Medical Liens on Wrongful Death Settlements in California

When someone receives medical treatment before dying from their injuries, the bills can be enormous. An ambulance ride, emergency surgery, intensive care, or an extended hospitalization may generate hundreds of thousands of dollars in medical expenses.

If the surviving family later recovers compensation from the person or company responsible for the death, an important question follows:

Can a health insurer, Medi-Cal, or Medicare take money from the family's wrongful death settlement to reimburse the medical expenses paid for the person who died?

In California, the answer generally depends on what claim was asserted and what damages the settlement actually resolves.

A settlement paid solely for the surviving family members' wrongful death damages generally is not a source for reimbursement of the decedent's medical expenses. A different rule may apply when the case also includes a survival claim belonging to the decedent or the estate.

That distinction can have a major effect on how much of a settlement the family ultimately receives.

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Wrongful Death and Survival Claims Are Different

California law treats wrongful death and survival claims as separate causes of action.

A wrongful death claim belongs to the decedent's surviving heirs. It arises from the losses they personally suffer because of the death, including the loss of financial support, household services, companionship, comfort, care, assistance, protection, affection, society, and moral support. See California Code of Civil Procedure sections 377.60 and 377.61.

A survival claim, by contrast, continues a cause of action that belonged to the decedent before death. It is brought by the decedent's personal representative or successor in interest under Code of Civil Procedure section 377.30.

This distinction matters because wrongful death damages compensate the heirs for their own losses, while a survival action seeks damages arising from injuries suffered by the decedent before death.

Medical expenses incurred in treating the decedent before death are therefore ordinarily survival damages, not wrongful death damages.

The California Supreme Court explained this distinction in Fitch v. Select Products Co. (2005) 36 Cal.4th 812. Because wrongful death damages compensate the survivors for their own losses, those damages do not include medical expenses incurred in treating the decedent.

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Why the Distinction Matters for Medical Liens

Subrogation and reimbursement rights generally allow an insurer or government program that paid medical expenses to seek repayment when the injured person later recovers compensation from a responsible third party for the same loss.

A California wrongful death claimant, however, is not recovering the decedent's medical expenses.

The heirs are recovering for their own injuries caused by the death, not for medical treatment provided to the person who died.

That distinction is illustrated by DeMeo v. St. Francis Hospital (1974) 39 Cal.App.3d 174. A workers' compensation carrier had paid medical and disability benefits for the decedent and attempted to pursue reimbursement. The Court of Appeal explained that the widow's wrongful death recovery was never subject to the carrier's lien or subrogation claim because the wrongful death cause of action could not include the decedent's special damages.

DeMeo applied California's former wrongful death and survival statutes, but the same separation between the heirs' damages and the decedent's damages is reflected in current Code of Civil Procedure section 377.61.

California's broader subrogation law follows the same basic principle. An insurer acting as a subrogee ordinarily acquires no greater rights than its insured possessed. See Liberty Mutual Ins. Co. v. Fales (1973) 8 Cal.3d 712, 717; Employers Mutual Liability Ins. Co. v. Tutor-Saliba Corp. (1998) 17 Cal.4th 632, 639.

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Private Health Insurance Liens

Private health insurance policies commonly contain reimbursement and subrogation provisions. A plan may provide that when it pays medical expenses caused by a third party, the member must reimburse the plan from a later settlement or judgment.

These provisions can be enforceable when the plan member recovers compensation arising from the injury for which the plan paid benefits.

A pure wrongful death settlement presents a different situation.

The health insurance contract generally covered the decedent. The insurer paid medical benefits on behalf of the decedent. But the wrongful death claim belongs to the surviving heirs, and the heirs' damages do not include the decedent's medical expenses.

The contractual language itself may reinforce the distinction. A typical reimbursement provision requires repayment when the plan member obtains a settlement for an injury for which the member received covered medical services. The surviving heirs generally are not the member who received those services.

For that reason, a health insurer should not simply be permitted to treat the heirs' independent wrongful death recovery as though it were the insured decedent's personal injury recovery.

The particular health plan language still matters. So do the identity of the claimant, the causes of action asserted, the damages demanded, and the language of the eventual settlement agreement.

For California-regulated plans and insurers, Civil Code section 3040 imposes additional limitations on reimbursement claims, including limits based on the amount actually paid for medical services and the amount of the insured's recovery.

But the first question is usually not how much the insurer can recover.

It is whether the insurer has any right to the particular wrongful death proceeds at all.

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Medi-Cal Liens

Medi-Cal provides the clearest California authority on this issue.

In Fitch v. Select Products Co. (2005) 36 Cal.4th 812, the California Supreme Court considered whether Medi-Cal could recover the cost of medical treatment provided to a decedent from the surviving family's wrongful death recovery.

The Court concluded that it could not.

Medi-Cal's statutory recovery rights are directed at compensation for an injury for which Medi-Cal provided benefits. But California wrongful death damages compensate surviving family members for their independent losses and do not include the decedent's medical expenses.

Allowing Medi-Cal to collect the decedent's medical expenses from those wrongful death damages would therefore reduce compensation belonging to the innocent survivors for losses Medi-Cal never paid.

