Who Gets a Slice? Navigating Liens in Personal Injury Cases

What is a Lien?

Think of a lien as someone standing in line to get paid from your settlement before you do. When you've been through a personal injury case, there are often medical providers, insurance companies, or even government programs that want reimbursement for the expenses they covered on your behalf. Simply put, a lien is their way of saying, 'I helped you out, now I need my piece of the pie.' Let’s break down who these parties are and how liens affect your settlement.

Formally, a lien is a legal claim that allows a creditor to secure payment for a debt by establishing a right over a debtor’s assets or settlement. In personal injury cases, liens typically arise when an individual receives medical treatment following an accident. These liens enable the injured person to access necessary medical care without upfront costs, with the understanding that they must repay the costs once a settlement or judgment is awarded.

Understanding the different types of liens and their repayment obligations is essential for determining how they impact settlement amounts in personal injury claims.

Types of Liens in Personal Injury Cases

     I.         No-Fault Subrogation

Function: In Minnesota’s no-fault insurance system, no-fault insurers (usually your auto insurance) typically do not have the right to recover the payments they’ve made. Instead, liability insurers sometimes attempt to diminish offers by the amount of no-fault benefits paid, which can become a factor in the negotiation process. This is something to talk about with your attorney.

   II.         Hospital Liens (Minnesota Statute 514.68)

Function: Hospitals in Minnesota can file a lien for reasonable charges related to hospital care provided to an injured person. This lien applies to any legal claims arising from injuries that require hospital treatment and can be enforced against the injured person’s settlement or recovery. (Minn. Stat. 514.68)

Process: To file a lien, the hospital must submit a statement to the county office within ten days of the patient’s discharge, detailing necessary information. The designated county office will then record the date and hour of each hospital lien. Settling a claim related to a hospital lien requires either the hospital's approval or payment of the owed amount. The hospital can take legal action to recover what its owed from the responsible parties. This legal action must happen in the county where the lien is filed, and it must be initiated within two years of the liens filing. (Minn. Stat. 514.71)

Settlement Impact: When settling, you must obtain the hospital’s approval to release the lien or pay the owed amount from your settlement, reducing the net amount you receive.

Lien Priority: Hospital liens typically have high priority due to their direct relation to medical treatment.

 III.         Public Assistance Liens (Minnesota Statute 256.015)

Function: This statute establishes a lien for medical expenses incurred by public assistance recipients, allowing the state to recover costs associated with medical care and other payments made due to injuries. This lien covers all recovery rights under any health care or injury benefit policy, including claims against third parties that may be liable for the injuries sustained. The term "state agency" includes prepaid health plans, children's mental health collaboratives, demonstration projects for individuals with disabilities, nursing homes involved in alternative payment projects, and county-based purchasing entities.

Process: The state agency files a verified lien statement with the appropriate court, requiring notice for potential claims. Recipients must inform the agency about claims as they arise. Healthcare providers are also mandated to notify the agency if third-party liability is suspected. Additionally, key stages of a claim require notification to the agency when a claim is filed, when an action is commenced, and when a claim is concluded.

Settlement Impact: Upon settlement or judgment, the state can recover the total amount of public assistance paid after deducting reasonable collection costs and attorney fees, ensuring the recipient receives at least one-third of the net recovery.

Priority: The state’s lien takes priority over other claims but does not affect attorney’s liens. The agency must file its lien within one year of a claim or medical bill payment.

 IV.         Medical Assistance Liens and Third-Party Liability (Minnesota Statute § 256B.042)

Function: This statute establishes a lien for medical care costs provided by the state to individuals injured in incidents involving potential claims against third parties. This statute is part of the state's Medical Assistance program, which offers health care coverage to low-income individuals and is jointly funded by federal and state governments. It encompasses various state programs, including Medicaid and prepaid health plans.

Process: The state agency must file a lien statement with the court, including details like the patient’s information, injury date, and amount owed. It has one year to file after notice or payment of medical bills. If notice is lacking, it has a year to act upon discovery. The attorney general oversees these liens, with support from prepaid health plans.

