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OVERVIEW OF LIENS IN PERSONAL INJURY CASES

WHAT IS A LIEN?

A lien is a claim of a right to payment.  It is common that liens are asserted in personal injury cases.  The “personal injury lien” represents a claim of a right to payment from the proceeds received from any resulting settlement or judgment.  Liens in personal injury cases are usually asserted by a medical provider or an insurance carrier.  There are two types of liens that may be asserted: (1) Contractual Liens, and (2) Statutory Liens.  

Provisions for reimbursement are also considered liens, which will also require repayment only if there is a recovery.  In contrast, subrogation allows for a right to directly sue the third party tortfeasor (i.e. the party that caused the accident).  There must be statutory authority for an insurance company or healthcare provider to have subrogation rights.  Statutes that allow for subrogation include: California Civil Code section 3045.1 for Hospital Liens, California Labor Code section 3856 for workers’ compensation benefit reimbursements, California Government Code section 23004.1 for County Hospitals, and California Government Code section 13963 for victims of violent crimes.

WHAT ARE CONTRACTUAL LIENS IN A PERSONAL INJURY CASE?

Contractual medical liens are claims for repayment based on an agreement between the injured party and the medical provider.  These claims usually include: health insurance reimbursement, medical treatment provided on lien basis, and Med-Pay provisions for reimbursement.    

WHY IS HEALTH INSURANCE REIMBURSED IN A PERSONAL INJURY CASE?

Health insurance companies have a claim for reimbursement when the injuries that are treated are caused by a third party based on the contractual language in the injured victim’s health insurance policy.  Many Health Maintenance Organizations (HMOs) like Kaiser Permanente, health insurance companies, including Preferred Provider Organizations (PPOs) like Blue Cross and Blue Shield, and other health care plans will utilize boilerplate language in the patient contracts for a lien against any recovery by the insured for personal injuries from a third party tortfeasor (i.e. the party that caused the accident).  The lien provides for repayment of the medical expenses made on behalf of the injured party.  Because there is no statutory authority allowing for the insurance company or health care plan to obtain an assignment of the tort cause of action from the injured party or allowing for subrogation rights to directly pursue a cause of action, the lien is purely contractual.     

CAN A HEALTH INSURANCE LIEN ASSERTED IN A PERSONAL INJURY CASE BE REDUCED?

Yes, a health insurance lien can be reduced pursuant to statute.  

CALIFORNIA CIVIL CODE SECTION 3040 INSURANCE LIEN REDUCTION

California Civil Code section 3040 provides for reductions and a cap on the health plan’s contractual lien amount.  The statute is very extensive and also applies to disability insurance lien claims.   The California Civil Code section 3040 codifies: (1) Comparative Fault Reduction; (2) Common Fund Doctrine; and (3) Caps.    

California Civil Code section 3040 states:

(a) No lien asserted by a licensee of the Department of Managed Care or the Department of Insurance, and no lien of a medical group or an independent practice association, to the extent that it asserts or enforces a lien, for the recovery of money paid or payable to or on behalf of an enrollee or insured for health care services provided under a health care service plan contract or a disability insurance policy, when the right of the licensee, medical group, or independent practice association to assert that lien is granted in a plan contract subject to the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) or a disability insurance policy subject to the Insurance Code, may exceed the sum of the reasonable costs actually paid by the licensee, medical group, or independent practice association to perfect the lien and one of the following:

(1) For health care services not provided on a capitated basis, the amount actually paid by the licensee, medical group, or independent practice association pursuant to that contract or policy to any treating medical provider.

(2) For health care services provided on a capitated basis, the amount equal to 80 percent of the usual and customary charge for the same services by medical providers that provide health care services on a noncapitated basis in the geographic region in which the services were rendered.

(b) If an enrollee or insured received health care services on a capitated basis and on a noncapitated basis, and the licensee, medical group, or independent practice association that provided the health care services on the capitated basis paid for the health care services the enrollee received on the noncapitated basis, then a lien that is subject to subdivision (a) may not exceed the sum of the reasonable costs actually paid to perfect the lien, and the amounts determined pursuant to both paragraphs (1) and (2) of subdivision (a).

(c) If the enrollee or insured engaged an attorney, then the lien subject to subdivision (a) may not exceed the lesser of the following amounts:

(1) The maximum amount determined pursuant to subdivision (a) or (b), whichever is applicable.

(2) One-third of the moneys due to the enrollee or insured under any final judgment, compromise, or settlement agreement.

(d) If the enrollee or insured did not engage an attorney, then the lien subject to subdivision (a) may not exceed the lesser of the following amounts:

(1) The maximum amount determined pursuant to subdivision (a) or (b), whichever is applicable.

(2) One-half of the moneys due to the enrollee or insured under any final judgment, compromise, or settlement agreement.

(e) Where a final judgment includes a special finding by a judge, jury, or arbitrator, that the enrollee or insured was partially at fault, the lien subject to subdivision (a) or (b) shall be reduced by the same comparative fault percentage by which the enrollee or insured’s recovery was reduced.

(f) A lien subject to subdivision (a) or (b) is subject to pro rata reduction, commensurate with the enrollee’s or insured’s reasonable attorney’s fees and costs, in accordance with the common fund doctrine.

(g) This section is not applicable to any of the following:

(1) A lien made against a workers’ compensation claim.

(2) A lien for Medi-Cal benefits pursuant to Article 3.5 (commencing with Section 14124.70) of Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code.

(3) A lien for hospital services pursuant to Chapter 4 (commencing with Section 3045.1).

(h) This section does not create any lien right that does not exist at law, and does not make a lien that arises out of an employee benefit plan or fund enforceable if preempted by federal law.

(i) The provisions of this section may not be admitted into evidence nor given in any instruction in any civil action or proceeding between an enrollee or insured and a third party.

NO CO-PAYS INCLUDED IN HEALTH INSURANCE LIEN

All health plan lien claims should be reviewed carefully to determine if they also include co-pay for the services rendered.  The co-pays made by the injured party should not be included in the lien.  

LIMITS ON NON-CAPITATED AND CAPITATED SERVICES

There are limits on the amount of the lien based on whether the healthcare provider billed for services as they were incurred (which is known as non-capitated) or whether the healthcare provider billed a flat fee (which is known as capitated).  

If the services are provided on a non-capitated basis, the injured party will receive an itemized bill.  The health plan carrier will pay all or portion of the bill.  California Civil Code section 3040 limits the lien recovery for non-capitated services to the amount actually paid.  

