PERSONAL INJURY LIENS
WHY PERSONAL INJURY LIENS ARE IMPORTANT
In personal injury cases, whether it be a dog bite case or a car accident case, liens occur and the personal injury attorney has to manage these liens or the case can go south in a hurry. Liens can be helpful, or they can be deadly to a personal injury case.
A lien is a legal term that describes debt being secured. Secured debts are like your mortgage or car note. If you do not pay, they foreclose on your house and repossess your car. The creditor lien holder has a right to the collateral, i.e. the car or the house if you don’t pay the debt. Sometimes furniture stores can secure the installments payments with the furniture they sold, same goes with diamond rings. This is called purchase money security interest. Meaning they take back their stuff if you do not pay.
TYPES OF PERSONAL INJURY LIENS
There are several types of liens in the personal injury context. All liens need to be paid or the personal injury attorney can get sued, along with his client for not paying them. Here are the most common types of liens in a personal injury case.
1. Medical Lien. This is a consensual lien created by the contracting parties, i.e. the medical provider and the patient. This lien does not have to occur. Instead, it is by the agreement of the parties. Common medical liens are chiropractic or physical therapy liens whereby these medical providers agree to provide the patient continued medical care, but will not get paid until the end of the case. An example is where the chiropractic physician bills the patient’s personal injury protection benefits attached to the patient’s car insurance. After exhausting the normal $3,000 medical pay limits, the chiropractor may bill another $1,500 on a lien basis to get the patient better, because the patient needs the care but does not have private health care insurance to pay for it. Physical therapists who often treat car collision victims will work in the same way. Another form of the medical lien is specialty work like scar revision, or knee surgery. The variety of lien work is as varied as doctors who are persuaded that they will ultimately get paid on the back end. All too often, car crash victims do not have private health care insurance and they must get their needed medical care through a lien. The drawbacks of lien work is since the medical provider will not get paid until the back end, the provider will add a premium, like interest, to make up for the months or years of not getting paid, waiting for the case to settle.
2. Private Health Care Insurance Liens. It is ironic that you pay so much for private health care insurance with premiums and deductibles, that the insurers often want the money back from your settlement because they paid for medical care when the injuries were caused by a third person wrongdoer. Technically, these liens are by consent, but really the covered person (“insureds”) have no bargaining power against these large insurance companies. It is a one way street. These liens arise when you are hit in a car wreck, or any negligent situation, and your private health care insurance pays for the medical care incurred because of the wrongdoing of the other at-fault car. For example, you are rear-ended and you break your leg. You go to the ER and your private health care insurance pays $20,000. If you recover a $25,000 settlement, you will immediately pay your private health care insurer back the first $20,000. Leaving you with $5,000 to deal with costs and attorney fees still outstanding. Also the private health care insurer does not take into account all those premiums or deductibles that you paid over the years. It does not care. A one way street and your going the wrong way.
3. Medicaid Liens. Medicaid liens are created by federal and state law. If you sign up for Medicaid or use Medicaid, you will pay back Medicaid any monies it spent on your medical care that was caused by an at-fault party. It works very similar to private health insurance liens.
4. Medicare Liens. Medicare liens are also created by federal law. They work very similar to Medicaid liens, except when dealing with Medicare you had better pack a lunch and probably dinner also just to talk to a real person to find out what your lien balance is. They are very hard to deal with and it can take months to resolve a Medicare lien.
5. Funding Liens. Funding liens are where private companies give private, small loans to people hurt in personal injury cases. The loan amounts could be $800 to $2,500 depending on the facts. Basically, these companies front the money and charge significant interest on these loans.
6. Hospital Liens. Utah hospital liens are created by statute at Utah Code Ann. 38-7-1. Utah hospital liens are filed complaints with a Utah District Court asserting a lien on any personal injury settlement that may occur in the future where the hospital provided care to an accident victim because of an at-fault party. Your personal injury attorney will often times try to beat these liens before they are filed or are monitoring the court’s website for hospital lien filings.
REDUCING AND PAYING LIEN HOLDERS
All liens must be paid or the attorney risks being sued by the lien holder, along with the client. The attorney cannot give the client his settlement proceeds until all liens are resolved, which can take some time. This can be frustrating to the client who has already waited so long to settle their case and often needs the funds as soon as possible.
The attorney will work to reduce the liens and help the lien holder to realize that if the attorney had not been involved, the lien holder would not have been paid. Without the personal injury attorney, the insurance companies, lien holders or funding company would have to pursue the at-fault party for payment of their liens. This just doesn’t happen. Without the attorney, the lien holders would not get paid. With this in mind, the attorney asks each lien holder to reduce their liens generally by 1/3 taking into consideration the attorney’s time and costs expended on the case to collect the personal injury settlement. Sometimes a larger reduction is needed. Sometimes the lien holders refuse to reduce their liens and the case stalls for a year until the lien holder realizes they will not get paid unless they reduce because there simply is not enough money to go around to all the lien holders.
LIEN HOLDER CASE EXAMPLES
Imagine a rear-end collision. You go to the ER and then pursue chiropractic care. You have $3,000 in personal injury protection benefits under your Utah car insurance policy. The ER costs $1,000 and the chiropractor bills $3,000 for his services. Six months later you reach medical maturity and are released from care. Your medical bills top out at $4,000 and your PIP medical payments only cover the ER and the first $2,000 of the chiropractor’s bills. The chiropractor months ago had you sign a medical lien for the remaining chiropractic care he provided that was not covered by your private health insurance, or is above and beyond your $3,000 PIP coverage. A $10,000 settlement occurs. The first thing that happens is the attorney receives $3,300 for his work on the case under the written contingency fee agreement. Then the attorney recoups his costs on the case, which vary from case to case, but in our example is $50 for records requests to get the bills, records and police report. Your settlement is now left with $6,650. But before you receive the remaining settlement, you must pay all your liens, which in this example is a $1,000 chiropractor lien. At the end of the day, assuming there are no other liens your $10,000 settlement will net you $5,650. Sometimes the attorney will ask the chiropractor to reduce his $1,000 lien by 1/3 to take into consideration the attorney’s time and costs to collect the chiropractor’s lien.
I have had several cases where my client could not afford further physical therapy, but still needed the medical care. I was able to secure lien based physical therapy, which the client greatly appreciated, and the additional medical care was eventually paid for by the at-fault party’s insurance company.
In other cases, my clients needed knee surgery, but did not have private health care insurance to pay for it. After securing surgery funding my client’s felt better and they were still able to recoup the costs of the surgery in the settlement.