When people are injured in accidents, whether it is a PA car and truck accident or a Philadelphia sidewalk trip and fall accident, they often recover financial compensation from the responsible parties. However, what most injured accident victims do not know is that they may have to pay back a portion of their financial recovery to an insurance company, such as a workers' compensation carrier or a health insurance company. This is called a lien.
When individuals are injured in car accidents and need medical treatment, the first thing they often want to know is how the medical bills get paid.
As we’ve discussed before in our previous car accident legal articles, PA is a no-fault state. That means, regardless of who caused the accident, the individual’s own auto insurance policy pays for the medical expenses through their PIP coverage. The minimum amount of coverage in Pennsylvania is $5,000.
If the injured individual has serious injuries requiring extensive medical treatment, the $5,000 often exhausts quickly. After an injured individual’s PIP coverage is exhausted, their private health insurance would provide coverage. If the injured individual’s health insurance company pays $30,000 for the medical treatment after PIP is exhausted, the individual may have to pay back a portion of the medical expenses from the financial recovery in his lawsuit.
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Here’s an example of how the process works:
Driver A is injured in a car accident in Northeast Philadelphia on Roosevelt Boulevard. As a result of the car accident caused by Driver B, Driver A sustains serious injuries. He injures his arm and shoulder and is treated in a hospital emergency room. Diagnostic tests show that he fractured his shoulder requiring shoulder surgery. He also needs rehabilitation after the surgery.
Driver A’s $5,000 PIP coverage quickly exhausts. His health insurance company then pays for medical treatment, above PIP, and pays out a total of $15,000. Driver A receives a letter from his health insurance company stating that it has a lien against any financial recovery from the third party (at-fault driver). The driver files a car accident lawsuit against the at-fault driver. The case settles for $100,000.
Driver A may be required to pay back a portion of what the health insurance company paid on his behalf. However, he does not have to pay the entire $15,000. In general, the amount of the lien is reduced by 1/3 ($5,000). In addition, a portion of the litigation costs is also subtracted from the lien. To keep things simple, let’s say the cost of litigation is $2,000. Therefore, the driver would have to pay back $8,000 ($15,000 - $5,000 - $2,000 = $8,000) to the insurance company from his recovery.
However, there are specific insurance plans, such as ERISA plans, that are not required by law to reduce the lien. It is difficult for injured drivers to know what type of plan they have, thus it is important that an experienced car accident lawyer help injured victims determine what type of insurance they have.
If an individual is injured in an accident while working, there may be a workers’ compensation lien. PA’s workers’ compensation law requires an employer (via a workers’ comp carrier) to pay an injured worker's medical expenses resulting from a workplace injury. If the accident was caused by a third-party (not the employer), the workers’ comp carrier has a lien against any financial recovery.
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Here’s an example: A delivery man goes to deliver a package to a customer’s office. As he walks down a flight of stairs at the customer’s office, the step breaks causing him to lose his balance and fall down the flight of stairs. As it turns out, the customer knew that the step was broken and hadn’t gotten around to fixing it. Because the delivery man was injured while working, his medical expenses are paid by his employer via workers’ compensation benefits. His medical expenses total $15,000.
The delivery man also files a lawsuit against the customer and recovers $100,000. Like Driver A in the above example, the delivery man has to pay back a portion of the medical expenses to the workers’ comp carrier. Again, the lien is reduced by 1/3, plus costs. Using the same litigation costs in the first example, the workers’ comp carrier is entitled to receive $8,000, after the 1/3 reduction plus costs.
Liens are often confusing, and it is best for accident victims to speak to an experienced personal injury to seek legal advice. Daniel J. O’Brien, Esq., a personal injury lawyer licensed in PA and NJ, has helped countless accident victims recover the maximum financial compensation they are entitled to. Call to get a FREE consultation. 877.944.8396