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“Lien” on Me: A Primer on Liens

By: Attorney Kendall W. Medway
 

Let’s say you’ve been injured. You’ve obtained the medical treatment that you need, filed suit against the party (or parties) responsible for your injuries, and after years of litigation have obtained either a settlement or a verdict intended to compensate you for your loss. The fight is over, right? You can move on with your life… right?

Well… maybe. Even after you have settled or otherwise resolved your claims against the other parties, you and your attorneys may still need to address the rights of those who have liens against the money that you have recovered.

But - what’s a lien?    

By definition, a lien is an interest of one party in the property of another, usually one created by contract or statute. There are many different types of liens, but they all mean the same thing: somebody wants to get paid out of your money. This can create big problems in litigation, even after claims have otherwise resolved, especially if the lien holders’ interests were not taken into consideration during the negotiation process.

This article, while certainly not exhaustive, is intended to give you some information about the most common types of liens encountered in personal injury and workers’ compensation litigation so that you can help your attorneys gather the information necessary to maximize your recovery.

Medicaid/Welfare

Individuals whose medical care is provided for or paid by a State administered benefits program need to inform counsel about their receipt of such benefits. In New Jersey, Medicaid’s right to be paid back for medical care that it has paid for is protected by State statute. If you are injured in an accident, and Medicaid pays for your treatment, it is your responsibility to ensure that Medicaid’s lien is protected. Medicaid has no obligation to pursue the parties responsible for your injuries.

That being said, Medicaid only has a right to recover those healthcare expenses that are related to your injuries. For example, if you suffer a whiplash-type injury in a car accident, Medicaid has no right to recover money that it spent on treatment for unrelated high blood pressure. Therefore, it is very important that your attorney obtain an itemized statement from Medicaid setting forth the medical treatment for which it has paid. It may be that a substantial portion of the alleged lien is unrelated to your claim.

Child Support

If you have a child support obligation, or more than one, and you are behind in your payments, you and your attorneys are responsible to ensure that those obligations are satisfied (to the extent possible) out of your recovery.

The State’s Probation departments do not always update the obligation amounts in a timely fashion. Your attorney should be made aware of your obligations; if you have made payments that are not reflected in the obligation amount given to your attorney by Probation, it may be necessary to hold a hearing to ensure that you are not paying more than necessary. Bear in mind, however, that any such issues have to be corrected before your injury claims are resolved, or you may find yourself bound by the obligation amount quoted by Probation.

Private Health Insurance/ERISA-based Welfare Plans

These liens are created by contract, so the best thing to do is to provide your attorneys with copies of the applicable insurance policy or benefits plan. Your attorneys will then be able to advise you whether a lien has been created and needs to be taken into consideration.

In general, health insurance and welfare plan liens provide a means by which the cost of medical treatment paid for by such plans may be recovered dollar for dollar out of any monetary recovery that you may make. Because medical treatment can be so expensive, these liens often amount to thousands of dollars.

Note that certain types of welfare plans that come into being under ERISA may also give rise to liens under theories of equity. However, the law concerning such liens is currently unsettled and should be discussed with your attorneys immediately if you believe that such circumstances apply to your case.

Medicare

Medicare’s liens arise as the result of Federal legislation that has been around since the 1970s. As Medicare has the full force and resources of the Federal government behind it, it pays to take care to ensure that any interest that Medicare may have in your claim is considered. The penalties for failing to do so can be severe, including suspension of Social Security benefits, possible suit in Federal District Court and triple damages. Your attorneys may also be sued for failing to consider Medicare’s interests.

However, as you can only obtain Medicare coverage due to age or disability, it is fairly easy to determine whether this scenario applies to you: you either have a Medicare card or you don’t.

Medicare has the right to recover any payments that it has made on a dollar for dollar basis, assuming that those payments are actually related to your injuries. Frequently, Medicare is careless when processing claims and will often include unrelated treatment in its payment summary forms, which provide you with the amount of Medicare’s lien.

Make sure that your attorneys know of your Medicare eligibility, and also make sure that both you and your attorneys review any statements received from Medicare. Liens can frequently be compromised to a substantially lower amount.

§40 Liens

This type of lien is another statutory creation, specifically §40 of the New Jersey Workers’ Compensation Act. At its essence, this Section of the Act prohibits a double recovery in those instances where an individual has two claims arising out of the same accident. For example, consider the situation of somebody who drives as part of his or her job. If that person were to be involved in a motor vehicle accident while working, they would be able to file both a workers’ compensation claim and a negligence claim for the same accident.

Since the law would unfairly favor those particular individuals, however, the later of the two recoveries is proportionately reduced based on the first recovery. So, if this is the situation in which you find yourself, make sure that your attorneys (assuming both claims are not being handled by the same office) coordinate their efforts on your behalf and keep each other informed as to the progress made in each case. Again, this helps to maximize your recovery.

General Tips

Make sure that you communicate with your attorneys about any situation in which medical treatment is being paid for by any source other than the parties responsible for your injuries. This will raise a red flag in the mind of any competent attorney and will hopefully result in a significant amount of information about the potential lien being gathered on your behalf.

Perhaps most importantly, hire experienced, knowledgeable attorneys to represent your interests. The more cases that have been handled by your attorneys, the more familiar they will be with issues such as those addressed in this article. Since they will already have an idea of what to expect in your claim, they will be better able to anticipate issues that may arise and can be proactive, rather than reactive, if liens should be asserted.

About the Author

This article was written by attorney Kendall Medway who practices in our Workers’ Compensation Department. Mr. Medway has specialized knowledge of liens. He and another attorney in this firm Anne McHugh gave a seminar in the Spring of 2008 sponsored by the Mercer County Bar Association on this topic.

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