If the services are provided on a capitated basis, the injured party will receive no itemization of the bill.  This applies to Kaiser Permanente beneficiaries.  California Civil Code section 3040 limits the lien recovery for capitated services to “80% of the usual and customary charge for the same services by medical providers that provide health care services on a non-capitated basis in the geographic region in which the services were rendered.”  That is, the gross capitated lien claim is reduced by 20%.  However, when the health care provider that provides capitated services pays for a non-capitated service such as an outside emergency room bill, that specific lien repayment is considered to be a reasonable cost charged and is not included in the reduction.  

COMPARATIVE FAULT REDUCTION

In addition, a lien amount may be reduced pursuant to the insured’s comparative fault.  California Civil Code section 3040 provides: “Where a final judgment includes a special finding by a judge, jury, or arbitrator, that the enrollee or insured was partially at fault, the lien shall be reduced by the same comparative fault percentage by which the enrollee or insured’s recovery was reduced.”  It is important to note that there must be a finding of comparative fault.  Therefore, the percentage of comparative fault should be negotiated with the lien claimant prior to agreeing to a settlement in the personal injury case.  If there is no special finding and the lien claimant is not willing to negotiated, the plaintiff’s personal injury attorney can request that the third party insurance adjuster put in writing that the settlement offer is made with consideration of a specific percentage of comparative fault assigned to the plaintiff.

COMMON FUND DOCTRINE

California Civil Code section 3040 provides for a pro rata percentage reduction based on the insured’s reasonable attorney’s fees and costs.  This codifies the Common Fund Doctrine.  Essentially, the third party recovery effectively creates a “common fund” where not only will the injured party receive a benefit for having created the fund, but also the lienholder can draw from that same fund.  Therefore, the lienholder should not get the benefit of free legal services required for obtaining the fund.  The lienholder is required to share in the expenses and the lien amount is therefore reduced accordingly.

LIEN RECOVERY CAP

California Civil Code section 3040 provides for a cap on the amount recoverable on the lien.  When an attorney is retained by the injured party, the health plan’s lien claim may not exceed one-third of the money due to the injured party.  When the injured party does not have an attorney, the lien claim may not exceed half of the money.

THE MADE WHOLE EQUITABLE DOCTRINE

The Made Whole Doctrine is an common law equitable principle that limits the ability of the insurer to exercise its right of subrogation because the injured plaintiff has not been fully compensated for their injuries and pain and suffering.  In this situation, the injured plaintiff has not been “made whole.” The application of this equitable principle varies depending on the jurisdiction.  This principle comes into play when the insurance policy is not sufficient enough to make the injured plaintiff “whole” by the settlement.  

HOW IS MEDICAL TREATMENT PROVIDED ON A LIEN BASIS?

Many times, the injured party may not have health insurance coverage.  Nonetheless, the injured party is in need of medical care.  Depending on the state law in the jurisdiction, many health care providers will provide treatment to the injured party provided they sign a lien to reimburse the expenses once a third party recovery is obtained.  Some states prohibit health care providers from treating on a lien basis when there may be third party liability.  For example, New York does not allow treatment on a lien; whereas, in California, receiving treatment on a lien is an effective way to obtain the necessary care.  Generally, the provider is not affiliated with any health insurance provider, and usually includes individual medical practitioners, chiropractors, small health clinics, and x-ray facilities.  Physical therapy, chiropractic treatment, orthopedic care, and surgeries may be provided on a lien basis.  

The lien is purely contractual.  An agreement is signed by the injured party and the health care provider. If the plaintiff’s attorney also signs the agreement, the attorney has created a fiduciary duty with the lienholder to satisfy the claim.  

Moreover, California Civil Code section 3040 does not apply to individual medical providers.  In this situation, the Made Whole Doctrine and the Common Fund Doctrine cannot be applied to reduce the lien amount.

WHAT IS MED-PAY?

A lien is a contractual right based on a provision in an agreement that allows for reimbursement if a monetary recovery is obtained from a third party.  Many times, an individual’s own insurance policy agreement may provide for a lien owing to the insurance carrier for any amounts paid for medical expenses on behalf of the insured.  The provision will require reimbursement if the insured obtains a monetary recovery from a third party.  This type of provision is known as a Med-Pay lien.  There is no statute permitting reimbursement or subrogation rights to an insurance carrier.  Therefore, Med-Pay provisions are purely contractual and must be set forth in the insurance contract.    

AUTOMOBILE INSURANCE MED-PAY

Many automobile insurance policy contracts provide for the payment of medical expenses for injuries resulting from an accident while driving in an insured vehicle, or while in a non-insured vehicle, or while in a non-owned vehicle, or as a pedestrian.  

For example, a passenger who does not own the vehicle and suffers an injury while in the vehicle which has Med-Pay coverage may be able to obtain medical payments from that vehicle’s insurance.  The passenger is considered a third party beneficiary to the insurance contract.  However, the passenger will be obligated to repay the insurance carrier for the payments received pursuant to the insurance contract provisions.

NON-AUTO MED-PAY

Many non-automobile insurance policies may have a right to reimbursement even though the injured party does not make any recovery from a third party tortfeasor (i.e. the party that caused the accident). Essentially, the Med-Pay provision provides for a credit to the insured which will be a debt owed to the insurance carrier.  The injured party’s attorney will have a fiduciary duty to the lien claimant upon execution of a contract providing for the lien.  Because the lien is a contractual right obligation, partial payment of the lien amount may not relieve the injured party from the still owing amount.  If only partial payment can be made, it is necessary to have a stipulation in writing that this will satisfy the total obligation.  

CAN A MED-PAY LIEN BE REDUCED?

Med-Pay liens may be reduced based on the Common Fund Doctrine as codified in California Civil Code section 3040 and also based on the Made Whole Equitable Doctrine.  

COMMON FUND DOCTRINE

California case law permits attorney fees and costs to be deducted from the lien repayment.  See Lee vs. State Farm Mutual Ins. Co. (1976) 57 Cal. App. 3d 562.  This is known as the Common Fund Doctrine, which requires a pro rata share of fees and expenses so that the insurance company is not unjustly enriched by the legal services of the plaintiff’s attorney that obtained the recovery not only for the injured party but also for the insurance company.  California Civil Code section 3040 codifies the Common Fund Doctrine.  The lien party must reduce its claim by its pro rata share of reasonable attorney fees and court costs required to prosecute the injured party’s claim against the third party tortfeasor.

