Understanding Liens in Personal Injury Cases
If you are about to settle your personal injury claim, or have just settled it, you need to know whether any other people or entities (known as “lien holders”) are entitled to a portion of your settlement. A lien is a legal right acquired in someone’s property by a creditor. Generally, liens stay in effect until the underlying obligation is satisfied.
There are many potential lien holders for personal injury claims. They may include:
- Health care providers, including doctors, clinics, and hospitals;
- Medicaid, Medicare, the military, or the Veteran’s Administration;
- Workers’ compensation insurance; or
- Health and auto insurance companies.
Who Can Put a Lien on a Personal Injury Settlement?
Typically, liens against personal injury settlements arise when someone is injured and doesn’t have the money to pay for necessary treatment. If you were hurt in an accident and could not afford the medical services you needed at the time, you probably have a duty to repay your healthcare provider(s). There may be one or more liens against your personal injury settlement proceeds.
The laws and regulations governing how a lien must be “perfected,” or legitimized, by a lien holder vary by state. However, federal and state law generally support liens against personal injury settlements and your duty to pay (or “satisfy”) them. Some lien holders must advise you of their intent to reclaim money from your personal injury , and some do not Determining if there are liens or subrogation claims against your settlement proceeds and how to resolve them is very complicated and we recommend that you not attempt to do so without the help of an experienced personal injury attorney.
1. Health Care Providers
Health care providers, such as doctors, clinics, and hospitals, can legitimize their liens by:
- Having you sign a letter of protection or lien before administering treatment, or
- Exercising their lien rights under state law.
Sometimes, health care providers do both. A lien is a signed agreement stating that you will pay the health care provider from your personal injury claim settlement proceeds. If you fail to pay the health care provider from your personal injury settlement proceeds, the health care provider may possibly sue you.
2. Medicaid, Medicare, and Veteran Benefits
If Medicaid or Medicare paid for your medical treatment after an accident, they likely have a lien against your personal injury settlement proceeds. These types of liens are governed by federal statutory law, found at 14 U.S.C. § 1395y.
The process for reimbursing Medicaid and Medicare for medical treatment is called “subrogation.” It is administered by the Centers for Medicare and Medicaid Services (or “CMS”). It is important to understand that if you have a CMS lien against your settlement proceeds, it will take precedence over all other liens. You do not have to repay CMS unless they ask you to. However, they have a six-year statute of limitations period for reimbursement.
It may be several months (or even more than a year) before you receive a notice to reimburse CMS. If Medicaid or Medicare paid for any portion of your medical treatment after an accident, you should set aside money from your settlement so you can repay CMS in full in the event they send a notice of reimbursement.
If you received Veterans Administration (or “VA”) benefits from the federal government, the VA may have a lien against your personal injury settlement proceeds. Like Medicaid and Medicare liens, a lien from the VA will take precedence over all other liens. VA liens are governed by federal statutory law, found at 38 U.S.C. § 1729.
CMS (Medicaid and Medicare) and VA liens are sometimes referred to as “super liens.” This is because they take precedence over all other liens. If you do not repay these liens, you will be subject to strict penalties under federal law. The penalties can be as severe as requiring you to pay back twice the original amount of the lien.
If you are concerned about your financial obligations to the federal government as a result of receiving medical treatment after an accident, you should contact an experienced personal injury lawyer right away.
3. Workers’ Compensation Insurance
If you were injured in a workplace accident, you normally do not have to reimburse your employer’s workers’ compensation insurance company. There is an exception, however, if you file a personal injury claim against anyone other than your employer. If you secure compensation from a third party (someone other than your employer), you may need to reimburse your employer’s workers’ compensation insurance company for any medical treatment the insurance company paid for.
4. Private Insurance Providers
Your private health insurance provider may have placed a lien on your personal injury settlement proceeds. If your health insurance provider paid for all (or a portion) of your medical bills prior to you settling your personal injury claim, you will probably have to reimburse your insurance company from your settlement proceeds.
Although health insurance policies differ by company and plan, your insurance company likely has the right to recover the amount of money they paid for your medical treatment from your personal injury settlement proceeds. Health insurance companies do not want you to “double dip” (that is, get paid twice for the same treatment). There is probably a clause in your health insurance policy stating that your health insurance provider can place a lien on your personal injury settlement.
Your auto insurance policy likely has a similar clause, providing that is is entitled to place a lien on your personal injury settlement if it paid for your medical treatment or other expenses after an accident. You should review your auto insurance policy carefully for language concerning how and when it can establish a lien on your personal injury settlement proceeds.
5. PIP and UIM Coverage
In the past, insurance companies could not establish liens on personal injury settlement proceeds when their insured purchased a separate policy rider for Personal Injury Protection (“PIP”) or Uninsured/Underinsured Motorist (UIM) coverage. Now, many states have passed laws that allow insurance companies to assert liens against personal injury settlements for amounts paid out under these types of policy riders. If you have a PIP or UIM rider, you should review your policy carefully for language about whether the insurance company can assert a lien against your personal injury settlement proceeds.
How Long Are Private Liens Valid?
As discussed above, the federal government has up to six years to pursue a lien against your personal injury settlement proceeds. Most private insurance companies (including private health insurance providers, auto insurance providers, and workers’ compensation insurance providers) do not have this long to pursue a lien. The laws of individual states govern how long liens remain valid. If you haven’t heard from a private lien holder within one year of the date of your personal injury settlement, there’s a good chance they have waived their claim against your settlement proceeds.
Before you spend the entirety of your personal injury settlement, you should check with an experienced personal injury lawyer to make sure that any private lienholders no longer have a right to claim a portion of your settlement proceeds.
How to Hire a Personal Injury Lawyer
Liens against personal injury settlements are common, and most personal injury lawyers have experience helping their clients deal with them. If you are concerned about your obligations to a creditor (such as the federal government, a health care provider, or insurance company), you should contact a qualified attorney in your area right away.
Disclaimer: Information provided on this site is NOT formal legal advice. It is generic legal information. Under no circumstances should the information on this site be relied upon when deciding the proper course of a legal action. Always get a formal case evaluation from a licensed attorney if you think you might have a personal injury lawsuit.