What Happens When Other Liens Are Also Attached to Your Settlement or Award?
The way in which your recovery proceeds are to be disbursed when multiple liens, including ERISA liens, are attached to your recovery proceeds has generally been left unanswered by the courts to date. It is evident that ERISA may claim a priority right to reimbursement in their contracted plans. It is not evident, however, as to when the priority right is actually enforceable. Generally, a lien is established either contractually or statutorily. Federal statutory liens such as Medicare and TRICARE also claim a first right to reimbursement. Generally speaking, when in conflict, federal statutory liens should trump contractual-based liens. A contractual lien and statutory lien are in conflict when both are claiming the same rights. ERISA liens and Medicare/TRICARE liens fit this situation because they both claim a first right of reimbursement. Therefore, Medicare and TRICARE Liens (federal statutory liens) should probably be reimbursed before ERISA liens (contractual liens). With all this being said, I would highly recommend not paying any liens until the amount to be paid is approved by each lien holder or interested party. This can be done by sending a letter to each lien holder providing them with a breakdown of the reimbursement plan.
When a statutory lien and contractual lien are not in conflict, then the contractual lien will likely take priority. For instance, physicians liens under North Carolina law do not claim a right to priority; therefore, an ERISA lien will receive reimbursement before a physician lien.
As you can see, dealing with ERISA liens and their interactions with other liens can be very difficult because there really is no right or wrong answer. It is always a good idea to try to get all lien holders to compromise and work together to come to a reasonable agreement.
Consequences for Not Dealing with ERISA Properly
ERISA liens should always be dealt with appropriately, as failing to do so can have significant consequences. If an ERISA reimbursement claim is not handled properly, you will still be liable for the amount to which the plan was entitled. In other words, ERISA will likely sue you for the lien amount. Not paying ERISA’s claim for reimbursement can cost you a lot more in the long run, as the cost of litigation is very expensive.
Also, if you neglect to use your recovery to pay what is owed to ERISA, the plan can follow the proceeds of your recovery. Essentially, the plan will be entitled to place liens on items purchased with your recovery proceeds. For example, let’s assume that you received a settlement from an accident and neglected to pay a valid ERISA lien. You then used those proceeds to purchase a new vehicle. ERISA will be able to put a lien on the new vehicle. This is significant because you will not likely be able to sell or receive a clean title until the lien is paid.
If you have questions about ERISA-based health insurance policies and how they may affect your personal injury settlement, please contact an experienced personal injury lawyer. Feel free to use our Lawyer Locator or chat with one of our attorneys using the button below.