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A lien gives a person or company a right over someone else's property, or an interest in their legal claim. Sometimes called a "security interest," a lien can come from a contract, or from state or federal law.
One of the most common examples of a lien is a mortgage, which gives the bank or mortgage company a right over your real estate. As long as you pay your mortgage, the bank can't take your property, but if you stop paying your mortgage, the bank has the right to foreclose on your property.
In the car accident claim context, a lien gives a person or business the right to recover part of any compensation you end up receiving—most often that means the lienholder is entitled to part of your injury settlement.
The official creation of this kind of enforceable lien is usually governed by state law:
There are several types of liens that can be placed on any car insurance settlement or court judgment the injured person receives. Some of the most common liens come from the following types of services, contracts, and debts:
Let's take a closer look at the different kinds of liens that could arise in a car accident case.
Many people with personal injury claims end up with unpaid medical bills. Most states have a law that allows health care providers to place a lien on the injured person's case, meaning the facility or health care professional who gave you medical care after your car accident has a lien on any money that you might receive on your claim through a settlement or court judgment.
Most states' laws say that hospitals and other health care providers are only entitled to liens stemming from care that was "reasonable" or "necessary" (or similar language). Other states have more specific restrictions on medical liens. In Illinois, for example, if health care provider liens amount to more than 40 percent of the total compensation the injured person received, the liens will usually be capped and reallocated among the various lienholders.
In many health care lien scenarios, a lawyer will try to negotiate with the health care provider to see if they'll agree to accept less than the full amount of the lien.
Insurance companies that have paid out car accident-related insurance benefits to an injured person will almost always have a contractual lien allowing them to be repaid out of any injury settlement or award the injured person ends up receiving. The specifics of the lien will be dictated by language in the applicable insurance policy.
Insurance liens arise from all types of insurance benefits you might receive after a car accident, including:
If a car accident injury claimant receives local, state, or federal government benefits as a result of the crash and their injuries, the respective government branch or agency will almost certainly have a lien on the injured person's financial recovery. These liens are typically created by statute.
The kinds of government benefits that might create a lien include:
Some car accident injury claimants decide to get a pre-settlement loan. That usually means signing a contract with a pre-settlement loan company, who now has a lien on the proceeds of the injured person's claim. Pre-settlement loan companies rarely agree to negotiate a reduction of the amount owed, which is just one of many reasons to think twice before signing up for a pre-settlement loan in a personal injury case.
If a lien exists on a car accident settlement, the claimant's lawyer must repay the lienholder before disbursing any settlement or court-order judgment to the client.
If the lawyer knowingly fails to repay the lien out of the client's settlement or verdict, the lienholder will almost certainly sue the lawyer (and the client) for the money, and the lawyer will almost definitely be sanctioned by their state's legal governing authority.
If you're concerned about potential liens on your car accident settlement—and especially if you think you'll need help trying to negotiate with a lienholder—it might make sense to discuss your situation with an experienced legal professional.
Of course, navigating the lien landscape is just one way a car accident lawyer can help you get the best outcome for your case. Learn more about when you might need a lawyer for a car accident case and get in-depth information on working with a personal injury lawyer .