As the Supreme Court explained, Medi-Cal's reimbursement rights cannot operate to deprive survivors of damages that were never covered by Medi-Cal in the first place.

Accordingly, Medi-Cal cannot assert a lien against a recovery consisting solely of California wrongful death damages.

The result can be different when the case also includes a survival claim.

If the decedent's estate or successor in interest seeks recovery of medical expenses incurred before death, Medi-Cal may have reimbursement rights against the portion of the recovery attributable to those expenses, subject to applicable statutory limitations.

California expressly permits wrongful death and survival actions arising from the same wrongful act to be joined under Code of Civil Procedure section 377.62.

Medi-Cal tort reimbursement should also be distinguished from any separate rights the state may have against the decedent's estate. A determination that Medi-Cal cannot reach the heirs' wrongful death settlement does not necessarily resolve every potential estate-recovery issue.

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Medicare Recovery Claims

Medicare is governed by federal law, so its reimbursement rights should be analyzed separately from Medi-Cal.

Under the Medicare Secondary Payer Act, Medicare may make conditional payments for medical treatment when another person or insurer is ultimately responsible. If a later settlement, judgment, or other payment resolves responsibility for those medical expenses, Medicare may seek reimbursement.

CMS generally refers to this as a Medicare Secondary Payer recovery claim, rather than technically as a lien.

For California wrongful death cases, however, current CMS guidance provides an important limitation.

The Medicare Secondary Payer Manual states that when state wrongful death law does not permit recovery of the decedent's medical expenses, Medicare has no claim against a recovery obtained solely under that wrongful death law.

CMS goes further. When a settlement, judgment, or other payment is based entirely on wrongful death, appropriate documentation supports that characterization, and no medical expenses were claimed or released, CMS states that Medicare has no recovery rights against the payment.

CMS also states that such a settlement does not need to be reported to Medicare for recovery purposes.

The current guidance appears in section 10.8 of Chapter 7 of the Medicare Secondary Payer Manual. See CMS Transmittal 12898.

That guidance fits California law because the medical expenses incurred in treating a decedent are not recoverable as wrongful death damages.

CMS specifically advises parties to maintain records supporting the nature of the recovery, which may include:

• The complaint or other pleadings
• Settlement agreements and releases
• Documents exchanged during settlement negotiations
• Other materials demonstrating that the recovery was solely for wrongful death

This makes consistency throughout the claim particularly important when Medicare paid any portion of the decedent's medical expenses.

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Hospital Liens

California hospitals can also assert statutory liens under the Hospital Lien Act, Civil Code sections 3045.1 through 3045.6.

The Hospital Lien Act differs from ordinary health insurance reimbursement rights. Civil Code section 3045.1 gives a qualifying hospital a lien for reasonable and necessary charges when it treats a person injured by another's wrongful conduct. The statute expressly states that the lien may apply to damages recovered by the injured person or, in the event of death, by the person's heirs or personal representative.

That language makes hospital liens in wrongful death cases more complicated than ordinary private health insurance reimbursement claims.

At the same time, California wrongful death damages do not include the decedent's medical expenses. In Fitch v. Select Products Co. (2005) 36 Cal.4th 812, the California Supreme Court held in the Medi-Cal context that a lien for medical expenses could not be taken from a pure wrongful death recovery because none of the survivors' damages represented compensation for the decedent's medical treatment.

Although Fitch did not decide a claim under the Hospital Lien Act, its reasoning provides a substantial argument against applying a hospital lien to settlement proceeds that genuinely compensate only the heirs for their independent wrongful death damages. Because section 3045.1 expressly refers to recoveries by heirs, however, a hospital lien should be analyzed separately rather than treated as identical to a Medi-Cal or private insurance lien.

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What Happens When There Is Also a Survival Claim?

The analysis changes when the decedent's estate or successor in interest also pursues a survival claim.

A survival claim may include medical expenses, lost earnings before death, and other economic losses suffered by the decedent before death. It may also include punitive damages when the decedent would have been entitled to recover them if still alive.

When a settlement resolves both wrongful death and survival claims, a health insurer, Medi-Cal, or Medicare may have reimbursement rights against some portion of the survival recovery.

That does not necessarily mean the entire combined settlement is subject to reimbursement.

The health plan, applicable statutes, damages sought, settlement allocation, release language, and identity of the settling claimants all need to be examined.

The safest practice is to identify the distinction between the claims at the beginning of the case rather than attempting to create an allocation only after settlement has been reached.

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Should a Family Limit the Case to Wrongful Death?

Sometimes.

If the decedent incurred substantial medical expenses, asserting a survival claim may expose a portion of the settlement to reimbursement claims without adding comparable value to the case.

In other cases involving a tortfeasor with significant insurance coverage limits, a survival claim may be important because of substantial pre-death economic losses, punitive damages, or other case-specific considerations that add real value to the claim.

The decision should therefore be based on the economics and legal issues of the individual case, not simply on a desire to avoid a medical lien.

