In the context of a personal injury case, a lien holder is a creditor that has the right to get paid out of the recovery or settlement before you do. There are many many types of lien holders and others with subrogation rights to be repaid out of the settlement.
The main lien holders in Florida are hospitals, Medicare and Medicaid. Others who do not have liens but have rights of subrogation or reimbursement are health insurers and physicians who have been promised payment under a letter of protection.
How this works is that after a settlement or a recovery is made the lien holder is paid out of the recovery before the proceeds are distributed to the injured party. In theory this is a fair system because the recovery includes payment for bills and so if you are paid the bills in return in the settlement then you have a double recovery for the bills. If the repayment is made the double bill recovery is avoided and all are fairly compensated. Note I said in theory it is a fair system. In reality it is, many times, not fair at all. There are many cases where the injured party does not get paid in full due to a reduction for his own negligence or because of a lack of insurance. In those cases if the victim is not paid in full the lien holder should not be paid in full either. Additionally, most cases do not include an award of attorney’s fees. As a result, the victim has to pay a percentage to the lawyer and the lien holder should also or they are getting the legal costs of collection for free paid by the victim.
Medicare has a formula to deduct the cost of the fair share of fees and costs, surprisingly, many private companies do not. In a famous recent case, Wal-Mart used the ERISA laws to assert a claim for all of the proceeds of a settlement for a woman who was badly injured. Wal-Mart was chastised by the press and recanted after much criticism a claim they made for 100% of a health beneficiaries recovery even though it left here brain damaged, handicapped and without one dime for the huge future medical bills and huge loss of earnings. Sadly not every case gets the press exposure that does and more and more companies are using the ERISA law to try and take more and more from victim’s recoveries with no regard to equity or fairness. Lawyers should fight ERISA health insurance plans all the time to do the right thing. Every lawyer should do that after all it does not matter what you recover in the settlement what matters is what the client ends up with after all has been paid.
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