Understanding Subrogation Liens in Personal Injury Cases

Quick Answer

A subrogation lien is a claim by an insurer or government program to be repaid, out of your personal injury settlement, for medical bills or other benefits it already covered. In New York, General Obligations Law 5-335 bars most private health insurers from asserting these claims against a settlement. The liens that still apply are workers’ compensation liens, Medicare conditional payments, Medicaid liens, self-funded ERISA employer health plans, and hospital liens under Lien Law 189. Each follows different rules, and most can be reduced through negotiation, statutory cost sharing, or a formal waiver request.

Key Takeaways

• Subrogation lets a payer step into your shoes and recover what it paid from the party who caused your injury, usually out of your settlement.
• New York’s anti-subrogation statute, General Obligations Law 5-335, conclusively presumes that a settlement does not include compensation for medical costs or lost earnings an insurer already paid, so most private health insurers cannot claim reimbursement.
• The statute does not protect you from Medicare, Medicaid, workers’ compensation carriers, or additional no-fault benefits, and federal law lets self-funded ERISA plans bypass it.
• Workers’ compensation carriers hold a lien only on your net recovery, after attorney fees and costs are deducted, and must share litigation costs under Workers’ Compensation Law 29.
• Medicare reduces its recovery to account for your attorney fees and costs, does not pursue physical trauma liability settlements of $750 or less, and can seek double damages if it has to sue to recover.
• Medicaid can reach only the portion of a settlement that represents medical expenses, past and future, under the U.S. Supreme Court’s Ahlborn and Gallardo decisions.
• Every lien should be verified, audited for unrelated charges, and negotiated before settlement funds are disbursed. Mark E. Seitelman Law Offices handles this as part of every personal injury case.

Subrogation liens in personal injury cases can make a big difference in what an injured person actually takes home from a settlement. When a personal injury case settles, the injured party is not the only one with a financial stake in the outcome. Health plans, workers’ compensation carriers, Medicare, Medicaid, and hospitals may all assert a right to be repaid from the recovery for the medical care and benefits they provided. Whether they can actually collect, and how much, depends on who the payer is and on New York law, which is more protective of injured people than most articles on this topic acknowledge.

Mark E. Seitelman Law Offices has represented injured New Yorkers for more than four decades and resolves liens as a routine part of every case. This guide explains what subrogation is, how a subrogation lien works, which liens New York law permits and which it bars, and the practical steps that protect your net recovery.

What Is Subrogation in a Personal Injury Claim?

Subrogation is a legal principle that allows one party to step into the shoes of another to pursue a claim. In personal injury cases, it usually arises when an insurer pays for an injured person’s medical care or lost wages. Having paid those costs, the insurer acquires the right to recover them from the person or company whose negligence caused the injury. In practice, the insurer rarely sues the at-fault party directly. Instead, it asserts a claim against the injured person’s own settlement or verdict, since that is where the at-fault party’s money ends up.

The underlying idea is to prevent a double recovery. If your health plan paid $40,000 in hospital bills and you then recover the same $40,000 from the at-fault driver, you would be paid twice for one loss. Subrogation and reimbursement rights are designed to route that $40,000 back to the payer. The problem is that most personal injury settlements are compromises that never fully compensate the injured person, so a lien often comes out of money that was really meant to cover pain and suffering or future needs. That tension is exactly what New York’s anti-subrogation statute addresses.

What Is a Subrogation Lien in a Personal Injury Case?

A subrogation lien is the mechanism a payer uses to enforce its subrogation or reimbursement right. It is a legal claim against the proceeds of your personal injury case that must be satisfied, or resolved, before the remaining funds are released to you. Lawyers use the word “lien” loosely to cover several distinct things:

• A statutory lien: a right created by a specific statute, such as a workers’ compensation carrier’s lien under Workers’ Compensation Law 29, a Medicaid lien under Social Services Law 104-b, or a hospital lien under Lien Law 189.
• A contractual reimbursement claim: a right written into a plan document or insurance policy, most importantly in self-funded ERISA employer health plans.
• An equitable subrogation claim: a common law right an insurer may assert even without a specific contract clause. New York’s Court of Appeals recognized this right in Fasso v. Doerr in 2009, and the Legislature responded the same year with General Obligations Law 5-335.

Which category a claim falls into matters, because the rules for validity, priority, and reduction are different for each. The first job of a personal injury attorney handling a lien is to identify exactly what kind of claim is being asserted and what law governs it.

