How Can a Good Attorney Reduce Liens on a Personal Injury Settlement in Illinois?

What is a Lien?

In personal injury cases, a lien is a right of a creditor to get paid from a personal injury settlement. A lien allows the injured party to not have to worry about paying their medical bills until the case has settled. Once the personal injury case has been settled, the creditor will be paid from the personal injury settlement. In order for a lien to be valid, the creditor (called the lienholder) must notify both the injured person and the at-fault person (call the tortfeasor) of the lien. The lien must contain the name and address of the injured person, the date of injury, the name and address of the lienholder, and the name of the tortfeasor. 770 ILCS 23/10(b).

There are several types of liens that can be placed against a personal injury claim. The first type of lien is a healthcare lien, governed by the Health Care Services Act. 770 ILCS 23/1. Under the Act, a hospital, doctor, or physical therapist that has provided services to the injured person may place a lien against that person’s personal injury claim. For more information on how healthcare liens work, see our previous blog HERE.

The second type of lien is a subrogation lien. Subrogation is the right of the indemnitor to obtain reimbursement for the amount it paid to indemnify the injured party’s loss from the tortfeasor. Subrogation liens allow for the indemnitor to recover any amount it paid to the injured party from the personal injury settlement, so the injured party does not receive a double payment – payment from both the tortfeasor and the indemi. Subrogation liens normally occur when either the injured party’s health insurance or the injured party’s automotive insurance medical payment policy has paid some or all of the injured party’s medical bills.

The third type of lien is an ERISA lien. ERISA liens are liens placed by the injured party’s health insurance work benefits plan. ERISA liens are the most complicated type of liens, and have special rules. For more information on ERISA liens, visit our blog HERE.

The fourth type of lien is a Medicare/Medicaid lien. Medicare and Medicaid liens are “super liens”, which means that they have a right to full reimbursement. For more information on how Medicare and Medicaid liens work, see our previous blog HERE.

The last type of lien is an attorney lien, governed by the Attorneys Lien Act. 770 ILCS 5/1. An attorney lien entitles the attorney to be paid for their services in obtaining a settlement for their client. An attorney lien takes priority of all the liens. 770 ILCS 23/40.

How Can an Attorney Help with Liens?

A knowledgeable attorney representing an injured client can maximize the client’s net profits by working with lienholders to reduce liens. Different types of liens have different rules which affect how an attorney can negotiate them. A skillful attorney will know the intricacies of the rules of each type of lien and how to maximize profits for the client.

Under the rules of the Health Care Service Lien Act, all healthcare liens may not exceed 40 percent of the injured person’s settlement. 770 ILCS 23/10(c). No single lienholder may receive more than 1/3 percent of the settlement. Id. Under the Act, if the total amount of all liens meets or exceeds 40 percent of the settlement, then all the liens of healthcare professionals and providers cannot exceed 20 percent of the settlement. Id.

The rules of the Common Fund Doctrine require subrogation lienholders to pay a pro rata share of the costs of the personal injury claim under the Common Fund Doctrine. Under the Common Fund Doctrine, an attorney who performs services in creating a fund (i.e., a settlement for the client) should be allowed compensation out of the whole fund from those who seek to benefit from it (subrogation lienholders).This means that the client does not have to pay that portion of the costs, which means more money in the client’s pocket. For more information about the Common Fund Doctrine, visit our previous blog HERE.

Having a personal injury claim can be a difficult and confusing process, especially if lienholders are involved. If you or a loved one has been injured, contact the personal injury attorneys at the law firm of John J. Malm & Associates to learn more about how you may be entitled to receive compensation for your injuries.


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