Liens and Your Personal Injury Settlement (What You Need to Know)

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:

  • An overview of what liens are and how they work
  • Who can place liens on your personal injury claim
  • The impact liens have on your settlement
  • How an injury lawyer manages the process
  • How an injury lawyer might reduce your liens
  • Actual examples of how we’ve helped clients reduce liens
  • What you should know before you case your settlement check

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.

What is a lien on a personal injury settlement?

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.

Who can place a lien on my injury claim?

Some of the parties that may be able to place a lien on your injury claim include:

  • Your auto insurance
  • Your health insurance
  • Doctors, chiropractors, and other providers who treated you
  • Hospitals

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.

How do liens impact my personal injury settlement?

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.

How does a personal injury lawyer help with liens process?

Typically, a personal injury lawyer will manage the liens process on your behalf.

Some of the specific tasks they’ll cover include:

  • Identify all liens. Your lawyer will want to know upfront who is likely to assert a lien. They may ask you for a list of places you have been treated and additionally, ask you to sign a medical release so they can contact providers on your behalf. It is important you disclose anyone and everyone that has treated you for your injury.
  • Maintain communication with all lienholders throughout the process. A good lawyer will be proactive in reaching out to all lienholders and updating them on the progress of your case.
  • Review lien amounts from each lienholder. Prior to finalizing any settlement, your lawyer will review all requested funds. Sometimes, there are duplicates or unrelated charges that need to get removed, such as copays. Other times, a lien (or a portion of it) may not be valid – or could be negotiated.
  • Disperse funds to the lienholders. Once you’ve agreed to a settlement and the funds have been received, your lawyer will disperse and settle accounts with all the lienholders. After this takes place, you will receive the remaining funds as part of the settlement.

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.

Can a personal injury lawyer help me reduce liens?

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:

  • Verifying that all liens are valid, lawful, and contractual
  • Reviewing each charge on a lien for reasonableness
  • Negotiating a reduction

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.

How we’ve helped reduce liens: actual case examples

Let’s illustrate how we’ve been able to help clients reduce liens. Here are some actual examples, with first names changed for privacy.

Example One: Lien of $147,000 Waived

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. 

Example Two: PIP Lien Removed

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. 

Example Three: ERISA Lien of $32,000 Eliminated

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!

What should I know when I receive my personal injury settlement or verdict check?

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:

  • The total settlement award
  • Attorney fees
  • Liens paid (itemizing each lienholder and amount)
  • Your net settlement amount

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.

Talk to an injury attorney today!

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.

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