Personal injury cases take time – sometimes a year or longer. Whether the insurance company agrees to pay a fair settlement or your case ends up going to trial, you are generally going to incur significant medical expenses before you receive compensation for your injuries. Your doctor and the hospital may agree to wait until the end of your case for payment; or, you may have to use Medicare, your own health insurance, or another source to pay your bills. These payors likely have liens against your personal injury recovery.
1. What is a lien?
A lien is a legal right to take possession of someone else’s property. In a car accident case, it is the right for a doctor, hospital, insurance company, employer, or the government to receive a portion of your settlement or court verdict. Personal injury liens can generally arise one of two ways – either:
A medical provider agrees to wait for your case to be resolved before requiring you to pay your bills, or
You receive benefits under an insurance policy or from a government program that you are required to repay if you receive compensation from another source.
2. Who can place a lien on my personal injury settlement?
are a number of different parties that may be entitled to place a lien on your
personal injury settlement. These include:
- Doctors, hospitals, and other medical care providers
- Your auto insurance company (if you used your medical payment coverage)
- Your health insurance company
- MaineCare (Medicaid)
- Your employer’s worker s’ compensation insurance provider
Certain entities that either allow you to delay payment or actually make payments on your behalf are entitled to place liens on your settlement or court award. However, lien issues can get complicated very quickly, so it is important to work with an attorney who can help you understand your options, obligations, and legal rights.
How can I make sure liens don’t take up my entire settlement?
Making sure liens don’t take up your entire settlement requires experienced legal representation. If you settle too early or for less than you are owed, you may risk your entire settlement going to pay your outstanding bills and liens. If your medical care provider has agreed to delay payment, you may even still owe money after your case is over. To make sure you pocket as much money as possible, you need an attorney who is knowledgeable about lien and reimbursement issues.
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.
Negotiating a final settlement in your injury case is a little like bargaining to buy something at an outdoor market where haggling is commonplace. You and the buyer (the insurance adjuster) both know roughly how much an item (your damages) is worth. You know how much you are willing to take for it, and the adjuster knows how much the insurance company is willing to pay. But neither of you knows how much the other side is willing to pay or receive. So you go through a process of testing each other, a dance of bluff and bluster that usually only last through two or three phone calls.
Here are a few typical steps in that “settlement dance”:
You ask for a high amount in your written demand letter.
The insurance adjuster tells you what’s wrong with your claim — that there is a question about liability, or that your lengthy physical therapy was unnecessary.
You respond to these arguments.
The adjuster makes a low counteroffer to feel out whether you are in a hurry to take any settlement amount.
You concede a little bit concerning the adjuster’s arguments and make another demand slightly lower than the one in your demand letter.
The insurance adjuster increases the company’s offer.
You either accept that amount or make another counter-demand.
It is usually as simple as that. The main facts determining how an accident settlement comes out are how well you have prepared all stages of your claim — investigation, supporting documents, and demand letter — how much you are willing to settle for, and how much of a hurry you are in to settle.
When Will Negotiations Begin?
Negotiations with the insurance claims adjuster will begin shortly after the adjuster receives your demand letter. Usually the adjuster will telephone you within a week or two after receiving your demand. The length of time between demand letter and response depends on how busy the adjuster is, and how much time the adjuster needs to go over your claim and perhaps to speak with the insured about the accident.
Don’t Sweat the Reservation of Rights Letter
The first thing you might receive from an insurance company is called a “reservation of rights letter.” This letter informs you that the company is investigating your claim but is reserving its right not to pay anything if it turns out that the accident is not covered under the policy.
A reservation of rights letter is intended to protect the insurance company so that you cannot later claim that because it began settlement negotiations with you, it acknowledged that the policy covers the accident. It also serves to plant the idea that the insurance company might not cover the loss at all, intimidating some people into taking a quick and small settlement.
Do not be intimidated by a reservation of rights letter. The insurance company still must investigate your claim and negotiate with you fairly. Of course, if there is good reason to deny coverage altogether under the policy, the insurer is legally free to do so. But a reservation of rights letter does not change how the insurance company will respond to your claim. That will be determined by the facts of your accident and your injuries.
What If the Insurer Isn’t Responding?
If you do not hear from an adjuster within two weeks after sending your demand letter, call the claims department and ask when you can expect a response. If an adjuster says that he or she hasn’t had a chance to review your demand yet, be polite but ask for a specific date — two more weeks, perhaps — by which the adjuster will contact you with a response. Confirm the date with a brief written letter.
you haven’t heard anything by the date mentioned, telephone or send an email
and firmly remind the adjuster of the promises made. If, after that, you still
do not get a prompt response to your demand, you may have to go over the
adjuster’s head to a supervisor.