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LIENS & SUBROGATION
Posted by: Daniel R. Robinson
November 29, 2011
Topic: General
In the boring but important category of law is the subject of liens and subrogation.
Subrogation is the substitution of one person or entity in place of another with reference to a lawful claim, demand or right. For example, say you have medical insurance through your employer. In that policy there is most likely a provision that gives your insurance company the right to claim a subrogation interest against another third party when your insurance company pays money on your behalf. So, should you be injured in an accident and recover damages in a settlement, your insurance company can assert an interest in your settlement proceeds. This is often (incorrectly) referred to as claiming a lien interest. More accurately, it is a subrogation interest.
Liens are usually creatures created by statutes, such as those granted to Medicare, Medicaid and Hospitals, and there are other liens that come from Judgments and Federal Agencies, like the Department of Treasury (I.R.S.).
A problem can arise that if you are in an accident, the amount of medical bills you accumulate may exceed the amount of the settlement. If that happens, are you then liable for the remaining unpaid bills? The answer is, Yes. However, Colorado has adopted the "Make Whole Doctrine" (§10-1-135 C.R.S.). A part of that statute provides that an injured party has the right to recover all of her damages before an insurer, contract provider, or benefit plan has a subrogation interest in the recovery. The statute does not limit the third party's subrogation rights, but it does protect the inured party from losing some or all of their recovery to lien holders and subrogation interests.
Whether the Make Whole Law will apply depends on whether the lien holder is a Federal agency (Medicare, Medicaid) or a hospital, which is exempt from the statute. Federal agencies are also exempt because Federal Law is supreme to state law and controls.
An attorney experienced in this area of law can save you money by helping to navigate the complicated process of settling liens and subrogation interests. Insurance companies often assert these interests against settlement proceeds even though they may not have a right to recover the full amount they are claiming.
KILLIAN & DAVIS, P.C. provides this service to its clients without charge after a settlement.
