Over the years, laws have been passed that grant many parties the right to have a lien on the proceeds of a personal injury case. The idea is that since the plaintiff might be getting a lump sum of cash in the future, the plaintiff might be able to pay back the government or other organization for benefits that the plaintiff might have received in the past. In these situations, the government or other organization is said to have a lien on the proceeds of the settlement. Note that the term lien is used loosely here and, technically speaking, not all claims are liens. But for practical purposes, they are treated as liens and the proceeds of the settlement must be held until the organization claiming their lien is paid off. Usually, the funds are taken directly out of the proceeds of the settlement fund to pay the lien.
Some common liens are liens from Medicare, the Connecticut Department of Administrative Services, the Department of Corrections, the military branches under the Medical Care Recovery Act and many self-funded health insurance plans governed by ERISA (Employee Retirement Income Security Act).
It is very important that before you bring your case, you evaluate potential organizations that might claim a lien. If you have lien claims that are very large, then it is possible that if your personal injury claim is successful you will receive nothing or very little at the end of the case because the liens eat up all or much of the proceeds.
It is also very important to understand that in many instances when a plaintiff brings a claim, the plaintiff will be using a large portion of the “damages” to pay back some other source like Medicare for benefits paid to the plaintiff for bills. That way, the cost of medical care that is caused by the carelessness of the truck or car defendant is not passed on to Medicare and is instead borne by the careless party or their insurance company.