MADE WHOLE EQUITABLE DOCTRINE

Before a lien is considered equitable and fair, the injured party must be fully compensated for the total injury by the third party recovery.  If a policy limit recovery does not fully compensate the injured party for the entire injury claim, then the injured party has not been made whole.  The purpose of personal injury damages is to make the plaintiff whole; that is, put the injured party back in a position had they not been injured by awarding monetary compensation for the total loss.  If the injured party has not been made whole by the third party recovery, the insured is not obligated to repay the medical payments made by the insurance carrier pursuant to the Med-Pay provision.  

However, the insurance policy contract may grant the carrier priority rights to the third party recovery, which may preclude the Made Whole Doctrine and allow the carrier to obtain repayment of the entire Med-Pay lien before the injured party receives any distribution from the recovery.  Even when priority rights are stated in the insurance policy contract, as a matter of law the attorney’s fees still have priority over medical liens regardless of when the rights were created.

WHAT ARE STATUTORY LIENS IN A PERSONAL INJURY CASE?

Pursuant to State law, certain claims for right of payment are presumed by statute.  These claims include: Workers Compensation Benefits, Hospital Emergency Services, and Government Benefits, which includes Medicare and Medicaid benefits.  If statutory liens are not resolved, the settlement disbursement will be delayed.  

WHAT IS WORKERS’ COMPENSATION?

The law requires each employer to provide a safe place of employment. When an employee is injured during the course and scope of employment, the injured worker is entitled to workers’ compensation benefits (also referred to as “workman’s comp”).  The workers’ compensation program is an insurance program mandated by the State to provide compensation to employees who suffer injury or illness as a result of the job.  Even temporary or part-time workers may be eligible to receive benefits. Even if the worker is called an “independent contractor,” the worker may still be covered by workers’ compensation as an employee.      

WHAT ARE WORKERS COMPENSATION LIENS?

When an individual is injured while on the job, the injured party may have both a claim for workers’ compensation benefits and a claim for civil damages resulting from the personal injury caused by a third party.  In this type of situation, the workers’ compensation insurance provider will have a statutory lien on the proceeds from the personal injury matter.  Any amount that the employee recovers from the third party is subject to the employer’s right of reimbursement for compensation already paid or credit against future compensation paid to the employee, or to the employee’s dependents in a death claim, on account of the injury.  

Moreover, practically speaking, if a third party has caused injury to an employee and caused the employer to pay for the injured worker’s medical care and pay benefits, then the employer has also been damaged by the third party.  Therefore, the employer also has a claim against that other third person or entity.  This is known as subrogation.  Pursuant to California Labor Code section 3852, statutory subrogation is the independent right of an employer, or an employer’s insurance carrier, to recover compensation paid to the employee against a third party, by whose fault the employee has sustained an industrial injury.

In addition, the workers’ compensation carrier has an actual lien against any verdict or settlement arising from any right to recover damages that the employee has against any other party for the injury.  The lien is automatic and notice does not have to be given.  If the employee receives any proceeds from a settlement or verdict and the employer’s lien is not satisfied, then the employer will get a credit against any future worker’s compensation benefits to be provided to the injured worker.  The employer may also file a civil lawsuit against the employee for the full amount of the lien.  Moreover, if settlement occurs without considering the compensation lien or without notifying the employer/carrier, then the injured worker may not be able to receive any future benefits.  It may be considered malpractice for the personal injury attorney to settle the case if the worker’s compensation carrier or the employer does not expressly approve the settlement.  

The reason for the workers’ comp lien is so that the injured worker does not obtain a double recovery.  However, many times, the larger the worker’s compensation lien from the workers’ comp insurance adjuster, the more valuable damages in the personal injury claim.  Every item claimed as a worker’s compensation benefit may also be asserted as being caused by the third party defendant.  Also, workers’ compensation will only award a portion of the lost wages.  The remainder of the wages may be asserted in the personal injury claim.  In a personal injury claim, the injured party is entitled to recover all resulting damages, including lost earnings, lost earning capacity, medical bills, future medical bills, permanent impairment, pain and suffering, and loss of enjoyment of life.

When the personal injury case reaches a settlement, the workers’ compensation lien may be negotiated and reduced.  It is important to review the itemization of the lien, as administrative costs, manager fees, and defense attorney fees should not be included in the lien amount.  Many times, if the workers’ compensation lien cannot be reduced, there will be no incentive for the injured worker to settle the personal injury claim and the plaintiff’s personal injury attorney is left no other option but to file a lawsuit.

For instance, the plaintiff’s attorney may settle the personal injury case and satisfy the worker’s comp lien, which will be reduced based on a prorated amount of the attorney fees and litigation costs.  In this situation, the workers’ compensation claim will still be pursued by the injured worker because the injured worker is still entitled to the continued benefits but now at a reduced rate.  The carrier or self-insured employer is responsible for all future benefits at the rate for which the attorney fees and costs in the personal injury case bear to the entire recovery until the net third party recovery is exhausted.  As a specific example, if a personal injury case settles for $150,000.00 and the attorney fees and costs equal 34% of the settlement, then the attorney will receive $51,000.00.  If there is also a worker’s compensation lien of $40,000.00, the workers’ compensation carrier will only be able to recover $26,400.00 to satisfy the lien.  This is because the $40,000.00 lien is reduced by 34%.  The client will net $72,000.00 from the total recovery of the third party personal injury claim, after deducting the attorney fee, litigation costs, and the satisfaction of the workers’ comp lien.  However, this net recovery does not consider the injured worker’s future benefits.  As a further example, if the injured worker’s doctor charges $1,000.00 for a future treatment, the injured worker must now first pay out of pocket the full amount charged and then submit a request to the workers’ compensation carrier for the portion it is responsible to provide as determined by the reduced calculation.  In the example, the workers’ compensation carrier will be responsible for providing $340.00 of the charge.  This procedure also applies to the injured worker’s lost wages.  This process will continue until the injured worker’s $72,600.00 is completely exhausted.  The accounting required in these situations is very difficult.  As a result of the administrative costs and burden on the workers’ comp carrier, there is an incentive to simply settle the worker’s comp claim at the same time the personal injury claim is settled.  

