Liens and Subrogation Overview



Seeking compensation for your North Carolina personal injury claim can be a tedious and complicated process. However, as you work toward a resolution of your North Carolina injury claim, you must be diligent and determine any liens or subrogation interests that may be attached to your personal injury settlement or judgment. While you may not be certain what these legal terms mean, it is essential that you understand the process of subrogation, what liens may exist and be attached to your settlement, and how medical liens work. This article should be used as an introduction to understand how liens and subrogation may affect your settlement.

Medical liens can range from demands for reimbursement to subrogation interests that attach directly to your personal injury case’s settlement or judgment. Generally speaking, a lien is a party’s right to receive reimbursement directly from your settlement for your injuries. While this right to demand payment from your settlement may feel unfair, there are many strategies for combating or mitigating medical liens to protect your settlement.

What are Liens and Subrogation Rights and What Do They Attach To?

As previously mentioned, seeking compensation for your personal injury claim can be a complicated process. Personal injury liens make this process even more complex. Liens allow a third party to possess interest or ownership in your personal or real property to satisfy a debt. When you are injured in an accident, healthcare providers, insurance companies or government programs may be able to place liens on your settlement or judgment proceeds from your accident. Therefore, when you receive a settlement or judgment from your accident, a portion of the proceeds may go to one of the lien holders.

A third party may also be able to attach to your recovery proceeds through subrogation. When injured in an accident, medical treatment is often necessary. Generally, if no fault has yet been determined in your accident, your own insurance company will cover some or all of your medical costs. The insurance company may seek reimbursement for those costs if a third party is found to be at fault. Therefore, the insurance company will have a “subrogation interest or lien” in any recovery proceeds related to your accident. North Carolina, however, is unique, as the state strictly prohibits subrogation clauses in privately funded health insurance policies. Essentially, this means that certain insurance company policies will not likely be able to receive subrogation interests in your personal injury settlement or judgment.

What Does a Lien Attach To?

Medical liens attach to settlement or judgment proceeds from your personal injury case. In essence, healthcare providers, insurance companies or government programs may attach to recovery proceeds of your personal injury case when they have either provided medical services or paid for your medical services, treatment or equipment. The medical services, treatment or equipment paid for or provided must relate to the injuries sustained from the personal injury claim.

Who Can Claim Liens?

Determining who has or may have a lien on your recovery proceeds can be difficult. In North Carolina, there are several types of common personal injury liens or subrogation interests. The list below provides a general description and information of some of the most common liens and subrogation mechanisms.

Medical Provider/Physician Liens

One of the most common liens that can attach to your personal injury settlement is a lien for a medical provider, known as a physician lien. Any physician who provides medical services can claim a medical lien against your settlement proceeds. This includes but is not limited to physicians, dentists, nurses and hospitals. In general, physician liens are the ability of a healthcare/medical provider to secure an interest on the proceeds received from a personal injury settlement or judgment and are governed by North Carolina General Statutes §44-49, §44-50, and §44-50.1.

Essentially, North Carolina law requires an accident victim or their personal injury lawyer to distribute a portion of the settlement to medical providers who have properly “perfected” their lien. However, if the lien is not properly “perfected,” repayment of the lien may not be required.

In order to perfect a lien, a medical provider must do three things:

(1) Furnish all medical records to the plaintiff or plaintiff’s attorney, free of charge

(2) Furnish all medical bills to the plaintiff or plaintiff’s attorney, free of charge

(3) Give an affirmative written notice of the lien to either the plaintiff or the plaintiff’s attorney

If a medical provider fails to comply with any of the three listed items, then the plaintiff’s attorney may be not required to pay the medical bills out of the proceeds of the personal injury settlement. If you need more information related to this topic, please read our article on Physicians Liens, where you can find detailed information pertaining to medical provider liens.