Types of Liens in Personal Injury Cases

The table below summarizes the liens and reimbursement claims most often raised in New York personal injury cases and whether each can reach a settlement.

New York’s Anti-Subrogation Law: General Obligations Law 5-335

The single most important rule for New York injury victims is General Obligations Law 5-335. Enacted in 2009 and amended in 2013, the statute provides that when a person settles a personal injury, medical malpractice, or wrongful death claim, it is conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings, or other economic loss that an insurer has already paid or is obligated to pay. Because the settlement is deemed not to contain that money, the insurer has no right of subrogation or reimbursement against the settling plaintiff for those benefits.

In plain terms, if your health insurance paid your hospital and doctor bills after a car accident, a slip and fall, or a construction site injury, and your plan is a standard insured policy regulated by New York, the insurer generally cannot demand a share of your settlement. Many injured people, and some out-of-state recovery vendors, do not know this. Insurers and their contractors still send reimbursement letters as a matter of routine. Those letters should be answered with a citation to the statute, not a check.

The statute has explicit limits. Under subdivision (b), it does not apply to subrogation claims for additional first-party benefits (optional no-fault coverage above the basic $50,000). Under subdivision (c), it does not apply to reimbursement or subrogation claims for benefits provided by Medicare, Medicaid, or a workers’ compensation policy, or to claims specifically authorized under Insurance Law Article 51. The statute’s text also refers only to settlements and does not expressly mention a judgment after a verdict, which is one of several reasons lien exposure is part of the analysis when deciding whether to settle or try a case.

Finally, the statute is a state insurance regulation, and federal law overrides it for one important category of payer: self-funded employee benefit plans, discussed below.

Who Can Still Assert a Lien or Reimbursement Claim in New York?

General Obligations Law 5-335 eliminates the most common private health insurance claim, but five categories of payers retain real rights against a New York settlement. Each operates under its own statute and its own reduction rules.

Workers’ Compensation Liens and Subrogation

When you are injured on the job and a third party is at fault, for example, a negligent driver who hits you while you are making deliveries, or a general contractor whose safety failures cause a construction accident, you may collect workers’ compensation benefits and also sue the third party. Workers’ Compensation Law 29 gives the compensation carrier a lien on the proceeds of that third-party recovery for the benefits it paid.

Three features of the statute protect the injured worker. First, under subdivision 1, the lien attaches only to the proceeds remaining after the deduction of the reasonable and necessary expenditures of the lawsuit, including attorney’s fees. The carrier does not get a share of the gross settlement. Second, the New York Court of Appeals held in Kelly v. State Insurance Fund (1983) that the carrier must also bear its equitable share of the litigation costs in proportion to the total benefit it receives from the recovery, which includes not only the lien repayment but also the future benefits it is relieved from paying. In Burns v. Varriale (2007), the Court limited that future-benefit apportionment where the value of future payments is speculative, as with a nonschedule permanent partial disability. Third, under subdivision 1-a, the carrier has no lien at all on first-party no-fault benefits.

There is also a procedural trap. Under subdivision 5, if the third-party case settles for less than the compensation benefits paid, the injured worker needs the carrier’s written consent or a court order approving the settlement. A case marked settled subject to that approval is restored to the trial calendar if the consent or order is not obtained within three months. Settling without consent can jeopardize future compensation benefits, so lien resolution has to be coordinated with the settlement itself, not handled afterward.

Medicare Conditional Payments

If Medicare paid for accident-related treatment, those payments are “conditional” under the Medicare Secondary Payer Act, 42 U.S.C. 1395y(b)(2). Medicare pays first so the beneficiary gets care, on the condition that it is reimbursed once a liability insurer, no-fault carrier, or workers’ compensation carrier is shown to be responsible through a settlement, judgment, or award. If Medicare has to file a lawsuit to recover, the statute allows it to seek double damages.

The process runs through the Benefits Coordination & Recovery Center (BCRC). After the case is reported, the BCRC issues a Conditional Payment Letter listing the claims it considers accident-related. Once the case settles, the attorney reports the settlement details and the BCRC issues a final demand. Interest runs from the date of the demand letter if the debt is not repaid within the period the letter specifies, and unpaid debts are eventually referred to the Department of the Treasury. Demand letters also explain the beneficiary’s right to appeal the amount and to request a waiver of recovery.

