Liens

A "lien" on a dog bite case is like a mortgage on a house. The holder of the lien is entitled to get paid when money comes in on the case, just like the holder of the mortgage gets paid when the house is sold.

Doctors usually are the lien holders. Doctors frequently treat an injured person without knowing exactly when they will get paid. That is one of the ethical rules of medicine: to treat the sick for free if necessary. However, doctors are entitled to be paid for their services. When the patient is discharged, the bills start coming. Some victims have insurance, some have plenty of money, but others have neither.

The victims who have neither insurance nor money present an obvious problem to their doctors. To solve that problem, a doctor might agree to wait for payment until the case is settled or money comes in from some source prior to settlement. That agreement is "secured" by a lien on the case.

The lien is a written document that contains provisions such as the following:

• The victim acknowledges that medical services were rendered in connection with an incident on a certain date.
• The victim acknowledges that he or she is responsible for payment.
• The victim represents that he or she is making a claim against the responsible party.
• The doctor states that he or she is willing to not send the matter to collection, and wait until money comes in from the responsible party.
• The victim agrees that his or her attorney shall be irrevocably instructed to pay the doctor out of the proceeds of the claim.
• The attorney agrees to honor the lien and pay the doctor accordingly.

By law in most states, an attorney who was notified of the doctor's lien is required to pay the doctor when funds come in from the case. So, that is how doctors frequently get paid.

Using liens to avoid having to pay bills right away

If a victim has neither insurance nor money in the bank, it is important that the victim find a doctor who will "take a lien." This is a shorthand way of saying that the doctor will not insist upon immediate payment, but will wait until the case is settled, in exchange for a lien signed by the patient and his or her attorney.

When choosing a doctor, ask his or her nurse whether they will "take a lien." You can say, "Will the doctor accept a lien?"

Don't be surprised if the answer is "No!" There is no law that requires a doctor to take a lien. However, you can assume that, if a doctor does not take a lien, he or she also does not handle these kinds of cases. That implies that this doctor would not be the best for your claim, because doctors have to have extra skills and experience -- and a different kind of attitude -- to help a victim during the course of a claim.

If the doctor's office says "Yes, we take liens," then expect to have to sign a lien form when you fill out the usual paperwork at the doctor's office. The form probably will cover the points written above.

Using liens to avoid having to pay the entire bill

If a victim uses liens to delay paying his or her doctors, there may be an additional advantage: the victim's attorney often can obtain a discount off the doctors' charges.

See, when the attorney settles the case for the client, the client does not receive the total amount of money, because the attorney receives a fee. Often that fee is one-third of the settlement. Therefore, the client receives only 66 cents on the dollar. In other words, the cost of the settlement was 33 cents on the dollar.

Now, why should the doctor get paid 100 cents on the dollar, when the victim is getting only 66 cents? It was the victim who hired the attorney, and the victim who perhaps put time and energy into assisting the attorney to collect the money. Isn't it fair to require the doctor to pay his or her proportionate share of the attorney's fee? In other words, shouldn't the doctor receive only 66 cents on the dollar?

Courts and legislatures have answered this question different ways. The answer is that the entire amount has to be paid if the lien is by the federal government or military. The answer is that it probably has to be paid in full if the lienholder is a hospital or emergency physician, or even a private medical practice in some states. Under some circumstances, however, the answer is that the victim will get a reduction, such as where the lien is from certain government agencies (i.e., MediCal in California), from private insurance, or the victim has received so little money that he cannot be said to have been "made whole" by the recovery.

Therefore, one of the reasons to engage an experienced attorney is that, when the attorney settles the case, he might be able to obtain reductions of bills sent by lien holders.

How liens affect the settlement

Liens do not change the grossamount of money that a victim will get in settlement. If a case is worth $75,000.00, and there are liens totaling $25,000.00, the gross settlement still will be $75,000.00.

However, the net settlement will be affected. Here's how:

• From the $75,000.00, the attorney will take his or her fee. If it's a one-third fee, then the attorney will take $25,000.00.
• That leaves $50,000.00. If there were no liens, then the victim would receive the entire $50,000.00.
• The attorney will attempt to convince the doctors to reduce the $25,000.00 in medical bills to only $17,000.00 (see the prior section if you don't know why).
• The liens totaling $17,000.00, have to be paid out of the $50,000.00. As a result, there will be only $33,000.00 for the victim.

Does that seem fair? At first you might say "No." However, it is quite fair. Remember that the victim received $25,000.00 in medical treatment -- without ever having to pay a dime! Well, those doctors have to get some money for their services, right? Since the victim did not have insurance, the doctors have to be paid out of the settlement. In such a case, the victim should be really happy that doctors will render their services "on a lien."

Are liens always legal?

Liens claimed by third parties are not always legal. In other words, just because a hospital or insurance company asserts a lien, that does not mean the victim must pay it.

The answer depends on state law. The law might be statutory or created in court decisions.

For example, in Parnell v. Adventist Health System/West, 34 Cal.4th 595 (Cal. Sup. Ct., 2005), the California Supreme Court held that a California law which gives hospitals the right to assert a lien against the third party claims of injured people did not permit a hospital to recover more than the negotiated amount received under the agreement with the victim's health plan. In that case, the hospital accepted the amount set forth in the patient's health plan, but later asserted a lien against his settlement or judgment in his third party claim. The patient sought relief from the courts, and won.

In some states, it is not legal for insurance companies to take any part of the settlement or judgment won by the companies' customers. Many feel that this should be the law throughout the USA.