Before deciding whether to pursue a survival claim, counsel should consider:

• The value of the wrongful death damages
• The available survival damages
• The amount of the decedent's medical expenses
• Who paid those medical expenses
• Potential private insurance, Medi-Cal, or Medicare reimbursement claims
• Available liability insurance limits
• The financial condition of the defendants
• The availability and practical value of punitive damages
• The specific language of any health plan

In some cases, pursuing only wrongful death may substantially increase the family's net recovery. In others, the additional value of a survival claim may justify the reimbursement exposure.

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The Demand Letter

If the family is pursuing only wrongful death, the demand should remain consistent with that position.

A wrongful-death-only demand should seek compensation for the surviving heirs' losses.

It should not demand:

• The decedent's medical expenses
• The decedent's lost earnings before death
• The decedent's property damage
• The decedent's other survival damages

The demand should clearly identify the claim as one belonging to the statutory wrongful death claimants.

This becomes particularly important if Medicare paid any portion of the decedent's medical expenses because CMS may review documents exchanged during settlement negotiations when determining whether the recovery was genuinely limited to wrongful death.

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The Complaint

The same analysis applies when a lawsuit is filed.

A survival cause of action should not necessarily be added automatically simply because the case involves a death.

Counsel should determine what damages are actually recoverable through the survival claim and compare their potential value against the reimbursement exposure the claim may create.

When only wrongful death is alleged, the complaint should accurately reflect the independent losses suffered by the heirs and should not seek the decedent's medical expenses or other damages belonging to the estate.

A settlement is much easier to characterize as a genuine wrongful-death-only recovery when the demand, complaint, discovery responses, mediation briefs, and settlement documents all reflect the same theory.

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The Settlement Agreement

Settlement language deserves particular attention.

When a payment truly resolves only wrongful death damages, the settlement agreement should make that clear.

Depending on the circumstances, the agreement may appropriately state that:

• The claimants asserted only claims for wrongful death.
• The settlement consideration is being paid solely for the heirs' wrongful death damages.
• The heirs' wrongful death damages independently equal or exceed the settlement consideration.
• No portion of the payment compensates the decedent or estate for medical expenses or other survival damages.

Counsel should be cautious, however, about characterizing a payment as solely for wrongful death while simultaneously using a release that expressly releases medical expenses or other survival damages.

CMS's current policy expressly addresses settlements in which no medical expenses were claimed or released. A broad release intended to give the defendant additional finality can therefore complicate an otherwise strong argument that Medicare has no recovery rights against the settlement.

The structure of the release should be evaluated before settlement terms are finalized.

An indemnification or hold-harmless provision also deserves careful attention. Such a provision can create a contractual obligation that is broader than the underlying lien law.

When possible, an indemnity should apply only to liens or reimbursement claims that lawfully attach to the settlement, rather than every medical bill or reimbursement demand that someone might later assert.

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A Wrongful Death Settlement Does Not Erase the Medical Bills

One final distinction is important.

The fact that a health insurer or government program cannot take reimbursement from a pure wrongful death settlement does not necessarily mean every medical bill or debt disappears.

Unpaid medical expenses may present separate issues involving:

• Claims against the decedent's estate
• Probate creditor claims
• Provider contracts
• Medi-Cal estate recovery
• Medicare obligations
• Other applicable state or federal law

The issue addressed in this article is narrower:

Can an entity that paid the decedent's medical expenses reach settlement proceeds belonging to the surviving heirs as compensation for their wrongful death damages?

When the settlement genuinely consists solely of California wrongful death damages, the answer is generally no.

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The Bottom Line

California law draws a critical distinction between a wrongful death claim belonging to surviving family members and a survival claim belonging to the decedent or estate.

That distinction usually determines whether medical reimbursement claims can reach a settlement.

A pure wrongful death settlement generally does not include compensation for the decedent's medical expenses and therefore should not be subject to reimbursement for those expenses.

The analysis changes when the case also includes a survival claim seeking damages that belonged to the decedent, particularly medical expenses.

For Medi-Cal, the California Supreme Court's decision in Fitch v. Select Products Co. provides strong authority protecting pure wrongful death recoveries.

For Medicare, current CMS guidance similarly recognizes that Medicare has no recovery rights when the settlement is entirely for wrongful death, state law does not permit recovery of the medical expenses, and those expenses were neither claimed nor released.

For private health insurance, the particular plan language and governing law must be examined, but the same threshold distinction remains important: the surviving heirs' wrongful death recovery is legally different from the decedent's personal injury or survival recovery.

How the case is pleaded, demanded, negotiated, and settled can therefore materially affect the family's net recovery.

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How Hulburt Law Firm Can Help

Medical reimbursement issues in wrongful death cases can materially change what a family ultimately receives.

The outcome often depends on decisions made well before settlement, including which claims are asserted, which damages are demanded, how the complaint is drafted, what documents are provided during negotiations, who signs the settlement agreement, and exactly what the release says.

A San Diego wrongful death attorney can evaluate these issues at the beginning of a case and structure the claim to protect the family's recovery without unnecessarily giving up valuable claims.

If you lost someone you love because of another person's negligence in San Diego, Hulburt Law Firm can help. Call (619) 821-0500 or message us through our contact form for a free, confidential case review.