injury attorneys don’t charge for their initial consultation. There’s no cost to find out what a good attorney can do for you.
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