Two rules soften Medicare’s claim. First, under 42 C.F.R. 411.37, Medicare reduces its recovery by its proportionate share of the attorney fees and costs spent to obtain the settlement. If procurement costs were 35 percent of the settlement, Medicare’s demand is cut by 35 percent. Second, CMS does not seek recovery on physical trauma liability settlements of $750 or less. The CMS alert issued on November 18, 2025 confirmed that the $750 threshold remains in place for 2026 and also applies to no-fault and workers’ compensation settlements where the carrier does not have ongoing responsibility for medical care. The threshold does not apply to ingestion, implantation, or exposure claims.

Medicaid Liens

New York Medicaid’s recovery right is codified in Social Services Law 104-b. When Medicaid has paid for treatment of an injury caused by a third party, the responsible social services district may assert a lien on the recipient’s personal injury claim for the amount of assistance furnished. The lien must be perfected by serving written notice, by certified or registered mail, on the liable party, that party’s attorney if known, and its insurance carrier before any money is paid, with a copy sent by regular mail to the recipient and the recipient’s attorney if known, and by filing a copy with the county clerk. The statute makes the Medicaid lien subordinate to the attorney’s lien and does not apply to workers’ compensation claims.

In New York City, liens are handled by the Human Resources Administration’s Division of Liens and Recovery, which requires law firms and insurers to contact it for a final lien amount at the time of settlement. Outside the city, and for many statewide cases, the Office of the Medicaid Inspector General (OMIG) pursues recovery by filing a 104-b lien against the settlement.

Federal law limits how far a Medicaid lien can reach. In Arkansas Department of Health and Human Services v. Ahlborn (2006), the U.S. Supreme Court held that a state may recover only from the portion of a settlement that represents payment for medical expenses, not from amounts compensating pain and suffering or lost wages. In Wos v. E.M.A. (2013), the Court struck down a state rule that irrebuttably presumed a fixed percentage of every settlement was for medical costs. And in Gallardo v. Marstiller (2022), the Court held that the medical-expense portion includes settlement dollars allocated to future medical care, not only past bills Medicaid already paid. In a case that settles for a fraction of its full value, documenting the allocation among damage categories can therefore reduce a Medicaid lien substantially.

ERISA Self-Funded Employer Health Plans

The Employee Retirement Income Security Act (ERISA) governs most employer-sponsored health plans. ERISA’s savings clause, 29 U.S.C. 1144(b)(2)(A), preserves state laws that regulate insurance, so an employer plan that buys coverage from an insurance company is still subject to General Obligations Law 5-335. But ERISA’s deemer clause, 29 U.S.C. 1144(b)(2)(B), says a benefit plan itself may not be deemed an insurer for purposes of state insurance law. The U.S. Supreme Court held in FMC Corp. v. Holliday (1990) that this exempts self-funded plans, which pay claims from the employer’s own assets, from state anti-subrogation laws.

The result is that a self-funded ERISA plan can enforce a reimbursement clause written into its plan document even in New York. In US Airways v. McCutchen (2013), the Court held that clear plan terms control over equitable defenses such as the made-whole doctrine, although where the plan is silent about attorney fees the common fund doctrine requires the plan to share those costs. In Montanile v. Board of Trustees (2016), the Court held that a plan seeking equitable reimbursement must trace the settlement funds; once a participant has spent the money on nontraceable items, the plan cannot reach the participant’s general assets.

Because the outcome turns entirely on plan funding and plan language, the first step when an employer plan asserts a claim is to demand the plan document and summary plan description and confirm whether the plan is actually self-funded. Recovery vendors frequently assert claims on behalf of fully insured plans that have no right to reimbursement in New York, and those claims should be rejected outright.

Hospital Liens Under Lien Law 189

New York’s Lien Law 189 gives charitable hospitals, public hospitals operated by a county, city, town, or village, and State University of New York hospitals a lien for the reasonable charges for treatment, care, and maintenance of a patient who received emergency treatment or was admitted within one week of the injury, on the patient’s rights of action against the person responsible for the injury. The lien attaches to verdicts, judgments, settlements, and compromises alike. To perfect it, the hospital must serve written notice by registered or certified mail on the allegedly liable party and any known insurer before payment is made, and must file a verified notice of lien with the county clerk. The lien does not apply to workers’ compensation awards or settlements, or to settlements of $300 or less.

Physicians, physical therapists, and other private providers do not have this statutory lien. Any claim they assert against your settlement rests on a contract, most often a letter of protection you or your attorney signed agreeing to pay their bill from the recovery. Those balances are negotiable.

