What Is a Lien on a Personal Injury Case?
David Muñoz | July 2, 2023 | Personal Injury
A “lien” on a personal injury case typically refers to when you use your prospective personal injury compensation to guarantee payment of your medical expenses. You will need medical services immediately, but you will have to wait for your personal injury compensation. In fact, you cannot be absolutely sure that you will receive any compensation at all. You could find yourself in even worse financial trouble if you lack health insurance.
A healthcare provider such as a hospital might be willing to accept a lien on your future personal injury compensation in exchange for providing you with medical services now. This could result in a much better quality of health care than you would otherwise have been able to arrange.
Another way to handle a medical lien is for your healthcare provider to agree to provide medical treatment right now at a discount, with the understanding that you will pay more once your compensation arrives.
Alternatively, your health insurance may pay part of your medical bills right now, up to their policy limits. Your medical lien would cover part but not all of your medical bills. It all depends on your financial situation and the negotiating skills of your lawyer.
Finding a Healthcare Provider That Will Accept a Medical Lien
Healthcare providers are not particularly enthusiastic about providing medical services in exchange for medical liens, considering the speculative nature of any personal injury recovery.
A skilled personal injury lawyer might be able to help you negotiate such an arrangement. If the lawyer wins most of their cases, the healthcare provider is likely to trust them to win your case as well. This reduces the risk that you will fail to pay your medical bill.
Establishing and Perfecting a Medical Lien
Establish and perfecting a medical lien works like this:
- Your healthcare provider and your lawyer negotiate the terms of a medical lien.
- You sign a lien agreement detailing the terms of the lien.
- Your healthcare provider sends a formal written notice of the existence and terms of the lien to the responsible insurer and any other party with a stake in the outcome of the lien.
An experienced personal injury attorney can offer legal guidance throughout the entire process and ensure your lien is perfected appropriately.
The Legal Status of a Medical Lien
Legally, a medical lien is a binding, enforceable contract. Just as with any other contract, your healthcare provider can sue any party that fails to adhere to its terms, including you. Beware–contractual language can be tricky. Have your attorney draft the lien themself, or at least have them review the lien before you sign it.
Your healthcare provider will almost certainly insist that the lien contract include a clause that obligates you personally if you lose your claim or if the amount of your recovery turns out to be insufficient to pay your medical bills. In a worst-case scenario, this could leave you with unpayable medical bills that could force you into bankruptcy.
Health Insurance: The Better Option
The best way to handle the disadvantages and risks of a medical lien is to purchase sufficient health insurance to pay all of your likely medical bills in case of an accident. Do this before you get hurt, not afterward! Relying on a medical lien should be a last resort.
The responsible party will pay your personal injury compensation to your lawyer, not you. Once you receive a judgment or settlement, your lawyer will deduct the amount of your medical lien from your compensation. They will also deduct their legal fees (perhaps 30% to 40% of the total) plus any case expenses, such as expert witness fees.
Not Hiring a Personal Injury Lawyer Will Probably Be More Expensive Than Hiring One
This statement doesn’t seem to make sense at first, but ultimately it does. A good personal injury lawyer might make the difference between winning and losing your claim. Even if you would have “won” anyway, a good lawyer might triple or quadruple your payout. And that will leave you with far more money in your bank account than you otherwise would have enjoyed-–even after paying your legal fees.
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