In Pennsylvania law as well Federal law, Liens play an important role in Personal Injury Law.
Government Sponsored Programs (Medicare, Medicaid, and Pennsylvania Department of Public Welfare), Private Health Insurance, and Workers' Compensation Insurance are the biggest sources of Liens. When these organizations pay out money for medical treatment of injuries, they are entitled to their money back from the responsible party. For example, say that Medicare or Medicaid pays out $50,000 in medical bills on behalf of an injured party. If that injured party gets a $50,000 settlement from the responsible person, she has to pay back all $50,000 (minus attorney fee) to Medicare. Thus, in theory, the injured party gets nothing.
Practically, if you were trying to settle a case, Medicare would be willing to take less than its full $50,000 to make it worthwhile for the injured party to make a claim, settle the case and get some money. Otherwise, the injured party has no interest in making a claim or settling.
Private Insurance Companies (Blue Cross, Aetna) as opposed to Government Sponsored Insurance Companies (Medicare, Medicaid) do not have an automatic lien by law on money recovered by an injured party. However, if the Health Plan is based in ERISA (Employment Retirement Income Security Act), by Federal Law, they are entitled to assert a Lien and recover money paid out from the responsible party.
In Pennsylvania, Workers' Compensation Wage and Medical Benefits that are paid to an injured worker must be paid back out of the settlement proceeds received by the Claimant from a third party claim against anybody not related to the workplace. The Workers' Compensation Lien and right to reimbursement is absolute and automatic.
For example, an employee is walking to work in the employee parking lot and slips and falls on black ice. The employee will get paid for lost wages and medical bills through Workers' Compensation. However, the employee may also have a legal claim against the independent plowing company that did not plow and salt the parking lot. Again, if Workers' Compensation pays out $100,000 in lost wages and medical bills to the injured worker and the injured worker collects $100,000 in a separate proceeding from the plowing company, the injured worker must pay back his share of the $100,000 to Workers' Compensation.
In a case like that the Personal Injury lawyer for the injured worker should negotiate a compromise with Workers' Compensation as to how much Workers' Compensation would accept out of a recovery from the plowing company. Otherwise, the injured worker has no incentive to make a legal claim against the plowing company if all money received would need to be paid back to Workers' Compensation.
As you could see, the world of Liens is complex but critical to understand and follow. If Liens are not paid back, the injured party will get sued by the insurance company asserting the Lien after he has received money for an accident and perhaps spent it. No one should be in that position.