No-Fault Insurance and Loss Transfer

Most New York car accident victims are treated first through no-fault coverage, which pays up to $50,000 in basic economic loss (medical bills, 80 percent of lost earnings up to $2,000 per month, and other reasonable and necessary expenses up to $25 per day for one year) regardless of fault under Insurance Law 5102. Under Insurance Law 5104(a), a person covered by no-fault has no right to recover basic economic loss from the at-fault driver. Because that money is never part of your bodily injury recovery, your no-fault carrier has no lien on your settlement for it.

Insurers do have a limited recovery mechanism against each other. Insurance Law 5105 allows a no-fault carrier to recover what it paid from the at-fault driver’s insurer through mandatory arbitration, but only when the accident involved a vehicle weighing more than 6,500 pounds unloaded or a vehicle used principally for hire, such as a truck, bus, or taxi. That loss transfer happens between insurance companies and does not come out of your settlement.

How Subrogation Liens Affect Your Net Settlement

Liens are paid from the settlement before the client receives the balance, so the practical question is always the net figure. The example below shows how the same $300,000 settlement produces very different results depending on how a $60,000 medical lien is treated. The attorney fee is shown at one-third, and case costs at $6,000 for illustration only.

The middle column applies the formula in 42 C.F.R. 411.37: procurement costs of $106,000 divided by the $300,000 settlement produce a ratio of about 35.3 percent, which is applied to Medicare’s $60,000 payment and subtracted from the claim. A workers’ compensation carrier’s lien is reduced in a similar way under Kelly v. State Insurance Fund. Figures are rounded, and every case is different, but the pattern holds: correctly classifying and reducing a lien often adds tens of thousands of dollars to the client’s recovery.

Do You Have to Pay a Subrogation Lien in a Personal Injury Case?

It depends on who is asserting the lien. A valid statutory lien held by a workers’ compensation carrier, Medicare, Medicaid, or a qualifying hospital must be addressed before settlement proceeds are distributed. Ignoring a Medicare demand can lead to interest, Treasury referral, and a federal lawsuit for double damages. Settling a third-party case without the compensation carrier’s consent can cost a worker future benefits. Paying out settlement funds while a perfected lien is outstanding can expose those funds, and the attorney who disbursed them, to a claim by the lienholder, so liens should be resolved before any money is released.

A reimbursement demand from a fully insured private health plan, on the other hand, is generally not enforceable against a New York settlement under General Obligations Law 5-335, and paying it would be a mistake. Between those poles, a self-funded ERISA plan’s claim is enforceable only to the extent its plan language supports it, and a private provider’s balance is a contract debt that can be negotiated. The answer to “do I have to pay” is therefore never yes or no across the board. It is a payer-by-payer analysis.

Can You Fight or Reduce a Subrogation Lien?

Yes. Subrogation liens are not absolute, and in New York the available defenses and reductions are unusually strong. The most effective strategies include:

• Challenge the payer’s standing. If the claim comes from an insured health plan, cite General Obligations Law 5-335 and demand withdrawal. If it comes from an employer plan, require proof that the plan is self-funded and a copy of the reimbursement language.
• Audit the itemization. Conditional payment summaries and lien ledgers routinely include treatment unrelated to the accident. Every line should be matched to the injury before the amount is accepted.
• Apply statutory cost sharing. Medicare’s procurement cost reduction under 42 C.F.R. 411.37 and the Kelly apportionment for workers’ compensation carriers are rights, not favors, and should be calculated and asserted.
• Allocate the settlement. Under Ahlborn, Wos, and Gallardo, Medicaid may reach only the medical-expense portion of a recovery. A documented allocation among medical expenses, lost wages, and pain and suffering can reduce the lien in an underpaid case.
• Request a waiver or compromise. Medicare will consider waiver or compromise requests based on financial hardship or the equities of the case, and the demand letter explains how to file one. Interest continues to run while the request is pending.
• Negotiate hospital and provider balances. Hospitals and private providers regularly accept less than face value, particularly where the settlement is limited by the defendant’s insurance policy.
• Consider the settlement structure. Because General Obligations Law 5-335 applies to settlements, lien exposure is part of the strategic comparison between settling and proceeding to verdict.