In practice, the personal injury attorney should settle the workers’ compensation claim before settling the personal injury claim.  If a prospective personal injury client already has the worker’s comp claim settled, the personal injury attorney must carefully review the workers’ comp settlement documents, paying particular attention to the judge’s Order Approving Compromise and Release or the Award made pursuant to the Stipulated Finding and Award.  There should be language in the workers’ comp settlement documents that state that the amount is fixed as of the date the settlement Order is entered, and that there is a limit or cap on the amount of the worker’s comp lien asserted in the personal injury settlement.  Often if the workers’ comp carrier anticipates that the injured worker will incur future medical bills and lost wages, the carrier may agree to waive the worker’s comp lien and pay a lump sum of $10,000.00, of which 20% will be paid to the attorney as fees for making a recovery in the worker’s comp matter and the net would go to the injured worker in exchange for giving up any future workers’ comp benefits.  A petition, order, and affidavit by the injured worker will need to be approved by the Workers’ Compensation Appeals Board.  

In the example above, if the personal injury settlement is $150,000.00 with attorney fees and costs of 34% and a reduced workers’ comp lien of $26,400.00, after waiver of that lien and agreement of lump sum for future benefits, the injured worker will now net $107,000.00 as combined settlement of both the personal injury matter and the workers’ comp matter.  To note, the workers’ comp attorney cannot be fully compensated on the lien amount of $26,400.00 which would be $5,280.00.  This is because the Workers’ Compensation Appeals Board will not approve fees on the portion of a lien that was waived.

“SETTLING AROUND THE EMPLOYER” AND ESTABLISHING EMPLOYER FAULT

If the injury to an employee during the course and scope of employment is caused by a third party, the employer has the right to recoup the worker’s compensation benefits paid to the injured worker out of any third party settlement or verdict.  The employer can assert a lien or file a “complaint in intervention” in the third party lawsuit to protect its right to reimbursement.  Usually in these situations, the injured worker and the employer form an alliance to establish liability against the third party.  

However, there are times when the liability of the employer may also be at issue.  In this situation, generally the amount of the lien asserted by the worker’s comp subrogation attorney is in dispute.  If liability on the part of the employer is established, the plaintiff’s personal injury attorney should seek to have the employer reduce its lien or make other concessions.  In cases where the employer is not willing to compromise, the plaintiff’s personal injury attorney may attempt to “settle around the employer.”  The employer’s right of recovery for its asserted lien can be adjudicated in the trial court or the Worker’s Compensation Appeals Board at the election of the workers’ comp carrier.  

Many worker’s comp subrogation attorneys believe that the right to recovery of its lien is absolute.  The subrogation attorney will essentially extort its lien amount from the personal injury settlement, thereby holding up and stalling any settlement negotiations in the personal injury matter.  The subrogation attorney and the employer may also put financial pressure on the injured worker by asserting a credit in the worker’s comp matter and stop paying disability payments and medical costs.  The subrogation attorney will rely on California Labor Code section 3869 to support its position that the plaintiff is not authorized to settle the claim with the parties without the express consent of the subrogation attorney.  The subrogation attorney will also rely on case law to support the position that the employer is also entitled to attorney fees based upon the actual benefit conferred upon the plaintiff from the settlement.  See Draper vs. Aceto, (2001) 26 Cal 4th 1086.  However, such reliance by the subrogation attorney is misplaced and misleading.  In fact, the worker’s comp lien may have little to no value depending on the extent of the employer’s fault in causing the employee’s injury.  

In practice, “settling around the employer” is a complicated process.  The first step in the process is to serve the initial complaint against the third party on the employer by personal service or certified mail with a proof of service, which must then be filed with the court in the initiated civil lawsuit.  See California Labor Code section 3708.5.  The employer must have statutory notice of the civil lawsuit, or else the plaintiff will be exposed to a lawsuit by the employer to recover the worker’s comp benefits already paid.  See Board of Administration vs. Glover, (1983) 34 Cal 2d 906.  Failure to provide statutory notice may be considered malpractice by the plaintiff’s attorney.  Once the third party responds with an answer to the complaint, the personal injury attorney should review the answer for any asserted affirmative defenses alleging the employer was at fault or negligent.  The answer should also be served on the employer.  During the discovery process, the plaintiff’s personal injury attorney should attempt to discover evidence supporting the employer’s fault.  Getting this information should be done with caution, as the employer is typically an ally of the plaintiff early on in the litigation for establishing the third party liability.  Therefore, proper timing of uncovering this evidence is essential.  

Discovery should be conducted into certain facts and evidence.  To note, California Code of Regulations Title 8, Section 3203 imposes an obligation upon employers to establish a workplace injury and illness prevention program (“IIPP”).  In addition, the employer must perform periodic inspections to identify unsafe work conditions, provide training and instruction to employees, and maintain records of inspections for at least one year.  The failure to meet these obligations may be considered negligence per se and impose liability on the employer.  See Board of Administration vs. Glover, (1983) 34 Cal 2d 906.  Discovery into these critical facts establishes the standard of care to be applied against the employer and also possibly against the third party defendant.  

In order to settle the personal injury case with the third party when the subrogation attorney is not cooperating, i.e. “settling around the employer,” the third party defendant will need to be assured that the employer will not seek to obtain an additional recovery against the third party after the settlement.  Therefore, in practice, the plaintiff’s personal injury attorney will most likely have to: (1) agree to defend, indemnify, and hold harmless the third party against the employer in its complaint in intervention; (2) establish a separate trust account for the settlement proceeds to protect the worker’s comp lien in the event that no employer fault is established; (3) agree to represent the third party defendant at trial on the issue of employer fault; (4) obtain a “conflict of interest waiver” allowing the plaintiff’s attorney to represent the third party defendant concerning the issue of employer fault; (5) obtain an assignment of the third party defendant’s costs incurred in defending the lawsuit; (6) serve a Notice of Third Party Settlement on the employer and include the initial complaint and answer alleging employer fault; (7) serve discovery on the employer, particularly Requests for Admissions relating to employer fault; and (8) serve separate Offers to Compromise to the employer on behalf of the plaintiff and the third party defendant.

Once a settlement is reached in the personal injury case, the plaintiff’s attorney must serve notice of the settlement on the employer.  See California Labor Code section 3860(a).  If the matter was “settled around the employer” without the employer’s consent, the following language should be included in the Release: (1) plaintiff will defend, indemnify, and hold harmless the third party from the lawsuit brought by the employer-intervenor; (2) plaintiff’s counsel will substitute into the action brought by the employer-intervenor to represent the third party defendant; (3) the third party defendant will assign its recoverable costs in the lawsuit; and (4) the third party defendant waives any actual or potential conflict of interest in the action.  Moreover, case law supports the position that where employer fault is established, the employer’s attorney fees are deducted from the amount the employer recovers if any.  See Summers vs. Newman, (1999) 20 Cal. 4th 1021.  Also, if the subrogation attorney does not prevail, the employer may be responsible for paying litigation costs and statutory costs.