Medicaid Lien

Medicaid is a federally funded program administered by the states. As you may be aware, Medicaid is a need-based program that is provided to those who fall within the strict qualification guidelines. Medicaid liens are governed by the complex North Carolina General Statute §108A-57. Essentially, Medicaid liens attach to personal injury proceeds once the injured party accepts Medicaid coverage. Therefore, if you are injured in an accident and accept benefits from Medicaid to help cover treatment for those injuries, Medicaid automatically receives an interest on future settlement or judgment proceeds for the accident.

It is important to note that Medicaid’s recovery on their lien may not exceed 1/3 of your total settlement or judgment amount. Furthermore, a change in North Carolina law in 2013 allows for an injured party to petition the court and request further limitation on the amount Medicaid may recover. Moreover, the change in law now allows Medicaid to negotiate their lien amount.

Handling Medicaid liens can be difficult and cumbersome. Speaking with a lawyer and seeking legal advice about your injuries and Medicaid coverage is always a good idea. For further information pertaining to Medicaid liens, please read our article on Medicaid Liens.

Medicare Liens

Similarly, Medicare is a federally funded government program that provides some health insurance assistance to individuals with disabilities and citizens receiving Social Security benefits. Medicare is classified as a “secondary” payer. In other words, Medicare will not pay for medical treatment until all other avenues are exhausted. These avenues are generally personal coverage plans.

Medicare liens automatically attach to the proceeds of a settlement or judgment so long as Medicare has made payments toward any of the medical expenses related to the personal injury treatment. Furthermore, Medicare receives a priority right of reimbursement. This means that if there is a Medicare lien attached to your recovery proceeds, that lien must be paid first before all other liens. Therefore, if the Medicare lien is worth 50 percent or more of your net proceeds (after attorney’s fees, if applicable) then no other lien will be entitled to payment from the proceeds.

For a more detailed analysis of Medicare liens, please read our article Medicare Liens.

Health Insurance Plans

Health insurance can be extremely helpful in paying for your medical expenses and treatment after a car accident. Certain health insurance providers will not be allowed to claim reimbursement for the cost of your medical treatment in North Carolina. It is important to know why that is and when it may not apply. North Carolina is very unique, as the state strictly prohibits subrogation language or clauses in privately funded health insurance policies. This means that North Carolina insurance companies are not able to receive a subrogation interest in your personal injury recovery. Many insurance companies, however, still try to claim a right to reimbursement under exceptions to this rule.

Determining whether a health insurance provider is entitled to reimbursement can be confusing and convoluted, even after you have resolved your case. You should always consider speaking with an experienced personal injury attorney for some guidance through the complex entanglement that makes up the concept of liens.

Employee Retirement Income Security Act (ERISA) Policies

The Employee Retirement Income and Security Act, known as ERISA, is a complex federal law that allows employers to establish a self-funded insurance policy that is not subject to North Carolina’s anti-subrogation insurance laws. This is significant because North Carolina strictly prohibits subrogation clauses in privately funded health insurance policies. Essentially, this means that insurance companies will not likely be able to receive a subrogation interest in your personal injury recovery (see explanation above for subrogation). ERISA plans are unique because they do not have to follow North Carolina’s strict no-subrogation laws, as ERISA is governed not by state law but by federal law.

Generally speaking, an employer who provides an ERISA insurance-based plan will likely be entitled to reimbursement for all medical expenses paid for on behalf of the injured party from settlements or judgments that relate to those medical expenses and treatment. Furthermore, the federal government has ruled that as long as the notice of subrogation is in the policy’s contract, then the insurance provider will likely have a right to reimbursement from your car accident settlement.

The ERISA statute and the liens it creates are very difficult to understand. Please read our article ERISA Liens for more information regarding identifying ERISA liens and negotiating ERISA liens.

