When Liens Fail: Assignments of Benefits and Their Effect

At least on its face, N.C.G.S. § 44-49 leaves some medical providers with their derrières to the wind. Does that mean they're out of luck? Ha! Nope!

At least on its face, N.C.G.S. § 44-49 leaves some medical providers with their derrières to the wind. Does that mean they're out of luck? Ha! Nope!

I've been waiting for this for weeks!

Since you all follow my blogging with such rabidity, you're surely aware that we've spent the last couple weeks covering Medical Provider Liens, authorized under North Carolina General Statutes §§ 44-49 and 44-50. What these so-called § 44-49 liens do is enable medical providers to choose between (i) billing your health insurance and getting a little bit of money, or (ii) rolling the dice by not billing the insurance, waiting, and possibly getting more money by asserting a lien against your personal injury recovery. We know that there are perfection requirements, and we know that if there are more than one medical providers claiming liens that they get to prorate the maximum statutory allowance amongst themselves. Knowing all this, it certainly seems like North Carolina's medical providers are doubly assured of getting paid, right?

Right. So what's the problem?

It turns out that there is a problem - and a relatively substantial one - even if it is subtle. The issue is that the statute says this:

From and after March 26, 1935, there is hereby created a lien upon any sums recovered as damages for personal injury in any civil action in this State. This lien is in favor of any person, corporation, State entity, municipal corporation or county to whom the person so recovering, or the person in whose behalf the recovery has been made, may be indebted for any drugs, medical supplies, ambulance services, services rendered by any physician, dentist, nurse, or hospital, or hospital attention or services rendered in connection with the injury in compensation for which the damages have been recovered.
— North Carolina General Statutes § 44-49 (2001)

"[S]ervices rendered by any physician, dentist, nurse, or hospital ..." Hmmm. Does that seem like it leaves anybody out? Like, I dunno, chiropractors? What in the world does it mean that the statute doesn't specifically include these folks, whose treatment is often imperative to a plaintiff's recovery? Could it be possible that the statute's exclusion means that chiropractors can't assert a medical provider lien against your recovery?

Jackpot!

Well, not so fast there, skipper. It's true that there's never been a case in North Carolina directly addressing whether chiropractors get the benefit of § 44-49 liens. It then follows that there's at least an argument to say that your chiropractor doesn't get to assert any claim of recovery against your personal injury settlement. However! The point has become moot with the advent of what we call "Assignments of Benefits."

Oh goodie. What's an Assignment of Benefits?

An Assignment of Benefits (or "AOB" for short) is basically a contract that you sign before beginning care, saying that you authorize your medical provider (often, but not always, a chiropractor) to recover his or her fees for your treatment from your personal injury proceeds. An AOB is going to say something to the effect of, "I hereby direct all insurance carriers, attorneys, and anyone else responsible for handling a third-party settlement to pay my medical provider whatever they're owed out of my recovery. If that doesn't happen, then that's a breach of contract and I'll become directly liable for the balance." It's a lot like a § 44-49 lien in terms of its effect and scope, so to speak, but the functional difference is that the § 44-49 liens originate in the statute and the AOB originates in contract. 

This begs the question; if an AOB arises in contract, doesn't that mean that the medical provider can get more aggressive with it? The answer is that they are certainly welcome to try, but they run the risk of getting slapped down by the court system if they get too greedy. One more common scenario is that a provider will try to double-recover by having a patient sign an AOB, then also asserting a § 44-49 lien after treatment is concluded. Turns out they're not allowed to do that. The other more common occurrence is that a provider will try to secure either full repayment or more than the statutory cap through an AOB. Again, the courts tend to be not-super-happy about this kind of behavior, and North Carolina case law unequivocally holds that AOBs can only secure the amounts that a § 44-49 would secure, and that AOBs assume equal footing with statutory liens. That means that AOBs are also capped at 50 percent of the recovery after attorneys' fees are deducted, and that they have to prorate right alongside the statutory liens.

Anything else I should know?

The most important thing is that, just like with any contract, you really need to read any AOBs carefully before you sign them. It's universally a bad idea to put your name on something if you don't know what it says.

The other biggie is that, like with § 44-49 liens, if the statutory maximum amount is less than what the medical provider is owed, then you still owe whatever the balance is. It follows that, also like with § 44-49 liens, you can put a bit of a squeeze on your providers to accept the statutory amount as full-and-final if the alternative is you walking away from the settlement altogether.

Finally, you need to be aware of the difference between an assignment of the proceeds of your claim and an assignment of your claim itself. The first is obviously okay, since it leaves control of the claim itself intact and in your hands. The second is not okay because it puts control of your claim in the hands of an outside third party. We call this champerty, and it's more or less unanimously viewed as a parasite on the hide of human society. So to speak.

Anyway, that's all I've got for today. When we return, it's on to Medicare!