Generally, the issue of employer fault will proceed to trial.  The personal injury attorney will announce its readiness to represent both the plaintiff injured worker and the third party defendant.  The intervenor employer will most likely not be prepared to adequately present a case at trial to rebut its fault and prove the third party liability.  The goal for the personal injury attorney is to present enough facts to prove sufficient employer liability to allow for substantial future workers’ comp benefits.  At the time of trial, the personal injury attorney should be in a better position to negotiate a settlement with the employer, who may rather not have the matter be decided by a jury.

The plaintiff’s personal injury attorney should set up a Qualified Settlement Fund for the settlement money received by the third party.  Once the employer learns of the third party settlement, it is likely that the employer will stop paying worker’s comp benefits, including future permanent disability and medical costs.  In order to preserve the injured worker’s right to receive these benefits, the injured worker must not actually receive its net recovery from the third party settlement.  Instead, the settlement will be placed in a qualified account until the worker’s comp lien is resolved.  In doing so, the injured worker does not in fact receive any settlement funds and the employer cannot stop paying benefits.  Pursuant to United States Treasure Regulation section 1.468B-1(c)(1), a Qualified Settlement Fund must be established pursuant to a court order.  The plaintiff’s personal injury attorney should file a petition with the court, indicating that the Qualified Settlement Fund is being established to prevent the injured worker from being in constructive receive of any amounts placed in the account prior to an agreement between the account’s administrator and the injured worker, and the petition should state that the account is being created to allow for financial and legal planning.  The employer’s lien interest is protected by the Qualified Settlement Fund by setting aside sufficient funds to cover the lien in the event that no employer fault is established.  

WHAT ARE HOSPITAL LIENS?

Pursuant to the California Hospital Lien Act, codified in California Civil Code sections 3045.1 to 3045.6, a hospital may have a claim of repayment for all “emergency and ongoing” services provided to a person who was injured in “an accident, or negligent or wrongful act.”  In addition, pursuant to California Government Code section 23004.1, county hospitals may also have a claim.  The county hospital’s lien will be considered first priority and must be settled before all other liens.  The hospital lien is generally limited to only third party recoveries and not from Uninsured Motorist or Underinsured Motorist insurance policies.  The hospital lien usually arises when the hospital provides emergency care to the injured victim after an accident, and the injured party does not have health insurance to pay for the treatment, or the injured party has health insurance but it will not cover all of the hospital bill, or the hospital refuses to submit the bill to the injured party’s health insurance because a third party is liable.

PERFECTING THE HOSPITAL LIEN  

Pursuant to California Civil Code section 3045.3, the hospital must provide written notice in order to enforce its lien and there are limits on the amount a hospital may recover from the third party settlement.  The Notice of Lien must be sent by registered mail, return receipt requested, and must be sent to the responsible third party and their insurer prior to the payment of funds to the injured person.  The statute of limitations for the hospital to file a lawsuit to enforce its lien is within one year from the date of payment to the injured party.   

HOSPITAL LIEN REDUCTION

Pursuant to California Civil Code section 3045.4, if the third party pays the injured party a settlement without satisfying the lien, then the third party is liable to the hospital for the amount claimed in the hospital lien.  Usually, third parties will not release a settlement check until they have written confirmation that the hospital lien has been satisfied.  Pursuant to California Civil Code section 3045.4, the hospital’s lien may be reduced by deducting the attorneys fees from the gross settlement amount and any other prior liens, and then the hospital is capped at recovering up to 50 % of the remaining net settlement amount.  It is important to remember that county hospital liens must receive first priority.           

HOSPITAL BALANCE BILLING

Many times, the hospital and the separate emergency room physicians may attempt to charge the injured party the difference between the hospital’s “charge rate” and the amount the injured party’s health insurance paid as the “contract rate.”  This is known as “balance billing.”  Pursuant to Title 42 of the United States Code section 1395CC, balance billing is prohibited when the hospital accepts payments from Medicare or Medicaid.  In addition, California case law establishes that when a hospital accepts payments from the injured party’s private health insurance as payment in full for the hospital bills, then the hospital cannot charge for its balance.  See Parnell vs. Adventist Health System West (2005) 35 Cal. 4th 595.  However, the California courts have not restricted the hospitals and the private health insurers from entering into a contract to preserve the right to obtain the balance billing.          

WHAT IS MEDICARE AND MEDICAID LIENS?

The Medicare and Medicaid programs provide public assistance benefits from the government.  If any medical bills were submitted and paid by public assistance benefits, there is an automatic right of repayment when the injured party recovers from a third party for personal injuries.  

WHAT IS MEDICARE?

Pursuant to the federal Social Security Act, Medicare is a federally funded insurance program for the elderly and disabled.  It provides health insurance for Americans aged 65 and older who have worked and paid into the system through the payroll tax. Younger people with disabilities, end stage renal disease, and amyotrophic lateral sclerosis may also qualify as beneficiaries for Medicare.  

There are five parts to the Medicare statutes – Part A, B, C, D, and E.  Medicare Parts A and B are fee-for-service insurance that will provide coverage for portions of the cost for hospital and health care services.  Part D provides coverage for prescription drugs.  Part E provides coverage for the cost of miscellaneous services.  

Medicare Part C provides for the Medicare Advantage program, which allows the Medicare beneficiary to enroll in a Medicare Advantage Organization (MAO).  This operates similar to a Health Maintenance Organization (HMO).  Instead of the fee-for-services program under Medicare Parts A and B, the beneficiary may elect to participate in a MAO in order to obtain the necessary services.  The federal government will pay a fixed amount to the MAO for each enrolled Medicare beneficiary.  That is, Medicare pays a capitated amount to the MAO.  The MAO assumes the risk that the government payment may not be enough to cover the cost of care for enrolled Medicare beneficiaries.  

WHAT IS MEDICARE SUBROGATION?

Subrogation is the term used to allow a healthcare provider to directly sue a third party tortfeasor.  Subrogation is defined as the substitution of one person or group by another in respect of a legal right or claim against a third person, accompanied by the transfer of any associated rights and duties.  That is, the right to file the lawsuit against the wrongdoer is assigned to a different party than the injured party.

