What is CA Civil Code 3040?

California Civil Code § 3040 relieves some of the financial burden on injury victims. This law helps protect victims by limiting how much health care providers or insurers can take from your settlement for medical care, meaning you can put more money toward rebuilding your life.

The car accident attorneys at The Barnes Firm can help you negotiate a fair distribution of your settlement. We offer direct 24/7 access and a personalized strategy to help our clients get the best result possible. Call (800) 800-0000 or reach out online today for guidance and support after an accident.

Medical Liens & Civil Code 3040

Many health care providers will provide the treatment you need after an accident in exchange for a medical lien. A medical lien is a legal claim given to a health care provider who treats an accident victim without payment up front. Instead of the upfront payment, the provider receives the right to receive a portion of an insurance settlement or judgment.

If you have health insurance, the insurance carrier may pay for the medical services. However, the insurer will receive a lien giving it the right to repayment from the settlement or judgment. The insurer will then assert its right via a process known as subrogation.

Unfortunately, these liens can lead to providers and insurers taking a major portion of your settlement, drastically reducing the resources available to you to cover other accident-related losses.

Recovering from an accidental injury is a stressful enough process. Having to worry about medical bills only adds to the many difficulties that people injured by another party’s negligence must face.

The Purpose of California Civil Code 3040

California Civil Code 3040 restricts the amount of money that a health insurance provider can recover from your settlement. The deduction can either be the amount of medical expenses they catered for or a percentage of the settlement amount based on a few variables, whichever is less.

The cost of medical care depends on the payment made by the insurance company to the health provider. A medical provider who receives payment from an insurer should not receive more than 80% of what they usually charge other patients.

Alternatively, a health provider can receive payment based on the medical bill if they do receive payment from the insurer.

Consider engaging an experienced car accident attorney who can offer better insights on how the California Civil Code 3040 applies to your case.

Why Does Civil Code 3040 Matter After an Accident?

Civil Code § 3040 protects personal injury settlements from excessive charges by health care providers and insurers, allowing accident victims to receive compensation for other aspects of their recoveries.

Civil Code § 3040 limits the amount that medical lienholders can claim from a patient’s settlement to the lesser of:

• The reasonable medical costs charged to the victim
• One-third of the total settlement if the victim had an attorney
• One-half of the total settlement if the victim did not have an attorney

For example, suppose you receive a settlement of $100,000, incur $27,000 in reasonable medical fees, and have an attorney, thus limiting proportional medical compensation to $33,000, or one-third of the settlement. In this scenario, the provider or insurer could only recover $27,000, the least of the three possible costs.

The law prevents medical providers and insurance companies from claiming significantly more money than would ordinarily be charged when the settlement is paid out.

Reductions for Attorney Fees & Comparative Fault

Two major factors can reduce medical liens in a personal injury case: attorney fees and comparative fault.

Attorney Fees

Under California Civil Code § 3040(c), having representation from an attorney limits the amount providers can claim from your settlement to one-third of the total amount received. This amount is substantially less than the one-half limit for self-represented injury plaintiffs. This lesser amount is required because a plaintiff with a lawyer must also pay attorney fees from their settlement. The one-third limit protects plaintiffs from losing their entire settlement between attorneys, providers, and insurers.

For example, suppose you receive a $100,000 settlement. You agreed to pay your attorney a contingency fee of one-third of your settlement, or $33,000. Your health care provider or insurer is limited to claiming one-third of the settlement, or $33,000. Thus, you will receive $34,000 after deducting the attorney fees and medical lien. If you did not have representation, the insurer or provider would be entitled to one-half of the settlement, or $50,000.

Comparative Fault

Medical liens can also be reduced because of comparative fault. Comparative fault means that the plaintiff shared fault for the accident. In California, the compensation is reduced in proportion to the plaintiff’s share of the fault. Thus, if you sustained $100,000 in damages and were 20% at fault for the accident, you can only receive up to $80,000 in damages.

Under Civil Code § 3040(e), shared fault reduces the amount of the recoverable medical lien on your settlement. The limits apply to the amount of compensation you received, not the total damages you sustained.

Suppose you didn’t have an attorney and sustained $100,000, but only received $80,000 due to comparative fault. Your medical lienholder would be limited to claiming half of the amount you received, or $40,000 of your settlement.

Civil Code §3040 is a complicated statute. Our experienced legal team can help you understand how Civil Code §3040 may apply to your case.

Can You Negotiate a Medical Lien?

An experienced personal injury attorney can recommend a health care provider who offers reasonable lien terms before signing an agreement. If you’ve already signed a lien agreement, an attorney can negotiate with the lien holder to reduce the amount you owe or agree to a payment plan.

The California Civil Code § 3045.4 limits hospitals to receiving up to 50% of the injury settlement amount after paying attorney fees. In most cases, lienholders prefer claiming the entire 50%; however, an attorney can negotiate for a lenient fraction.

Who Can Place a Lien on Settlement Proceeds?

An interested party can place a lien on a personal injury case if you have insurance, government health benefits, or are uninsured.

The following institutions have the right to place a lien on settlements:

• Health care providers and hospitals
• Health insurance providers
• Medicare
• Medicaid
• U.S. Department of Veterans Affairs

Health insurance and government health programs use subrogation, a concept that preserves the right to repayment for the costs paid on your behalf. An insurer also has the right to take your place in suing the negligent party for compensation.

What Is the Common Fund Doctrine?

The common fund doctrine protects injured parties from bearing legal costs alone after an accident. Under this doctrine, if a plaintiff secures a settlement with representation they have paid for, an unrepresented lienholder claiming part of that settlement must pay a portion of the attorney fees.

The reasoning behind the doctrine is that the unrepresented lienholder has benefited from the plaintiff’s representation. Thus, it should be responsible for covering part of the cost of the legal work. This prevents the plaintiff from completely covering the fees for work the lienholder has benefited from.

Our personal injury attorneys have the knowledge and experience to enforce this rule and maximize our clients’ recoveries.

How The Barnes Firm Can Help You Navigate Medical Liens

The experienced attorneys at The Barnes Firm understand the legal and financial impact of liens inside and out. We employ Civil Code § 3040 and 3045.4 strategically to reduce recoverable lien claims and help clients retain more of their settlements and awards.

Our personal injury lawyers will negotiate with health care providers and insurance companies to reduce any medical liens and help you get the best result possible.

Our firm has handled over 150,000 personal injury cases and recovered more than $2.5 billion in case results for accident victims. Reviews we’ve received from our clients attest to our success.

Contact The Barnes Firm for a Free Consultation

If you’ve been hurt in an accident in California, turn to The Barnes Firm. Our significant experience with state laws, such as Civil Code § 3040, means you can trust us to develop an effective, personalized strategy for your case.

We’re available 24/7, and there is no fee unless you get paid. We’ll come to you wherever you need us, whether at home, work, or your hospital room.

Call (800) 800-0000 or contact us online today for a free consultation.

Richard Barnes – President of The Barnes Firm

Richard Barnes: “As President of The Barnes Firm, I have dedicated my career to achieving justice in hundreds of cases for the victims of injuries caused through the fault of others. Additionally, I have been honored to have been elected Best Lawyer and a Super Lawyer”

Years of Experience: 30+ years
LinkedIn Profile: Richard Barnes