Fighting lien overreach and the hidden tax on client recoveries
The lawyer sat down with the firm’s Pre-Litigation Manager, one of those types who always read the instructions for the board game in full before playing. “Rawlings is trying to get a piece of an uninsured motorist policy, but I don’t think they can,” said the Pre-Litigation Manager. The lawyer’s ears perked up. This was going to be interesting.
Lien in
Liens typically get paid from net settlements after attorney’s fees and costs. Aggressive lien negotiation takes time but doesn’t increase law firm profits. Yet every dollar saved goes directly to the client. This is precisely why fighting lien overreach matters. While most clients don’t know the difference, part of our fiduciary duty includes crushing liens. For those who enjoy crossword puzzles, play chess, and read the tax code for fun, it can be thrilling work.
What were legacy recovery companies – Optum, Equian, and Rawlings – have become private equity holdings with one ownership group, New Mountain Capital, appearing to have a controlling interest across the subrogation world. Name changes – Katch and Machinify – seem to be rippling through the system, promising AI solutions and savings. While the long-term impacts remain unknown, the recovery companies continue their strategy. They expect overworked attorneys will simply roll over and pay since the lien impacts client recovery, not attorney recovery. They provide nebulous legal support for their reimbursement claims, betting that obstructionist behavior will wear down the lawyer and client, a “can’t fight the Borg,” approach.
The Kaiser paradigm shift
While Equian and The Rawlings Company appear to now have a single private equity parent, The Rawlings Company’s recent takeover of Kaiser Permanente’s lien recovery from Equian reveals their different approaches. Equian notably did not pursue recovery from uninsured or underinsured motorist claims (meaning they followed established law.) In an argument akin to loudly claiming the sun rises in the east, Rawlings believes it can change the law if it repeats an unlawful position aggressively and frequently. They now pursue UM and UIM recoveries, arguing that plan language alone creates enforceable rights even if the plan is contrary to the law.
The legal ammunition
When Rawlings or similar companies assert overreaching liens against UM/UIM coverage, they hope folks don’t know the law. Boston Mutual Ins. V. Murphree, 242 F.3d 899 (9th Cir. 2001), states: “Given the functional differences between these coverages, no reasonable insured would expect that the plan’s coordination clause, which at most implicates other first party medical coverage, could possibly apply to UIM coverage.” Similarly, St. Paul Fire & Marine Ins. Co. v. Murray Plumbing & Heating Corp., 65 Cal.App.3d 66 (1976), provides additional case law to countermand this overreach. Armed with these authorities and tremendous patience, sometimes combating the same flawed argument in multiple rounds, we’ve found Rawlings can be cut down to size.
The medical payments strategy
There are times where liens are valid. That doesn’t mean they should be paid in full. Clients and their employers paid health premiums for years. Liens are contractual shakedowns created by recovery specialists. So shake back. Under California Civil Code § 3040 health insurance plans must reduce their liens for attorney’s fees and costs. After securing this reduction, use Medical Payments coverage to satisfy the lien. Presuming one recovered policy limits, the auto insurer cannot then seek reimbursement on a Medical Payments lien. Even if the auto insurer attempts subrogation on the Medical Payments coverage, one can reduce that lien for fees and costs as well, minimizing the client’s total reimbursement obligation through strategic sequencing of payments and reductions.
Causation and expert solutions
Sometimes medical causation problems become a threshold issue. If the jury believes the defense’s experts, one could lose the damages case. The case settles, and the subrogation company shows up. Hold the lien analysts to their burden and use the defense experts’ reports. We used this method recently over a self-funded ERISA lien, resulting in a substantial reduction.
Some liens are too complicated for even the most competent plaintiffs’ firms. Fortunately, certain firms specialize in reducing these complicated liens. Their granular knowledge of self-funded ERISA plans can make all the difference. These firms are also generous with their learning, teaching CLEs and sharing templates. Supporting them yields new research and knowledge shared across the bar in the fight to reduce liens.
Outro
Back to our lawyer and Pre-Litigation Manager. The conversation was indeed interesting, and a reminder for us all. The next time a subrogation representative confidently asserts a lien, remember: their confidence stems from experience with attorneys who don’t push back. The more we push, the better our practice. Fight back. Know the law. Challenge the overreach. It fulfills our fundamentals: maximizing recovery for those who’ve trusted us to fight for them.
Bios:
Miles B. Cooper is a partner at Coopers LLP, where they help the seriously injured, people grieving the loss of loved ones, preventable disaster victims, and all bicyclists. Miles also consults on trial matters and associates in as trial counsel. He has served as lead counsel, co-counsel, second seat, and schlepper over his career, and is an American Board of Trial Advocates member.