The Medicare Secondary Payer (MSP) Act established that the Medicare program is the secondary payer of the Medicare beneficiary’s health care costs after other various sources of payment which are considered the primary payer.  These sources of primary payment include worker’s compensation, automobile insurance, liability insurance, self-insured policy, or no-fault insurance plans.  Only when a primary plan has not made or cannot reasonably be expected to make payment with respect to such item or service promptly, Medicare will then provide a conditional payment to cover the costs of the Medicare beneficiary’s health care services pursuant to Medicare Part A and B, which covers the bills for hospital and health care services.  However, in the case of a personal injury lawsuit, Medicare will require the amounts paid to be reimbursed if the plaintiff obtains a settlement from a third party automobile insurance or liability insurance carrier.  The payment by Medicare is conditioned on reimbursement.  The process of reimbursing Medicare and Medicaid is known as subrogation, and the procedure allows Medicare and Medicaid the right to directly sue the third party tortfeasor.  

The Centers for Medicare and Medicaid Services (CMS) will administer the subrogation.  Because the CMS lien is a lien by the government it is considered a “super lien” and it takes priority over all other liens.  Other government liens that take precedent include health care benefits covered by the Veteran’s Administration.  Moreover, CMS has a six-year statute of limitations period to seek reimbursement, and therefore any settlement monies must be set aside to satisfy any government lien.  The personal injury lawyer must be aware and inform the client that in the case of a disputed liability claim and substantial Medicare conditional payments, the plaintiff may not obtain any net recovery.  Moreover, if the government lien is not paid, the client may be subject to penalties under federal law which may include being responsible to pay back double the original lien amount.

The Courts have yet to clarify whether Medicare is entitled to reimbursement when settlement is obtained from a third party if the Medicare beneficiary is enrolled in Medicare Part C.  However, the trend indicates that Medicare Part C beneficiaries will have to reimburse the MAOs for the cost of health care for injuries sustained in a personal injury case.  The plaintiff’s attorney should request a list of charges for the care which are claimed to be related to the injuries at issue in the personal injury case, and before any settlement discussions commence the charges should be updated and clarified.  The process of clarifying the charges by the MAOs to a Medicare Part C beneficiary cannot be done via the Medicare website, as compared to Part A and B beneficiaries.  Instead, correspondence must be sent directly to the MAO.    

WHAT IS THE MEDICARE SECONDARY PAYER RECOVERY PORTAL?

The Medicare Secondary Payer Recovery Portal (MSPRP) is a web-based tool designed to assist in the Medicare recovery process in which liability insurance, no-fault insurance, and workers’ compensation are involved.  MSPRP can expedite the reporting of a claim and updating lien information.   MSPRP is used to obtain conditional payment information, to obtain current and final conditional payment letters, to dispute claims, and to upload settlement documents.  

Likewise, the California Department of Health Care Services has an online portal to report claims.

HOW TO REPORT A CLAIM TO MEDICARE?

In every personal injury case, once the defendant’s liability insurance is discovered, both Medicare and Medi-Cal should be put on notice of the claim regardless of whether the plaintiff is a beneficiary.  A letter from both programs stating that the plaintiff is not a beneficiary will expedite the settlement process.  Both Medicare and Medi-Cal allow for online reporting, however it may be best to keep a paper-trail by mailing letters.  

The mailing address for Medicare to send the Notice of Claim is:

 

Benefits Coordination and Recovery Center (BCRC)

Medicare – Data Collections

Non-Group Health Plan (NGHP)

P.O. Box 138897

Oklahoma City, OK 73113-8897

Telephone: 1-855-798-2627

Fax: (405) 869-3309; (405) 869-3307

 

An Authorization and a Request for Lien Amount should then be sent to the BCRC approximately two weeks thereafter.  

The mailing address for Medi-Cal to send the Notice of Claim is:

 

Department of Health Care Services

Medi-Cal Program

Third Party Liability and Recovery Division

Casualty Insurance Section – MS 4720

P.O. Box 997425

Sacramento, CA 95899-7425

Telephone: (916) 445-9891; (916) 650-0572

 

The beneficiary information should be included in the Notice of Claim, including: the client’s full name, Medicare Health Insurance Number (HICN), gender, date of birth, mailing address, telephone, date of injury or accident, description of the injury, type of claim (liability insurance, no-fault, or worker’s compensation), insurer or worker’s compensation name and address, lawyer’s name / address / telephone, and lawyer’s proof of representation.  If the client is not a Medicare or Medi-Cal beneficiary, a request for confirmation that no lien exists should be made in the Notice of Claim which should state the assertion that the client is not a beneficiary, and include the client’s social security number instead of a HICN.    

The BCRC will issue a Rights and Responsibilities (RAR) letter which states what information is needed from the beneficiary and what to expect during the Medicare Secondary Payer (MSP) recovery process. BCRC ensures that Medicare is repaid for any conditional payments made by Medicare for which another payer may be responsible.  Medicare conditional payments are made so that the beneficiary does not have to use their own money to pay the bill.  The conditional payments must be repaid to Medicare when a settlement, judgment, award, or other payment is made.  

The BCRC will then send a Conditional Payment Letter (CPL) which identifies the payments that Medicare has made.  The CPL will also include information on how to dispute a payment for not being related to the injuries that are the subject of the claim.  This is important particularly with clients who have chronic health care conditions.  The attorney should request that unrelated charges be deleted from the CPL before settlement discussions occur.  Moreover, the CPL is not considered a final notice charges, as Medicare may still make conditional payments pending the conclusion of the claim.  If the client has completed treatment, an Interim Conditional Payment Letter must be requested in order to commence settlement discussions.  BCRC will not issue a formal demand letter detailing the final primary payment responsibility until BCRC is put on notice of a final judgment, award, or other payment.  If the client’s treatment is ongoing, the final demand is the only conclusive determination of the amounts that must be repaid to Medicare.  

IS THERE A DUTY TO PROTECT MEDICARE’S INTEREST?

When negotiating a settlement from a third party liability claim, Medicare’s interest must be protected or penalties will result.  Settlement documents must reflect that Medicare’s interest was protected.  If Medicare’s interest is not documented, the beneficiary, the third party insurance company, the plaintiff’s lawyer, the medical providers, and any other party receiving money from the third party payment will be liable for Medicare’s interest.  Medicare may also suspend the beneficiary’s coverage.  It is critical to ensure Medicare’s interests are protected, as Medicare has the right to seek double damages for reimbursement of conditional payments.  

