Disclaimer: This article is for educational purposes only and does not constitute legal advice.
Detailed Answer
Before disbursing settlement proceeds in Colorado, you must identify and resolve any hospital or insurer liens that may attach to those funds. A lien gives a medical provider or insurer a right to be paid from the settlement. Ignoring liens can expose you or your client to double liability or court sanctions.
1. Identify All Potential Liens
Begin by reviewing medical records, billing statements and correspondence from providers. Request a full accounting of charges and balances from every hospital, clinic or physician who treated the claimant. Simultaneously, obtain subrogation or reimbursement demand letters from all insurers (health, auto, Medicare or Medicaid). Insurers often claim rights under Colorado’s health-insurance reimbursement statute, C.R.S. §10-3-1117 (https://leg.colorado.gov/statutes/10-3-1117).
2. Confirm Lien Validity and Priority
Colorado law requires a health-care provider to file a written notice of lien within 90 days after the patient’s last treatment or death under C.R.S. §38-22-104 (https://leg.colorado.gov/statutes/38-22-104). Verify that each notice was timely and correctly served on the claimant and counsel. Federal liens (e.g., Medicare/Medicaid) may take priority over state liens.
3. Calculate the Lien Amount
Obtain detailed invoices that break out treatment dates, services rendered and allowed amounts. Confirm whether the billed amount equals the outstanding balance after insurance payments. Some providers charge interest or late fees—review C.R.S. §38-22-110 (https://leg.colorado.gov/statutes/38-22-110) for permissible fees.
4. Negotiate Reductions or Settlements
Once you verify the balance, negotiate with each lienholder. Many hospitals and insurers will accept a percentage of the billed amount—or a negotiated flat sum—in lieu of full payment. Document any agreement in writing to prevent future disputes.
5. Obtain Releases and Subrogation Waivers
After payment, secure a lien release from each medical provider and a waiver of subrogation from each insurer. These documents confirm that the lienholder has no further claim against the settlement proceeds.
6. Disburse Funds in Accordance with Court or Client Instructions
Hold settlement funds in a trust or escrow account until all liens are resolved. If court approval is required (e.g., minors, personal representatives), file a motion attaching lien releases and payoff letters. Only then disburse the net proceeds.
Helpful Hints
- Start lien research early—uncovered liens can delay closing by weeks.
- Check Medicare and Medicaid because federal reimbursement can supersede state liens.
- Request itemized bills; vague statements can hide inflated charges.
- Verify notice deadlines under C.R.S. §38-22-104 to challenge stale liens.
- Document every payoff and release to ensure a clean closing.