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ERISA Liens and How They May Affect Your Personal Injury Recovery

The Employee Retirement Income and Security Act, known as ERISA, is a complex federal law that permits employers to establish special self-funded insurance policies. These ERISA-based policies are special in that they are not subject to North Carolina’s strict insurance laws. Accident victims in North Carolina receive certain protections from North Carolina insurance laws due to the prohibition of subrogation clauses in privately funded health insurance policies. For this reason, North Carolina’s insurance laws are considered to have an “anti-subrogation rule.”

North Carolina’s “anti-subrogation rule” means that privately funded health insurance policies in North Carolina will not be able to seek and receive reimbursement (also known as “subrogation”) from your personal injury recovery. However, ERISA plans are not governed by North Carolina law and are therefore unique because they do not have to follow North Carolina’s anti-subrogation rules. For information about what subrogation is and how it works, please visit our Liens and Subrogation Overview.

If your health insurance policy is an ERISA-based insurance plan, your health insurance provider will likely be entitled to reimbursement for all medical expenses paid to any medical providers for treatment related to your personal injury claim. This right of reimbursement or right to subrogation means that your ERISA-based health insurance provider is entitled to be paid directly from your North Carolina personal injury settlement or judgment for those related medical expenses.

Furthermore, the federal government has ruled that as long as the notice or warning of subrogation is in your health insurance policy’s contract, the insurance provider will likely have an enforceable right to reimbursement from your personal injury claim. This information is extremely important and has significant implications for your personal injury claim, settlement and final recovery. Given the complex nature of ERISA, this article should be used as an introduction to understanding the mechanics of these potential claims on your North Carolina personal injury settlement or award.

How to Determine Whether Your Coverage is an ERISA Plan

Before you settle or resolve any personal injury case, you should first determine who may have a potential lien or subrogation interest on your settlement or recovery. Whenever your health coverage is provided through your place of employment, it will be important to determine whether your health insurance policy is an ERISA-based policy or not. You can find a detailed guide of how to determine whether your health insurance policy is entitled to reimbursement under ERISA by reading our Comprehensive ERISA Guide.

How are ERISA Liens Established?

ERISA receives a right of reimbursement from a personal injury settlement or award based on the language contained within your heath insurance policy contract, namely the policy’s self-funded language. ERISA policies are required to include language establishing the plan’s provisions claiming their right of subrogation. The ERISA health insurance plan must explicitly authorize their claim for reimbursement. This means that the plan must actually state their right to reimbursement from settlements or awards in their plan contract.

Most people are not aware that the language even exists, but drafters of these plans know exactly what to include in order for the reimbursement clause to be enforceable. With this being said, if an ERISA contract neglects to include the proper language, the ERISA provider may not be entitled to receive the right to reimbursement. An ERISA plan’s failure to include the proper language is a rarity; thus, for the remainder of this article, we will assume that we are dealing with an ERISA plan that has included the proper language.

In order for an ERISA’s reimbursement clause to be enforceable, the plan must also be self-funded. This can be very tricky to determine, even for lawyers. Essentially, a plan is self-funded if the program is responsible for paying the medical bills of its plan beneficiaries (you and your family) as opposed to an insurance policy held by the plan. Determining whether a plan is self-funded is very difficult, as almost all health insurance plans claim to be self-funded. It is highly recommended that you consult with an experienced personal injury attorney whenever dealing with ERISA plans and their reimbursement rights.

So long as the proper contractual language exists and the plan is self-funded, ERISA liens will likely attach to personal injury proceeds. Therefore, if you are injured in an accident and accept benefits from this type of insurance plan to help cover your treatment, ERISA receives a subrogation interest in your personal injury settlement for the accident. Also, ERISA is not required to notify you or your attorney about their lien, as notice of the lien is already included in the plan’s contract.

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