There are four types of statutory liens that can be legally enforced in New Jersey against recoveries in personal injury matters. They are:
Workers’ compensation liens under N.J.S.A. 34:15-40;
Liens asserted by health insurance carriers under the Employee Retirement Income Security Act (ERISA), 42 U.S.C. 1395(b); and
Liens for unpaid child support under N.J.S.A. 2A:17-56.23b.
While a small treatise could be written on each type of statutory lien, the purpose of this article is to offer litigators some practical advice on how to recognize a valid lien and how to handle the lien once its validity has been confirmed.
I recommend every plaintiffs attorney keep a checklist of these four types of liens handy and refer to it during the initial consultation and then again before agreeing to any settlement or beginning trial.
Most defense attorneys see statutory liens as a plaintiff’s problem, but an astute plaintiffs attorney can usually demonstrate to defense counsel why sheneeds to be concerned about the lien, too. This is because a lien, particularly when it involves payments for medical treatment, can usually be viewed as an exception to New Jersey’s Collateral Source Rule, N.J.S.A. 2A:15-97, thus allowing the plaintiff’s attorney to introduce the medical bills into evidence at the time of trial. Looking at a lien this way, it is easy to see why a defense attorney should be concerned about the plaintiff’s attorney putting such numbers "on the board," when typically such medical bills would be excluded from evidence at the time of trial.
The statutory authority for Medicare asserting a lien against a personal injury recovery for amounts it has paid for medical bills can be found in 42 U.S.C.1395y(b)(2)(B). The law refers to such sums as "conditional payments." The amount of a Medicare lien can be determined by writing to the Centers for Medicare Services and requesting a "conditional payment letter."
The statutory authority for a Medicaid lien can be found in N.J.S.A. 30:4D-7.1(b). The amount of the Medicaid lien can be found by writing to State of New Jersey, Department of Human Services, Division of Medical Assistance and Health Services, P.O. Box 712, Trenton, N.J. 08625.
Previously, it could be very difficult to get lien information from Medicare or Medicaid, but the process has now been streamlined. This is particularly true in the case of Medicare liens, where lien information can be easily obtained by the attorney or the client at www.mymedicare.gov.
Also, because of the low rate of reimbursement to health care providers under these government programs, the lien is often substantially less than one might think. I recently received a conditional payment letter for a client who shattered his hip in a trip and fall. While the health-care providers billed $143,813.32 for his surgery and recovery treatment, Medicare allowed only $18,967.02. However, just because the amount of the conditional payment seems low does not mean the attorney and his client should not scrutinize the conditional payment letter for charges unrelated to the accident. Quite often there are charges listed in the letter listed as conditional payments which have absolutely nothing to do with the personal injury case.
Moreover, if a Medicare/Medicaid lien has become an impediment to settling a case, perhaps due to liability problems, there are a number of national firms a plaintiffs attorney can hire to ascertain the proper amount of the lien and even negotiate a reduction. Among these firms are Trauma Revenue Solutions in Conroe, Tex., and Crowe Paradis, in North Reading, Mass. Some firms charge a flat fee, others charge a percentage of the reduction they were able to obtain on the lien. While I prefer the former, the choice is up to the individual attorney.
Workers’ Compensation Liens
The statutory authority for the workers’ compensation lien can be found in N.J.S.A. 34:15-40.
An employee injured in a work-related accident, who has a third-party claim against someone other than his employer or co-worker, will have to reimburse the employer’s workers’ compensation carrier for any money the carrier has paid for medical treatment, lost wages and permanency. The classic example is a work-related motor vehicle accident where someone other than the injured worker is at fault. In such a case, workers’ compensation is responsible for the payment of medical bills, not the auto insurance personal injury protection (PIP).
The statute permits a one-third reduction of the workers’ compensation lien for attorney fees and an additional $750 reduction for litigation expenses.
A plaintiffs attorney should request an itemization of the workers compensation lien from the carrier broken down as to: 1) medical treatment payments; 2) temporary lost wages; and 3) money awarded for a permanent injury. The portion of the lien attributable to medical bills should be itemized even further. A gross dollar amount of the money the workers’ compensation carrier has spent on medical bills is not detailed enough to introduce into evidence at a personal injury trial. Moreover, by obtaining a detailed itemization of medical expenses paid by the workers’ compensation carrier, the plaintiff’s attorney can scrutinize the lien to see if the carrier has mistakenly included amounts paid for administrative costs, such as the services of a nurse case manager whose services are frequently improperly included in the lien amount but are not "lienable" under the statute. Kuhnel v. CNA Ins., 322 N.J. Super. 568 (App. Div. 1999).
The Appellate Division case of White Consolidated Industries v. Lin, 372 N.J. Super. 480 (App. Div. 2004), is required reading when trying to determine if a lien asserted by plaintiff’s health insurance carrier is valid. New Jersey’s Collateral Source Rule, N.J.S.A. 2A:15-97, prohibits such liens by health insurance carriers. However, the federal Employee Retirement Income Security Act (ERISA) pre-empts New Jersey’s statute when the health insurer is a qualified ERISA plan. This typically occurs when the health plan is funded completely with the employer’s money rather than by the employer purchasing health insurance from an outside vendor.
When a plaintiffs attorney receives notice of a health insurance lien, it is not enough that the purported lien holder cites the ERISA statute as their authority for asserting a lien. It is imperative that the attorney ask for copies of the plan documents and confirm that the plan is self-funded by the employer.
Once again, even if it is valid, it is important to scrutinize the lien for medical expenses unrelated to the personal injury case. Finally, the plaintiff’s attorney should also try to compromise the lien when issues of liability or comparative negligence exist.
Child Support Liens
N.J.S.A. 2A:17-56.23b provides that a lien for unpaid child support takes priority over all other liens except a lien for unpaid income taxes. It also exempts the first $2,000 due to the plaintiff, presumably to induce the plaintiff into signing the release when his entire settlement would otherwise go to pay back child support.
While insurance companies usually require proof that the plaintiff does not owe back child support prior to issuing any settlement funds, it is important for the plaintiff’s attorney to advise his client about this lien prior to reaching settlement, lest the client be unpleasantly surprised when he receives his share of the settlement.
A Note On Per Quod Claims
Finally, a note to plaintiffs attorneys on per quod claims. If a client who has suffered a physical injury is married, and his spouse has asserted a claim for loss of society services or consortium, the spouse’s claim is arguably not subject to any lien. See Weir v. Market Transition Facility of NJ, 318 N.J. Super. 436 (App. Div. 1999).
Thus, it helps to allocate the settlement proceeds between spouses, prior to settlement and even have the spouses sign separate releases for their share of the settlement proceeds so that the holder of a valid lien cannot take what rightfully belongs to the injured party’s spouse. •