How to Handle a Subrogation Lien in Your Personal Injury Claim

Lien resolution works best when it starts early and runs parallel to the injury case rather than after the settlement is signed. A typical sequence looks like this:

1. Identify every payer. List each source that paid for your treatment or wages: health plan, no-fault carrier, workers’ compensation, Medicare, Medicaid, hospitals, and any provider treating on a letter of protection.
2. Put payers on notice and obtain itemized claims. Report the case to the BCRC if you are a Medicare beneficiary, contact HRA or OMIG if Medicaid paid, and request itemized statements from every other payer so the numbers can be audited.
3. Classify each claim under New York law. Determine which claims are barred by General Obligations Law 5-335, which are statutory liens, and which depend on plan or contract language.
4. Verify perfection and validity. Confirm that Medicaid and hospital liens were properly served and filed, that Medicare’s conditional payment letter reflects only related treatment, and that any ERISA plan asserting a claim is actually self-funded.
5. Negotiate before the settlement is finalized. Obtain the compensation carrier’s consent under Workers’ Compensation Law 29(5), request Medicare’s final demand, and negotiate reductions while the settlement structure is still flexible.
6. Resolve liens at disbursement and keep records. Pay only valid, reduced liens from the settlement, obtain written releases or satisfactions, and retain the correspondence in case a payer later disputes the resolution.

Handled this way, liens become a manageable line item rather than a surprise that erases a large part of a hard-won recovery.

Frequently Asked Questions About Subrogation Liens in New York

Does my health insurance company get paid back from my personal injury settlement in New York?

Usually not. General Obligations Law 5-335 conclusively presumes that a personal injury settlement does not include the medical costs or lost earnings your insurer already paid, so a fully insured health plan has no subrogation or reimbursement claim against it. The exceptions are self-funded ERISA employer plans, which federal law exempts from the statute, and the government programs and workers’ compensation carriers listed in the statute itself.

What is the difference between subrogation and a lien?

Subrogation is the right of a payer to stand in your place and recover what it paid from the party at fault. A lien is the legal claim on your settlement proceeds that the payer uses to enforce that right. Some liens are created by statute, some by contract, and some by common law, and the rules for each are different.

How much of my settlement can Medicare take?

Medicare can recover the conditional payments it made for accident-related treatment, reduced by its proportionate share of your attorney fees and costs under 42 C.F.R. 411.37, and never more than the settlement itself. CMS does not pursue physical trauma liability settlements of $750 or less. You may also request a waiver or compromise of the remaining amount.

Can Medicaid take my whole settlement?

No. Under the U.S. Supreme Court’s decisions in Ahlborn and Gallardo, Medicaid may recover only from the portion of the settlement that represents medical expenses, including amounts for future medical care. It cannot reach the portion compensating pain and suffering or lost wages. In New York, the lien is asserted under Social Services Law 104-b and is subordinate to your attorney’s lien.

Does a workers’ compensation lien come out of the gross settlement?

No. Under Workers’ Compensation Law 29(1), the carrier’s lien attaches to the proceeds after deduction of the reasonable and necessary expenses of the lawsuit, including attorney’s fees, and under Kelly v. State Insurance Fund, the carrier must also share litigation costs in proportion to the benefit it receives. You also need the carrier’s consent or a court order if the case settles for less than the compensation paid.

How do I know if my employer health plan is self-funded?

Ask the plan administrator for the plan document and summary plan description. A self-funded plan pays claims from the employer’s own assets, often with a third-party administrator whose name appears on your insurance card. An insured plan buys a policy from an insurance company. Only a self-funded plan can enforce a reimbursement clause against a New York settlement, and only if the plan language actually provides for it.

What happens if I ignore a subrogation lien?

It depends on the payer. Ignoring a Medicare demand leads to interest from the date of the demand letter, referral to the Treasury Department, and potential litigation for double damages. Ignoring a perfected Medicaid or hospital lien exposes the settlement funds, and the attorney who disbursed them, to a claim by the lienholder. Ignoring a reimbursement letter from an insured health plan, by contrast, is usually appropriate once the plan has been told in writing that General Obligations Law 5-335 bars its claim.

Talk to Mark E. Seitelman Law Offices About Liens on Your Settlement

Subrogation liens affect the final settlement amount and how the funds are distributed, and the rules that govern them in New York are more favorable to injured people than most payers will volunteer. Mark E. Seitelman Law Offices identifies every lien early, rejects the claims New York law bars, and negotiates the ones that remain so that as much of the recovery as possible reaches the client.

Based in New York and serving all five boroughs, the firm has handled car accident, construction accident, slip and fall, and other personal injury claims for more than 40 years. If you are dealing with a lien or reimbursement demand, or want to understand how liens will affect your case before you settle, contact Mark E. Seitelman Law Offices for a free consultation.