IS THERE A DUTY TO PROTECT MEDICARE’S FUTURE PAYMENTS?

Although not required, it is strongly suggested that a Medicare Set-Aside (MSA) also be created to consider Medicare’s interest for future medical expenses that are likely to be incurred by the plaintiff.  CMS will review any proposed MSA.  If the MSA is approved, Medicare’s interest will be deemed to properly have been considered by the settling parties.

In addition, to support the parties’ consideration of Medicare’s interest, a professional company such as the Garretson Group or the Blackburn Group may be hired.  This is highly suggested in cases where there is a substantial settlement and there is a significant need for ongoing medical care related to the injuries for which Medicare may provide payment.  Otherwise, if the client’s treatment is completed, the treating healthcare providers should state so in the records so that CMS does not challenge whether Medicare’s future interest was considered in reaching a settlement.  If the settlement includes funding for the plaintiff’s future medical care, documentation should give clear notice to the plaintiff’s lawyer and the beneficiary that the settlement includes future medicals and they are obligated to protect the Medicare Trust Funds.  Again, Medicare has six years to seek recovery of any payments.  

CAN MEDICARE LIENS BE REDUCED?

MEDICARE PRO-RATA REDUCTION

Pursuant to Title 42 of the Code of Federal Regulations section 411.37, Medicare will make a pro-rata reduction based on the amount it cost for the beneficiary to obtain a settlement or judgment. The amount of the reduction will be determined by the attorneys’ fees which can be up to 40% and the costs incurred divided by the total settlement.  This will equal the percentage amount of the total settlement for which Medicare will reduce its lien. However, there are situations where the client may receive no net recovery despite a Medicare reduction.  For example, if a Medicare lien is $100,000.00 and the settlement is also for $100,000.00 and the attorneys’ fees are 40% and costs are $10,000.00, then Medicare will reduce its lien by 50%.  Nevertheless, after attorneys’ fees and costs and the reduced Medicare lien, the client will not receive any net recovery.  

When a liability settlement is $5,000.00 or less, there is a Fixed Percentage Payment option available in which the beneficiary can elect to resolve Medicare’s interest by paying 25% of the gross settlement.  The beneficiary must elect this option before Medicare issues a demand letter or requests reimbursement.  

On settlements of $300.00 or less, the beneficiary does not have to make any payment to Medicare.   

WHAT IS MEDICAID?

Medicaid was authorized in order to provide health coverage for low income people.  The Medicaid program is administered by the separate States, and therefore there are variations in coverage from State to State.  Moreover, the federal Affordable Care Act, also known as “Obamacare,” provides funds to States in order to expand Medicaid coverage.  However, not all States have opted to participate in Obamacare.  

Medi-Cal is California’s Medicaid program and it is administered by the California Department of Health Care Services (DHCS) and the federal Centers for Medicare and Medicaid Services (CMS).  

CAN MEDI-CAL LIENS BE REDUCED?

In every personal injury case, once the defendant’s liability insurance is discovered, both Medicare and Medi-Cal should be put on notice of the claim regardless of whether the plaintiff is a beneficiary.  A letter from both programs stating that the plaintiff is not a beneficiary will expedite the settlement process.  Both Medicare and Medi-Cal allow for online reporting, however it may be best to keep a paper-trail by mailing letters.

The mailing address for Medi-Cal to send the Notice of Claim is:

 

Department of Health Care Services

Medi-Cal Program

Third Party Liability and Recovery Division

Casualty Insurance Section – MS 4720

P.O. Box 997425

Sacramento, CA 95899-7425

Telephone: (916) 445-9891; (916) 650-0572

 

Medi-Cal is obligated to recover the payments made when a third party tortfeasor is responsible for causing the injuries to the Medi-Cal beneficiary.  Unlike Medicare, there are restrictions on the amount Medi-Cal can recover in a third party liability case.  

MEDI-CAL 25% RULE

Pursuant to the so-called “25% Rule,” the California Department of Health Care Services’ Medi-Cal claim for reimbursement must be reduced by 25%.  This reduction is for Medi-Cal’s share of attorneys’ fees and its pro rata share of the costs.    

MEDI-CAL 50% RULE  

Pursuant to the so-called “50% Rule,” California Welfare and Institutions Code section 14124.78 states: “[I]n no event shall [the California Department of Health Care Services] recover more than the beneficiary recovers after deducting, from the settlement, judgment, or award, attorneys’ fees and litigation costs.” If the 50% Rule applies to the personal injury case, the beneficiary does not also get the advantage of the 25% Rule.  

Moreover, the United States Supreme Court has ruled that the State may only recover its Medicaid lien from the damages in the settlement representing compensation for past medical expenses.  Once a settlement is reached, DHCS should be provided an itemization of the attorneys’ fees and costs.  A Request for Statutory Reduction in writing should also be provided to DHCS.  

In addition to the 50% Rule, pursuant to California Welfare and Institutions Code section 1412.4.71(b), DHCS is authorized to compromise, settle, or release its claim in whole or in part if the collection of the claim would result in undue hardship to the injured plaintiff.  The plaintiff’s attorney should request both a statutory reduction in addition to a compromise, waiver, or release of the claim due to hardship.  Particularly, in cases in which there are multiple liens with Medi-Cal and Medicare, obtaining full or partial waivers may be the only option for the plaintiff to recover any compensation for their injuries.         

IS THE VETERANS ADMINISTRATION ENTITLED TO REIMBURSEMENT?

When a third party is liable for the injuries suffered by a veteran who then receives treatment for those injuries through the United States Veterans Administration (VA), the VA is entitled to reimbursement from any amounts obtained by the veteran when pursuing a claim against the third party.  The amount of reimbursement is the fair value of medical care.  The VA’s right to reimbursement is pursuant to the Federal Medical Care Recovery Act (42 U.S.C.A. § 2651), which provides the United States the right to seek recovery.  The United States will normally send a Notice of Lien to the injured veteran or the attorney of record.  The responsibility is on the injured veteran to resolve the government lien.   

Accordingly, the Common Fund Doctrine allows for the veteran’s attorney to argue that the VA’s claim should be reduced by the same percentage of the attorney’s contingency fee so that the VA also pays its fair share of the veteran’s litigation costs in obtaining the recovery from the third party.  Applicable case law supports this Common Fund Doctrine argument.        

