Guide to Liens in Personal Injury Cases- Car Accident Lawyers

Liens in Personal Injury Cases

Basics of Liens and Subrogation

Subrogation comes from the latin word “Subrogare” , which means to substitute for. In general, subrogation issues arise whenever a person is injured and someone other than the at fault parties pays some benefit or cost associated with the injury. Out of fairness to the payor, the law permits them to essentially stand in the shoes of the injured party in seeking reimbursement.
Subrogation rights arise in 3 basic scenarios:

Automatically as a matter of law – This is an equitable doctrine that is rooted in the concept of unjust enrichment (i.e. conferring a benefit triggers and obligation to repay if you are “enriched” by subsequent compensation)
By contract
By statute (i.e. ERISA, Medicare or Medicaid)

Each scenario poses a bit of a different analysis, but basic principles apply equally. The biggest challenge in personal injury cases is being mindful of all possible rights to subrogation. Failing to do so can leave you open to malpractice claims, so the stakes are exceedingly high. This reality means that a personal injury lawyer must remain vigilant, organized and cautious with respect to any potential liens. Communication with the client is absolutely vital. It’s also critical to keep reminding yourself and your client that there is a stark and real possibility that the client may go without meaningful compensation due to an overarching legal interest in a third party for the proceeds. Managing this takes analytic ability, experience and diligence. This is especially true in the context of ERISA liens, explained in more detail below.

Collecting and Negotiating

Collecting medical bills can be incredibly slow and arduous, especially if you are dealing with certain health insurers. The best practice is to communicate with these insurers early and often. At the outset, you should obtain a wide range of medical releases from your client to ensure you have the appropriate authorizations in place from the start. Do not wait to start collecting these bills – waiting too long can put you in a position of having a blind spot in negotiations, or otherwise force unnecessary filing of suit to protect the statute of limitation. Information is power, so the more information you have regarding the subrogated amounts, the better you are able to negotiate a settlement with a complete understanding of the outstanding obligations of your client. More importantly, failure to consider all subrogated parties prior to settlement can open yourself up to malpractice claims.

There is an art to negotiating liens – but the approach will vary widely depending on the insurer and the source of the lien. In general, insurers are prepared to work with you to lower a lien amount. However, they will often want to know the full amount of settlement. Trap for the wary: be aware of limitations due to confidentiality provisions in a settlement here. If the settlement is more than adequate to repay the subrogated carrier, your negotiating leverage may be a bit impaired. Most insurers will rather take a “one in the hand is better than two in the bush” approach (i.e. better to get something now than chase the patient later). Use this to your client’s advantage – remember that you have provided a service to the insurer in securing compensation for their lien. Don’t be afraid to use that fact to your client’s advantage.

Logic is your friend here. You want to convey to the claims representative that in many ways, pursuing your client’s case is also in their best interest. Explaining that the plaintiff has no incentive to pursue a case for the sole benefit of the subrogated party – so that negotiation of the lien can ensure that the Plaintiff has a sufficient upside to litigate. You also want to make the case that if your client has had to compromise settlement due to liability considerations or other weaknesses in the case, the subrogated parties should extend the same courtesy. Also remember to earmark certain sums for certain injuries. For example, if a case is settled for $100,000, and $30,000 of it represents compensation for medical bills and pain and suffering, and $70,000 represents loss of income or earning potential – make the case that the subrogated party is only entitled to that amount which represents repayment for the medical services.

Hospital Liens

A hospital (or Physician’s Lien) is a lien made against a third party settlement. It is a legal device used by hospitals or doctor’s offices to secure payment for services rendered. Ohio is very unique in that there is no statewide law permitting for liens in the context of hospitals or physicians. As of 4/28/20, Ohio is only one of 9 states in the US without such a law. These states do not currently have a statute with a general “medical lien” provision that establishes a statutory foundation for all health care providers and institutions to file liens in the state.

However, you should always remain aware of equitable arguments for the establishment of liens – as well as contractual provisions that may apply to a unique circumstance of your client’s case. Also be aware of liens that are created due to affirmative duties undertaken by your client. For example, a “letter of protection” is a tool many lawyers use in the absence of insurance to ensure continuity of treatment for their clients. In sum, this letter says that the lien for services rendered will be affirmatively protected by the lawyer, at the direction of the client. In many circumstances, physicians or hospitals will refuse to treat without such assurances. If you use protection letters, take great effort to abide by your representations in the letter. Failure to do so may result in lawsuits against you or your client, and a general detriment to your reputation.