Child Support Liens

Child support liens may attach to the proceeds of a personal injury settlement or judgment. If you receive a settlement or judgment and you owe past-due child support, the other parent or the Department of Health and Human Services may seek a lien against your recovery to satisfy your past-due child support obligations. Before a child support lien can attach, a court order must be issued stating that child support is, in fact, past due. The court order must also state the amount of child support past due. Either the parent or the Department of Health and Human Services can seek the court order. Additionally, the parent or Department of Health and Human Services will need to send a notice of the lien along with a certified copy of the court order to you, your insurance company or your attorney in order to give notice. The lien will then attach once the notice and a copy of the certified court order are received.

It is important to note that a child support lien will not attach to a recovery that is less than $3,000. Therefore, if you recover only $2,999, the other parent or Department of Health and Human Services will not receive anything. Also, child support liens are subordinate to most other liens. In other words, medical provider liens, Medicare liens and Medicaid liens will receive their portion of the proceeds first.

This article is merely an introduction to understanding the mechanics of these potential claims on your settlement or award. More information related to child support liens may be found in our article Child Support Liens.

State Health Plan for Teachers and State Employees (SEHP)

On July 20, 2004, North Carolina legislation established a lien against personal injury recovery for any medical expenses paid by the State Health Plan for Teachers and State Employees. All state employees and their dependents covered by the health insurance program are subject to the liens. In other words, if you are a state employee and are covered by the insurance program, you may be obligated to reimburse the health plan for any medical expenses paid through settlement or judgment proceeds.

The lien is unique in that it is automatically perfected; therefore, no notice of the lien is required. Furthermore, the lien attaches to settlement or judgment proceeds on the date the health plan pays for the medical expenses. It is also important to note that the health plan may not recover more than 50 percent of the net proceeds (after attorney’s fees and costs are deducted, if applicable).

For more information on SEHP liens and subrogation, please read our article on SEHP Liens.

TRICARE

TRICARE is a governmental health care program that covers military personnel, retirees and their families. The federal government has established a lien right against personal injury recovery for any medical expenses paid by TRICARE.

The federal government does not require TRICARE to give notice of any liens. Furthermore, the lien will attach once treatment is provided to the insured. Once the TRICARE lien is attached, you may be obligated to use most of your recovery proceeds to pay the lien, as TRICARE does not have a cap on how much of the recovery proceeds it can take. Furthermore, TRICARE will receive reimbursement before most other liens, including attorney’s fees. In other words, attorney’s fees are determined after TRICARE receives their portion of the recovery proceeds. With this being said, TRICARE does allow for adjustments and can be reduced or waived if justice so requires. Therefore, it is always a good idea to hire an attorney to negotiate these types of liens.

For further information on TRICARE, please read our article on TRICARE liens.

Federal Employees Health Benefit Act (FEHBA)

FEHBA covers and regulates health benefit plans for federal employees. In North Carolina, Blue Cross Blue Shield covers the majority of federal employees under the plan. Within each plan of coverage lies a subrogation clause entitling the insurer reimbursement if someone else is found responsible for injuries. Basically, FEHBA coverage requires a contractual agreement to reimburse medical cost with personal injury settlement or judgment proceeds.

Determining FEHBA subrogation rights is very difficult as they directly conflict with North Carolina’s prohibition on subrogation provisions in healthcare plans. It is highly recommended that you speak with an attorney, as they will be best suited to navigate the complex maze of FEHBA reimbursement claims.

North Carolina Workers’ Compensation Liens

If you were injured at work by a person who does not work for your employer, your employer’s workers’ compensation insurance carrier likely has a lien on your recovery for your personal injuries. In other words, if your employer’s insurance pays for an injury, the lien is to guarantee that your employer or their insurance carrier will get paid back for the money paid for your medical treatment. North Carolina also allows for a Superior Court Judge to reduce or eliminate a workers’ compensation lien. The judge will look at what is “equitable” in making his or her decision. The Superior Court, however, may only reduce or eliminate the lien when there has been a final settlement agreement between you and the third party.

