A lien is when someone else has the right to be paid out of the money the other driver’s insurance pays to settle your case. In personal injury lawsuits, they are often called subrogation liens.
Subrogation liens work like your mortgage (which is also called a lien). If the bank has a mortgage on your house, it has the right to have your loan repaid out of the money paid by the buyer when your house is sold.
Like the bank, your health insurance company has the right to be repaid when you settle your lawsuit. So does your medical payments insurance company.
So do Medicare, Medicaid and Worker’s Compensation. In fact, sometimes these agencies have the right to be paid before you or your lawyer are paid. These liens may attach to the specific money paid by the other driver’s insurance; if Medicare or Medicaid does not get its money when the case settles, it has the right to sue you, your lawyer and the other driver’s insurance.
As you can guess, this makes car insurance companies nervous. Let’s say Medicare pays your doctors $10,000.00 to treat your injuries caused by the accident. Medicare therefore has a lien of $10,000.00. If State Farm insures the other driver, and promises to settle your claim for $30,000.00, Medicare has the right to get its money directly from State Farm.
So what does State Farm do? It won’t send a settlement check to your lawyer until it has a “final payment” letter from Medicare, saying that the amount of the lien is $10,000.00. Then it will issue two checks – one to you and your lawyer for $20,000.00, and the other to Medicare for $10,000.00.
And all auto insurance company releases make you promise to pay off your liens out of the settlement proceeds.
What does your lawyer have to do to avoid delays? First, he has to be aggressive about contacting your health insurance company, and finding out how much they will want out of the settlement.
Then, when he settles the case with the other driver’s insurance, most lawyers try to will negotiate a settlement with your health insurer as well. If your lawyer does not do this, you may wind up being surprised by a lawsuit.
Usually, the health insurance companies, and the medical payments insurers agree to take a cut in the amount they are owed. The reduction may range from 10% to two thirds or more, depending on the circumstances.
Medicare allows a reduction that is calculated by a formula. And Medicaid often does not bargain, but they usually don’t pay that much in the first place.
I have been a lawyer over 30 years. I have been negotiating settlements that entire time. If you have questions about how settlement of your lawsuit will work, talk with an experienced Cincinnati Injury Attorney about the case. Call me, William Strubbe, at 513-621-4775.
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.