Compromise of Lien

In most personal injury cases, there will be one or more lien claimants that will acquire a lien against your monetary recovery in your case.  There are several reasons this can and usually will happen.  The most common type of lien is a medical lien.  Another common type of lien is a health insurance lien.  A less frequent lien is a lien by operation of law, such as a Medicare, Medicaid, or Medi-Cal lien, which the government is not always aggressive in enforcing.  Quite often, a lien claimant may be willing to reduce or “compromise” its lien when you are attempting to reach a settlement of your claim. 

Medical Liens

When a doctor, physical therapist, or other health care provider performs services on a lien basis (they treat you now and get paid later), they will require that you or your lawyer sign a medical lien, giving them a lien against the recovery in your case.  This secures payment for their services.  When you are reaching a settlement of your case, the insurance company or other person or entity agreeing to pay your claim will give you a lump sum payment that will cover everything, including your medical bills, your lost wages, your pain and suffering, and other damages.  Often, it is difficult to determine what part of the settlement is for medical bills and what part is for other items.  Assuming that the medical bills would not be paid in full by the settlement after accounting for the portion that is intended to compensate you for lost wages and pain and suffering, it only makes sense and would be fair for the doctor, physical therapy treatment center, or other provider to compromise its claim.

Health Insurance Liens

Many health insurance policies contain provisions contractually requiring you to grant the insurance company a lien against your recovery and reimburse it if you are able to recover compensation for your medical bills in a personal injury case.  Health insurance companies may be willing to compromise their claim for two reasons.   First, similar to dealing with the liens of physicians and other health care providers, it is often difficult to determine which portion of your lump sum recovery is attributable to medical bills and which portion is attributable to other items.   But there is a second, additional reason to consider.   A health insurance company will have to pay for your doctor’s bills and other medical bills regardless of whether you recover any money by way of a personal injury claim.   Any money that they receive from your case is essentially a windfall to them.

Medicaid, Medicare and Medi-Cal

Government health programs such as Medicare, Medicaid and Medi-Cal typically have provisions giving them a lien against your recovery in your case.  Similar to health insurance companies, Medicare, Medicaid and Medi-Cal pay for the medical bills of qualified people and their families regardless of whether or not a recovery is obtained in a personal injury case.  Any money that they receive through your case is a windfall gain.  There is one additional factor to consider.  Many government agencies are not very aggressive in pursuing and enforcing claims, partly due to government agencies being understaffed.  This creates an added incentive and push for compromise of a lien claim when dealing with a government agency.

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