What is a lien? The person in Flower Mound, Haslet, Saginaw, Irving, Carrollton, De Soto, Grand Prairie, Arlington, Mansfield, Fort Worth, or anywhere else in Texas may ask that question.
Generally speaking, in the insurance context a lien is a right to money that a third person may eventually get. Others describe it as a property right which remains attached to an object tht has been sold, but not totally paid for, until complete payment has been made. Another way of putting it is, a hold or claim which one person has upon the property of another as a security for some debt or charge.
In the insurance world a lien normally arises where some person or business causes injury to someone. After the injury, the injured person seeks and receives medical care that his personal health insurance pays for. When this occurs the health insurance company will usually have a subrogation lien against the person or business that caused the injury.
A personal injury settlement or judgment may create tension between insured people and their health insurance company and their medical providers. The right of an insurer of a medical provider to be paid from the proceeds of a settlement falls under the general category of subrogation. Subrogation is defined as, “The substitution of one person for another, expecially the legal doctrine of substituting one creditor for another.”
Both “subrogation” and “lien” are terms of art with specific meanings, and it is sometimes hard to be true to the meanings. Legally, this is a challenge, as the terms are often used interchangeably by legislatures and courts and Judges. In the insurance context, it generally means the right to money that a third party may eventually get. Liens are perfected (that is, made collectable) by filing them with the appropriate County Clerk. Subrogation, which again is a term sometimes used interchageably with “lien,” and sometimes along with it, as in “subrogation lien,” is a right of repayment that can be created by a statute or by contract.
Before going further, when talking about liens and subrogation, it is vital that an experienced Insurance Law Attorney be consulted. Otherwise, a person receiving money and benefits can find themselves being sued. Sometimes a criminal wrong is committed unknowingly when these issues are not handled properly.
Subrogation interests are created by contract, and a third party’s liability for same can be extinguished by a release of the wrongdoer by the injured person.
One example is where a person’s car is damaged in a wreck with another person and the other person was at fault. The person’s car who was damaged makes a claim with the insurance of the atfault person but the insurance company is too slow to fix the damage so the person with the damaged car gets his own insurance company to fix his car. He gets his car fixed and goes on about his life when two weeks later the atfault driver’s insurance company calls and concedes they are atfault and pays money for the damage to the car. If the person who has his car damaged accepts the money he can get in trouble. Why? Because when he got his own insurance company to fix his car, his insurance company became the one who had the right to receive the money from the atfault driver’s insurance.
Another example is, same as above but the person was also injured and went to the hospital and had his health insurance pay for his medical bills. Later when the atfault driver’s insurance admits fault and pays the injured person for his injuries, the injured person’s health insurance company has a subrogation interest that must be satisfied to the extent of all monies paid to the injured person.
The confusing thing about the above is all the exceptions that can come into play.
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