Also, you want to ensure that you look carefully at any payments made to a doctor’s office or hospital and analyze whether they were made as a “paid in full” payment. There are circumstances wherein accepting partial payment can act as a full waiver of any deficiency, but this is fact specific. Lastly, remember that adjusters are human beings too. Appealing to their sense of compassion or sympathy can be a powerful tool.

Medicaid and Medicare Liens – How to and Pointers

Federal law provides that Medicare has strong statutory subrogation rights under 42 U.S.C.A. 1395. In this provision, the law provides that: The United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.

Further,, the Medicare, Medicaid and SCHIP Extension Act of 2007 enacted one of the most intensive reporting requirements in Medicare History. In sum, these requirements place an obligation on any entity that pays a settlement or judgment to a personal injury Plaintiff to report it to the Centers for Medicare and Medicaid Services. This means that there is an increased risk for any party that touches personal injury settlement proceeds at risk of civil penalties and damages for mismanagement.

The law surrounding medical payments (specifically 42 CFR § 411.24) states that all payments from Medicare are conditional, and anytime medical treatment is rendered, the medicare lien automatically attached to prospective proceeds. The overarching purpose of this is to ensure that taxpayers don’t ultimately become responsible for footing the bill for another’s malfeasance or negligence.

Remember that CMS is authorized and empowered by statute to seek recovery against a wide array of actors in a personal injury action – including insurance carriers, medicare beneficiaries, defense lawyers, plaintiff’s lawyer and medical providers. It’s also important to remember that, since Medicare is not a party to any settlement, they are not bound by those terms. This can have the effect of nullifying any indemnification or hold harmless clauses in a release.

Also consider jurisdiction whenever contemplating motion practice related to federal liens. In general, State Courts have no jurisdiction over Medicare. At the outset of representation, you must identify if the individual is “Medicare Eligible”. As a rule of thumb, anyone that is 65 years or older likely is eligible for Medicare. Always ask prospective clients about any and all health insurance they have available, and get copies of the respective health insurance cards on day one. Early focus on this will ensure you are in a position to settle the case in the future, with a deal in place with Medicare for the moment you are ready to settle and distribute proceeds. You do not want to have an offer accepted by the client, only to have months of delay in disbursement occasioned by lack of due diligence in dealing with the Medicare lien. Suffice it to say, this will create very unhappy clients.

Medicare Lien Process

After sending the Medicare authorization to Medicare’s Recovery Contractor, patience is often required but you should eventually receive a confirmation in response. Don’t waste time and energy trying to speed this process up – it is unlikely to work. In general, you will merely wait on hold for a protracted period, only to be connected to a low level employee with no authority beyond telling you to send you request in writing. Eventually, however, you should receive a letter entitled “Rights and Responsibilities” which will assign you a unique case number.

Upon the completion of all treatment, you must then request a “conditional payment letter” and “payment summary form”. These documents will list any and all payments that Medicare assumes are related to the case. Trap for the Wary: remember that this summary may not be complete, so extra attention should be paid to ensuring any and all visits are reflected. You also will want to evaluate the CPT (Common Procedural Technology) Codes to understand the basis of the billing, and to try to identify any services billed that are unrelated to the personal injury case. If you find an error, you will need to reduce your position into writing and send it to Medicare. You will usually receive a response in 60 days. Due to the inevitably slow nature of this, you should take pains to ensure everything you could possibly need is in the initial correspondence – as follow up requests for information will delay the process by 30-60 days minimum. You can always reach out to speak to a representative, but remember that you are unlikely to speak to the same person twice. Resist the urge to take out frustration on the representative – even feigning patience will help you get to a successful resolution in the end.

Once settlement is reached, you must inform Medicare, as soon as practicably possible, of the following information: The date of settlement; and Amount of settlement; and A copy of the distribution sheet; and The information for the liability insurer. 42 C.F.R. §411.37 provides for a pro-rata reduction in the lien amount that is calculated based on the percentage of the “procurement costs” (e.g., attorney fees and expenses). This means that, in a circumstance wherein the Medicare payments are less than the settlement or judgment (which should be most cases), Medicare will determine the ratio of procurement costs to total settlement, and then apply the ratio to the aggregate Medicare amounts. For example, if a personal injury case settles for $100,000, with accrued costs and disbursements of $10,000, a legal deee of $30,000 (one-third of remaining $90,000), Medicare would reduce it’s lien by 40% ($40,000 out of $100,000). In some circumstances, you may be required to provide a copy of the engagement letter setting forth the percentage paid to the lawyer. In circumstances wherein you accept a smaller fee (for example to avoid a costly and difficult trial) you are presented with a conundrum of sorts. The lower fee will have the unintended effect of reducing the ratio for this calculation and increasing the net amount paid to Medicare. Remember that the insurer, no matter how hard they protest, has no right to add Medicare as a payee on a settlement check. They must simply trust that you and/or you client will honor the Medicare Lien. Waivers are rarely granted, but can be requested in certain unique circumstances.