Settlement Impact: When a settlement or judgment occurs, the lien must be satisfied before any funds are distributed to the injured party. After reasonable attorney fees and costs of collection are deducted, the total amount paid for medical assistance by the state is then taken out. Importantly, the injured party is guaranteed to receive at least one-third of the remaining funds after these deductions.

Priority: This lien takes priority over other claims, meaning it must be paid before other creditors. However, attorney liens are still respected, allowing lawyers to claim their fees first.

   V.         Subrogation Rights and Private Insurance (Minnesota Statute § 256B.37)

Function: This statute outlines the state's right to recover costs when it provides medical assistance to those with private insurance or potential claims.

Process: When the state provides medical help, it can step in and use the rights of the person receiving that help to seek payment from insurance companies or other responsible parties. It's important for people receiving medical assistance to notify the state agency about any possible claims when they apply for assistance and as new claims come up. Medical providers also need to alert the state if they think a third party might have to pay for the care given. Everyone involved in a claim must inform the state before taking legal action or negotiating settlements, which ensures the agency knows about potential recoveries.

Settlement Impact: If the state does recover money from a claim, it can take back what it spent on medical assistance. First, any reasonable costs of collecting that money, including lawyer fees, are deducted. The recipient of the medical help is then entitled to at least one-third of the remaining money. This way, the person who received help can benefit from any recovery while the state gets back its costs.

Priority: Private insurance must be used first before the state pays for any medical assistance, ensuring it recovers costs only after all private benefits are exhausted.

 VI.         Medicare Liens (42 U.S.C. § 1395y(b))

Function: Medicare makes conditional payments for medical services related to injuries, requiring beneficiaries to reimburse it from any settlements or judgments.

Process: Beneficiaries must inform Medicare of claims and reimburse it for covered medical costs before retaining any settlement amounts. Medicare has one year to assert its recovery right upon notification.

Settlement Impact: Settling a claim requires beneficiaries to reimburse Medicare for any medical expenses it has covered, which can significantly reduce the amount they ultimately receive from the settlement.

Lien Priority: Medicare liens typically take precedence over other liens due to federal law mandating reimbursement for conditional payments before other claims are settled.

VII.         Employer Health Insurance Plans and Private Plans

Function: Oftentimes, clients must submit medical expenses to their health insurance plan when either no-fault benefits are unavailable, or exhausted. It must be determined what the rights to recovery are by looking at the plan document itself. The degree of difficulty in dealing with the lien increases when the lien falls under the Employee Retirement Income Security Act (“ERISA”). It must be determined whether the plan is self-funded or not, and what the plan’s true recovery rights are in each instance. A lien government under ERISA is stronger than one governed under Minnesota State Law as outlined below:

Process: The health plan language will state whether it is governed under state law or ERISA. If governed under state law, then Minnesota Statute Section 62A.095 provides that subrogation may be had against the client’s recovery only after it is established that the injured party has first received a full recovery. Minn. Stat. Sec. 62A.095 Subd. 2 (1). 

Lien Priority: Your lawyer can assist in the negotiation by insisting upon receiving a copy of the plan language and speaking with the health insurance representatives involved. 

Conclusions and How We Can Help with Negotiating Liens

Understanding and navigating liens is crucial for maximizing your settlement in a personal injury case. Each type of lien has its own implications that can affect your final recovery. When negotiating, it's essential to gather detailed information about the liens involved, including a copy of the lien language involved, amounts owed and conditions for their release. Many creditors may be open to negotiating a reduced amount, so documentation is key.

Our experienced team is here to help you understand your rights and effectively negotiate on your behalf. If you have questions about liens or need assistance with your personal injury claim, please contact our law firm. We’re ready to guide you through this complex process.

This document provides a sample of potential issues to address in Minnesota and is not intended as legal advice. Each case is unique, and we recommend discussing specific circumstances with a qualified attorney.