It’s important to understand what liens are and how they can impact your personal injury settlement. In fact, liens play a significant role in how much money ends up in your pocket.
Many injured victims understand that an attorney’s job is to negotiate a fair settlement with the insurance company. But a good attorney will also negotiate with your lienholders and manage this process for you, too.
In our post today, we’ll provide some basic legal information about the following:
Please note that our attorneys are licensed to practice in Washington State. Laws often vary in other states. Finally, please know that you can call us if you need targeted legal advice about your situation. We always offer free consultations.
A lien is a claim placed against an asset. We often think of liens in terms of real estate. For instance, if a homeowner sells their house, they must pay off the remaining balance of the mortgage. In this regard, the mortgage is a lien and the bank that owns it, the lienholder.
When it comes to a personal injury settlement, you may have lienholders. These are the providers who fronted the costs for your medical care and other services with the agreement that they’d be paid when you are compensated for your injury claim. In other words, they are asserting a claim on your expected settlement.
At first glance, a lien can sound like a bad thing, almost like a debt. After all, you are obligated to satisfy any liens you may have when you finally get your settlement. However, liens make it possible for you to receive medical care with no upfront cost. This means you can get treated for your injuries without the burden of mounting hospital and doctor bills.
Some of the parties that may be able to place a lien on your injury claim include:
There are some unique situations when additional lienholders may assert themselves. For instance, if you are behind on child support payments, a lien may be placed.
A lien is a financial obligation. When you receive your settlement, you must pay each lienholder. Put the simplest way, liens impact your settlement by reducing the amount you’re left with.
Suppose you are offered a settlement of $25,000. This does not mean that you will end up with $25,000 in your bank account. First, you must pay your lienholders. Let’s say you went to the hospital and saw a physical therapist. Combined, you owe both lienholders $10,000. If you worked with an attorney, their fees would come out of this amount as well.
It’s important to keep this in mind as your settlement negotiations proceed. When your attorney tells you the insurance company has made an offer, you might also wish to ask what you’ll be expected to pay in liens. This will give you a better idea of how much you’ll personally take home.
Typically, a personal injury lawyer will manage the liens process on your behalf.
Some of the specific tasks they’ll cover include:
Clearly, an advantage to using a personal injury lawyer for your claim is that they will manage this process on your behalf. Additionally, a lawyer may be able to negotiate your liens down in ways you wouldn’t be easily able to do on your own.
Yes! A good injury attorney will help reduce liens to maximize your take-home portion of the settlement.
Here at Ladenburg Law, our lawyers estimate that around 15% of their time is spent working to reduce or even eliminate liens.
There are a few tactics we have for handling liens:
Sometimes, a lien may be so high that it will eat up a disproportionate amount of a client’s proposed settlement. When this happens, we explain to the lienholder that the lien will prevent our client from accepting the settlement. This will force a trial. The lienholder will understand that there are risks with a trial. For instance, they may receive less money than the settlement offered – or none at all. As a result, it’s in the best interest of the lienholder to reduce their lien. This way, they’re guaranteed to get paid. This is another angle we have taken to work with lienholders.
In short, a good attorney will use their strong negotiation skills not only in securing the best settlement award possible for you, but also in reducing the amounts you’d be responsible for paying out to each lienholder.
Let’s illustrate how we’ve been able to help clients reduce liens. Here are some actual examples, with first names changed for privacy.
Mary was in a car crash and suffered serious injuries. As a result, her medical expenses were very high. Mary’s own health insurance paid her medical bills and asserted a lien for $147,000. Unfortunately, the other driver’s insurance policy limit was only $75,000. We were able to obtain that full amount, and without filing a lawsuit. We were also able to get the health insurance company to completely waive their lien. Additionally, we reduced our fee by 94% to put more money in Mary’s pocket. Bottom line: Mary received $73,000 of the $75,000 total settlement.
Sue was injured in a collision. The other driver’s insurance company contested liability. Sue’s PIP policy paid $10,000 in medical bills and placed a lien on her claim against the other driver. We negotiated a settlement that allocated 10% fault to Sue (reducing her damages by 10%, from $30,000 to $27,000). We informed her PIP carrier that our client was not “made whole” because she only received 90% of her damages. As a result, our client did not have to pay any lien to her PIP provider. Bottom line: Sue received about $4,000 more than she would have thanks to our negotiations with her PIP provider.
Tom was injured in a car accident and his own health insurance covered all his medical bills. The health insurance company asserted a lien for $32,000. They claimed their ERISA plan allowed them to recover 100% of the lien. Tom’s injury claim settled for the policy limits of $50,000. Our research showed that the ERISA plan was not fully self-funded and therefore, not covered by federal subrogation law. We told the health insurance we would not pay any of the $32,000 lien. They closed their file with $0.00 recovered. Bottom line: Tom was able to keep $32,000 more of his injury settlement thanks to our research and handling of his ERISA lien.
As you can see, our efforts to negotiate both policy limits and reduce liens have made a big impact for our client’s financial outcomes!
When you receive your check, most firms will have you sign a final agreement. At Ladenburg Law, we call this a Dispersal Agreement. While we know you are excited to finally have your check, do take the time to carefully review this document.
A dispersal agreement should detail:
Please note that some firms expect their clients to pay their lienholders. We do not feel this is ethical or fair to clients – so we handle this on all of our clients’ behalf.
If you have any questions at all about your settlement or liens, ask your attorney.
If you’ve been injured and would like to speak with one of our attorneys, we’d be happy to help. To get started, please give us a call or fill out the short form on our website.