Establishing a Medicare Set-Aside
Practitioners should take great care to properly evaluate all medical expenses before resolving a claim. It’s important to consider both past and future medical expenses – especially when Medicare is involved. Medicare is always regarded under Federal law as a “secondary payer”, which means that if there is any other insurance available, Medicare will not pay for the treatment expenses once that money is made available. Since a personal injury settlement is intended to cover future medical bills, Medicare maintains an interest in ensuring that that portion of settlement related to future medical expenses is used before Medicare covers future expenses. See Medicare Secondary Payer Act, 42 U.S.C. §1395.

The purpose of the set aside provisions is to escrow any funds intended for use in the repayment of future medical expenses. Once a settlement is reached, the amount of settlement that is “allocated” and “set-aside” for future medical treatment must be placed in a Medicare Set-Aside Account and spent strictly for treatment related to the accident. In order to establish a Medicare set-aside, you must submit a formal proposal to CMS outlining the projection of future medical expenses.
This is reviewed by CMS, who will return an opinion about the sufficiency of the amount. If the Medicare Set-Aside account is later exhausted prematurely, Medicare will then continue to pay bills for ongoing treatment.

Factors to consider in calculating future costs:

Prescriptions; and
Surgeries; and
Tests; and
Other Medical Procedures; and
Doctor’s Visits; and
Supplies; and
Equipment

Workers’ Compensation Liens: Procedures, Reduction and Resolution

Worker’s Compensation Liens are some of the more stubborn types of liens to deal with. The Ohio BWC has the right of recovery from a third person, party, or insurance company for the cost of benefits paid on behalf of the injured worker according to ORC 4123.93 et.seq. In relevant portion, this law reads: The payment of compensation or benefits pursuant to this chapter or Chapter 4121., 4127., or 4131., of the Revised Code creates a right of recovery in favor of a statutory subrogee against a third party, and the statutory subrogee is subrogated to the rights of a claimant against that third party. The net amount recovered is subject to a statutory subrogee’s right of recovery. There are very specific calculations codified in statute for BWC reimbursement. No settlement, compromise, judgment, award, or other recovery in any action or claim by a claimant shall be final unless the claimant provides the statutory subrogee and, when required, the attorney general, with prior notice and a reasonable opportunity to assert its subrogation rights.

The right of subrogation under this chapter is automatic, regardless of whether a statutory subrogee is joined as a party in an action by a claimant against a third party. A statutory subrogee may assert its subrogation rights through correspondence with the claimant and the third party or their legal representatives.

Essentials for Managing ERISA Liens
ERISA stands for the Employment Retirement Income Security Act of 1974. 29 U.S.C. §1001. This law creates a set of minimum standards that govern the necessary protections for individuals covered by retirement and health plans in private business. As defined, a “employee welfare benefit plan” is any group health plan established for or maintained by an employer that provides medical care or treatment to it’s participants (or their dependants). ERISA plan managers are fiduciaries, thus they are tasked with certain heightened obligations to the plan participants. Because of this, there is always a possibility that they can be sued for breach of fiduciary duty. When it comes to ERISA liens, read more in depth here.

Pre-Litigation Funding Leads

Not all liens are created equal, and some may be subordinate to others by operation of statute or contract. This is particularly true when “Pre-Litigation Funding” has been used. Oftentimes the contract for funding will subordinate the lien to Attorney’s Fees or other liens. Also remember that not all liens are enforceable against all parties involved. For example, consider the case of Kisling, Nestico and Redick v. Progressive decided this year in the Ohio Supreme Court. KNR had represented a client, Thomas, in an automobile accident. A settlement of $12,500 was negotiated, which the client rejected and fired KNR. KNR sent a notice of lien to Progressive – stating they had a quantum meruit lien on the proceeds.

The case was settled between Thomas and Progressive for $13,044 – none of which was paid toward the KNR lien. An intermediary Court found that, since Progressive had notice of the lien, they were liable for the non-payment. The Ohio Supreme Court held, however, that a discharged law firm cannot enforce its charging lien against the tortfeasor’s insurer – and instead could only sue their former client. Personal injury claims are notoriously complicated to value. There is no exact formula. Many practitioners fear undervaluing a case and asking for too little, thereby getting an offer that is less than what the carrier would otherwise be prepared to pay. However, practitioners need to be wary of overcorrecting for this fear and making an offer that is so high in relation to the value that the adjuster will simply never make an offer.