If the government lien cannot be resolved, the veteran’s attorney can file a Federal civil lawsuit on behalf of the veteran in Federal District Court in order to obtain a declaratory judgment determining the amount of the veteran’s special damages and the amount the government is entitled to recover pursuant to the Federal Medical Care Recovery Act.  

WHAT IS ERISA?

The federal Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. 1001, et seq., regulates the creation, operation, maintenance, and termination of employee welfare benefit plans.  ERISA was created to ensure financial soundness of employee welfare benefit plans and to ensure that the payment obligations to plan members were satisfied.  As such, many employee health plans are governed by ERISA. 

ARE ERISA BENEFITS ENTITLED TO REIMBURSEMENT?

ERISA plans rely on federal preemption as support for the position that the lien must be paid in full and not allowed to be reduced when there is a third party liability recovery.  ERISA liens are very difficult to negotiation and reduce. Whether an ERISA plan can be reduced depends on the whether the plan is self-funded or insured and what is stated in the actual contract.  Moreover, pursuant to section 502(a)(3) of ERISA, a civil action may be filed by the plaintiff’s attorney to obtain equitable relief to redress violations or enforce any provisions of the employee’s health plan.  See 29 U.S.C. section 1132(a)(3).

SELF-FUNDED VS. INSURED PLANS

There are generally three methods that an employer may fund a health care plan.  These include: (1) “unfunded plans” in which the employer purchases a group insurance policy from a commercial insurance company; (2) “self-funded plans” in which the employer is self-insured and absorbs the entire risk of loss; or (3) “partially funded plans” in which the employer self-insures up to a certain monetary amount and then purchases from an insurance company a “stop-loss” policy to cover any claim in excess.  

As a general rule, the federal law that governs ERISA plans pre-empt the state law.  An exception to the general is pursuant to the “Savings Clause” contained in 29 U.S.C. 1144(b)(2)(A), which states that “nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance.”  Therefore, if the ERISA plan is insured, then the state may regulate it.  Self-funded ERISA plans are exempt from state laws.  Self-funded plans include any plan that is solely funded by the employer.  The “Deemer Clause” contained in 29 U.S.C. 1144(b)(2)(B) states that an employee benefit plan governed by ERISA shall not be deemed an insurance company, an insurer, or engaged in the business of insurance for purposes of State laws regulating insurance companies and insurance contracts.  The United States Supreme Court has further ruled that an employee benefit plan must be self-funded for it to be out of reach of state laws.  See FMC Corp. vs. Holliday (1990) 498 U.S. 52. The Supreme Court further ruled: “[I]f a plan is insured, a State may regulate it indirectly through regulation of its insurer and its insurer’s insurance contracts; if the plan is uninsured, the State may not regulate it.” Id, at 64.  However, The Supreme Court has yet to address whether a partially insured plan is exempt from state insurance laws.     

Simply put, if the plan is self-funded, then only ERISA will govern.  If the plan is an insured plan, then state law will govern.  Therefore, in California, if the plan is insured, then California Civil Code section 3040 will apply limiting the amount the lien claimant can recover from a third party liability settlement.  

California Civil Code section 3040 provides for a pro rata percentage reduction based on the insured’s comparative fault, reasonable attorney’s fees, and costs.  This codifies the Common Fund Doctrine.  Essentially, the third party recovery effectively creates a “common fund” where not only will the injured party receive a benefit for having created the fund, but also the lienholder can draw from that same fund.  Therefore, the lienholder should not get the benefit of free legal services required for obtaining the fund.  The lienholder is required to share in the expenses and the lien amount is therefore reduced accordingly.  California Civil Code section 3040 provides for a cap on the amount recoverable on the lien.  When an attorney is retained by the injured party, the health plan’s lien claim may not exceed one-third of the money due to the injured party.  

In contrast, if the plan is self-funded, then the employer has a right to reimbursement under the federal law of ERISA.  Moreover, the United States Supreme Court held that the employer could pursue an equitable action to recover the amount of the reimbursement against the person holding the funds under a theory of constructive trust or equitable lien.  See Sereboff vs. Mid Atlantic Medical Services, Inc., (2006) 547 U.S. 356.  In such situations, the plaintiff’s attorney may only be left with arguing that the injured client may stop pursuing the claim if the ERISA plan does not reduce their lien.

CONTRACT LANGUAGE CONTROLS

The contract language of the employee health plan must be read very carefully.  The contract must first be determined in fact to be an ERISA plan, as the lien claimant will argue.  The plan may in fact be determined an HMO or a PPO.  The plan language will also indicate whether it is self-funded or an insured plan, whether the lien can be collected from the third party liability settlement, whether the lien can be collected from a first party liability settlement such as an uninsured motorist or underinsured motorist recovery, and whether the plan expressly waives the make whole doctrine or the common fund doctrine.     

The United States Supreme Court held that when the contract language excludes equitable defenses the employer may pursue an action to recover the reimbursement amount based on an equitable lien theory.  The Supreme Court stated that unjust enrichment, the make whole doctrine, or the common fund doctrine cannot override the contract language.  See U.S. Airways vs. McCutchen, (2013) 133. S. Ct. 1537.  However, when the plan language is silent in this regard, equitable defenses such as the make whole doctrine and the common fund doctrine may still apply.         

UNRELATED CHARGES NOT RECOVERABLE AND CREDIT FOR CO-PAYS

The charges covered by the ERISA plan should be itemized.  The itemization should not include unrelated charges or double billing charges.  A careful review of the itemization is required, including the reasonableness of the charges.  When negotiating the amount of the ERISA lien, the reasonableness of the charges should be considered and raised by the plaintiff’s personal injury attorney.  Moreover, the plaintiff should be given a credit for the co-pays that were paid out of pocket and therefore should be deducted from the lien amount.

MEDICAL BILL REDUCTION

If the recovery is not sufficient to compensate for the total amount of medical bills, it can be argued that the ERISA lien should be reduced by the amount of medical bills.  In addition, if the insurance coverage policy limits for the liable third party defendant is smaller than the value of the personal injury case, then it can be argued that the medical bills have not been recovered and the lien cannot include reimbursement for the same amount of medical bills. This is particularly a good argument if the wage loss incurred by the injured plaintiff makes up a substantial portion of the amount permitted by the policy limits.  Even more, if the policy limits are so minimal so as to not be enough to compensate for pain and suffering, it can be argued that a portion of the medical bills have not been recovered and therefore should not be included in the lien amount.  See Wos v. E.M.A., (2013) 133 S. Ct. 1391.