For further information on North Carolina’s workers’ compensation liens, please visit the following link. [LINK]

Federal Workers’ Compensation Liens

If you are a federal employee who was injured at work by a third party (someone who does not work for your employer) the federal government likely has a lien on your recovery for personal injury in the amount they paid for your medical treatment. The federal government will have priority on the recovery proceeds and may not waive or reduce the amount of the lien. The federal government, does, however, allow the injured party to receive at least 1/5 of the net recovery proceeds (after reasonable attorney’s fees are deducted, if applicable). Furthermore, you may not settle your case for less than the government’s workers’ compensation lien amount without prior written permission.

For further information on federal workers’ compensation liens, please read our article on the subject.

State Vocational Rehabilitation

As you are aware, accidents can affect one’s life significantly. When an accident causes temporary or permanent physical or mental disabilities, the injured party may receive aid through the Division of Vocational Rehabilitation Services. When an injured person receives assistance through the program, pursuant to a financial needs test, the state likely has a lien on any personal injury recovery. If no financial needs test was given, then the program will not likely be able to receive a lien on recovery proceeds.

As previously mentioned, once the proceeds of a personal injury case are received, the liens attached to the proceeds will receive their share. A rehabilitation lien receives their portion of the proceeds after attorney’s fees and costs are deducted; however, the lien does not allow the fees to exceed one-third of the amount recovered. Likewise, the amount of the lien is capped at one-third of the total amount. Furthermore, when the recovery proceeds do not fully cover the lien amount, state law allows for a total or partial waiver of the remaining balance. The waiver generally occurs when the Division of Vocational Rehabilitation finds that enforcement of the lien hinders the injured party’s rehabilitation.

For further information on state vocational rehabilitation liens, please check out our article on this topic.

Can I Refuse to Pay a Lien?

Medical liens and subrogation interests that are attached to your recovery from a personal injury case must be paid, when valid. Whenever there is a dispute as to the validity of a lien, the money should be placed aside until the lien’s validity is determined. A lien that is invalid does not have to be paid through the personal injury proceeds; however, you may still be obligated to pay those debts, when applicable. Determining whether you are obligated to pay a lien is a confusing process, and we recommend obtaining further information here.

Can I Tell My Lawyer Not to Pay the Lien?

Generally speaking, you may tell your lawyer not to pay a lien. Your attorney, however, may still be required to pay the lien with a portion of your personal injury proceeds as required by law. While it is an attorney’s obligation to represent your needs and requests to their fullest ability, attorneys have ethical guidelines by which they must abide. In North Carolina, an attorney is governed by the Rules of Professional Conduct established by the North Carolina State Bar. Per the rules, an attorney is required to disburse settlement or judgment proceeds in accordance with his or her client’s instructions. There is an exception to this general rule that arises when a medical provider has perfected their lien. When a medical lien is perfected, the attorney may pay the lien directly, if liquidated (exact amount), or set aside the amount in a trust account. An attorney will likely pay the lien or set aside the amount to protect themselves from liability, as an attorney may be personally liable for certain liens that are not paid.

If an attorney places money in a trust account, they should not remove any money from the trust until they are directed to do so by their client. Essentially, an attorney should not use the money in trust to pay a lien amount until the client has given their attorney the authority to do so.

Can I Negotiate a Lien?

Generally speaking, yes you can and should try to negotiate your lien amount. While not all personal injury liens are negotiable, the majority are, and those lien holders are often inclined and willing to accept a lesser amount, in certain circumstances. A lien should be negotiated before a final settlement is achieved. A lien holder will likely negotiate their lien amount if they are under the impression that the entire “deal” could fall through if they do not negotiate. Most lien holders would rather receive a definitive amount from a settlement agreement than receive nothing at all and spend money on further litigation.

Negotiating personal injury liens can be daunting but represents an integral part of a personal injury claim. It is always a good idea to seek legal representation to handle your personal injury case, as an attorney will likely be able to negotiate lien amounts and guide through you the entire process. For more information and tips on negotiating your lien, please read our article on negotiating liens.



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