Dealing with liens upon settlement

  • By:David Bate

Prior to settling any claim, it’s imperative to understand what medical expenses are outstanding.  Further, it’s important to prioritize these expenses by whether a valid lien has been asserted. Do not rely on whether the lien has been properly presented to the Plaintiff or Plaintiff’s counsel.  In most jurisdictions, this is irrelevant. It’s important to check with the relevant records department (1) in the county where the Plaintiff lives, (2) the county where suit is pending, and (3) the county were treatment was received.

If the Plaintiff received benefits from Medicare or Medicaid, it’s also a requirement to write CMS and determine whether they are entitled to subrogation on funds they have expended in connection with the injuries that are the basis of the suit.  With the death of Ahlborn, a Supreme Court case that previously dealt with the negotiation and reduction of Medicare and Medicaid liens, Medicare and Medicaid may now have a “superlien” that must be dealt with prior to or at settlement.

It’s also important to determine whether the Plaintiff’s own insurer has asserted a subrogation lien for payments they have made on the Plaintiff’s behalf.  It would be a monumental problem to disregard all properly asserted liens, and distribute the proceeds of the settlement without paying the lienholders.

Once all liens and other outstanding medical bills have been located, identified, and prioritized, it’s important to determine the validity of each.  Asserting a lien differs by jurisdiction, and many liens are required to be updated periodically to remain valid. Further, it must be determined if the underlying debt is still valid and whether the liens or outstanding medical bills are within the applicable statute of limitations.  Additionally, some jurisdictions do not recognize certain liens, like those from chiropractors, since a chiropractor may not meet the definition of a “practitioner” in certain jurisdictions. Once all problematic issues have been identified, the client should be advised, in depth, and in writing, about the payment of liens that are invalid.

Lastly, check to determine whether the jurisdiction recognizes the made whole doctrine.  It may be that the amount of the settlement does not “make the Plaintiff whole,” meaning that the Plaintiff may not be legally required to recognize some outstanding debts in connection with settlement.  In these jurisdictions, attorneys will write each lienholder and medical provider a “made whole” letter, educating them about the made whole doctrine and instructing them that they are not entitled to payment from the proceeds of settlement.

When dealing with liens, it’s important to make sure that you are always looking out for the best interests of your client, with the knowledge that they may continue to hear from outstanding medical bills after the settlement.  If it is impossible to repay all outstanding medical bills due to liability problems or the amount of available insurance, an in depth meeting with your client to make sure they understand is imperative, and it must be in writing.  Then, dealing with all lienholders in writing is imperative.

It is imperative to hire a veteran litigator and experienced trial personal injury lawyer who has been involved in dealing with liens.


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