In virtually every personal injury case, there is a claim (often called a lien) by a third party to be repaid out of the case settlement. Most frequently this lien is for the amount of medical benefits paid because of the injury. How this lien for repayment relates to the attorney’s contingent fee usual in a personal injury case is important to the net amount that the injured victim actually receives from a settlement. Clients often express the concern that after health insurance or other third parties are repaid and after the percentage is paid for attorney’s fees, there will be little left to compensate them as injured victims. This concern is well-founded where the settlement in a personal injury claim has to be discounted for reasons such as insufficient insurance, inability of the guilty party to pay or disputed liability.
The relationship between liens and fees depends on the type of lien. Workers’ compensation insurers are required by law to pay attorney’s fees and expenses in the same proportion as their claim bears to the total injury settlement. In essence, workers’ compensation insurers pay part of the attorney’s fees and expenses. Medicare liens operate the same way, with Medicare reducing its right to repayment by its proportionate share of attorney’s fees and expenses.
The story is different for health insurers in Massachusetts. Health insurance liens are entitled to repayment in full without having to take a reduction for attorney’s fees and expenses. This was the result of a Supreme Judicial Court case, Pierce v. Christmas Tree Shops. This rule has the potential for creating the situation where the insurer and the attorneys receive most of a settlement with the injured victim receiving little. Attorneys representing personal injury victims should attempt to negotiate a lien reduction with the health insurer to avoid this. Health insurers often, but not always, are willing to give some credit for attorney’s fees and expenses where collecting their full lien will deprive the injured victim of compensation.