Your Medical Insurer May Have a Lien Against Your Personal Injury Recovery

In many instances medical providers who render care to those involved in personal injury accidents receive payment from the patient's health insurer. Under Maryland law, those health insurers may have a "lien" against any personal injury recovery. What this means is that before the patient can receive any proceeds of settlement or a judgment award, the health insurer must be reimbursed. The duty to reimburse is frequently contractual. In other words, the health insurance contract provides for the right of reimbursement for treatment which is paid for by insurance but which is the subject of a personal injury claim where reimbursement for medical expenses is part of the claim.

In some instances a lien arises not by contract but by statute. In other words, Maryland legislation provides that certain health insurers are granted a lien by virtue of having paid out money without any contract or notice requirement. For example, bills paid by Maryland Medical Assistance automatically give rise to a lien held by the state against a client's recovery. Such a lien is referred to in the legal community as a "superlien" because it takes priority over other claims, and arises by virtue of the mere payment of a bill by Medical Assistance without any further action being required to establish or "perfect" the lien. Private insurers such as Blue Cross, however, are required to provide the attorney and/or the client/patient with written notice of a lien before that lien will be deemed perfected. An attorney receiving a "lien letter" cannot ignore the letter or the lien, and cannot follow client instructions not to pay the lien. Although a lien letter may not issue, the client may still be held responsible for reimbursing the health insurer even if the lawyer is not provided notice of the lien and does not withhold the funds at the time of disbursement. Liens are frequently reduced through negotiations or by statute. For example, Maryland law provides that a health insurer lien in some instances must be reduced by the percentage the client is paying to the lawyer under their contingent fee agreement. In other words, if the attorney's fee is one-third of the gross recovery, the lien must be reduced by one-third. The rationale behind this reduction requirement is that the health insurer has benefited from the client's retention of an attorney to pursue their claim and without the attorney's assistance, no money would have been paid. Therefore, the health insurer must pay the attorney a fee equal to the fee paid by the client. At Belsky, Weinberg & Horowitz, we negotiate lien reductions very rigorously. In all instances where the insurer reduces their lien, we give that money to our client and do not as a matter of courtesy retain the money even though it is paid to use for our services. This can amount to a sizable benefit to our clients and can increase their recovery by thousands of dollars. In an upcoming article, we will discuss how liens are handled when the amount of medical expenses are huge, and the recovery due to limited liability insurance is limited to an amount below the medical costs incurred. A recent Supreme Court case sheds some light on this issue. Stay tuned.