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Why Does My Lawyer Have To Pay People I Owe Money To Out Of My Settlement?

Sometimes, it’s required by law, or the other driver’s insurance company. Other times, it’s not required, but it’s just good sense.

Nearly always, your own health or auto insurance company requires that it be reimbursed for the cost of your treatment out of settlement funds. This is in their contract or policy.

And the other driver’s insurance company usually requires that your health or auto insurance company be repaid out of the settlement, to the point of having a separate check issued out of the settlement proceeds payable to the health or auto insurance company.

And often, it makes sense to pay your doctors and hospitals back out of your settlement, even if you do not have to do that.

Let’s start with the difference between a debt and a lien. If you owe someone a debt, obviously, they can sue you. But that may not do them much good if you don’t have a lot of money lying around.

A lien is a debt that gives the person you owe the right to be reimbursed from specific funds – in this case, the funds generated by your settlement with the other driver’s insurance company. The creditor has the right to sue not only you, but anyone coming into possession of settlement funds – that is, the other driver’s insurance company.

Health insurance companies have liens on money they pay for your medical treatment – your policy says the health insurance company has a right to be repaid out of the settlement. They enforce this lien by suing the insurance company for the other driver if they don’t get paid. Auto insurance companies – when they pay you medpay benefits – have this same rule.

So the other driver’s insurance company makes it a condition of the settlement that you will pay back your health or auto insurance company – and also Medicare, Caresource, and Medicaid if they have paid you any benefits because of the accident. If you don’t agree to this, they won’t pay the money, and they will make you go to trial.

If you don’t pay your health and auto insurance back – and your insurance company sues the driver’s insurance company to get their money back – you will probably have to pay the other driver’s insurance company not only the amount of the judgment, but also their attorney fees.

A good lawyer addresses this problem by negotiating a reduced payback amount as part of the whole settlement.

There are other types of liens that your attorney must pay out of settlement funds. These include liens that your attorney knows about and that are:

1) Created by a statute (such as Medicaid or Medicare; in fact, if Medicare or Caresource or Medicaid has paid you benefits, the insurance company will probably write a separate check to that insurer and deduct it from the total funds paid out.)), or

2) A judgment of a court addressing the disposition of the funds (for instance, once two of my clients divorced; the final decree stated that part of one’s property settlement had to be paid out of the other’s injury settlement), or

3) Liens guaranteed in writing by you or the lawyer on your behalf out of the settlement funds. As of today’s date – March 31, 2014 – this probably does not include chiropractors’ liens.

Chances are your doctor or hospital does not have a “lien”. But if those bills have not been paid, they are a debt that you still owe, and can be sued on – or they can become a negative on your credit report. I advise all my clients to resolve these – or let me negotiate terms for repayment of these debts – out of the settlement.

Sometimes my client doesn’t want to repay the doctor or hospital. They take their chances that the debt will eventually be written off, or just “fall through the cracks.” And that is fine.

But with all debts that are not liens, it is up to you – until you get sued.

If you want to know more about how this works, call me, Bill Strubbe, a Cincinnati Personal Injury Lawyer. My phone is 513-621-4775. There is no charge for talking to me.

Other lawyers refer their clients to me. And if you decide you‘d rather hire someone else, that’s OK.

Because all situations are different, and because there may be other facts pertaining to your case that I don’t know about, you should not rely on this answer for legal advice. I am not your attorney, and no lawyer client relationship has been formed. All discussions are limited to Ohio law unless otherwise indicated. And past performance cannot be used to predict future results.

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