I received a phone call from a friend of mine and he asked me to explain to him what a lien actually is. He said he was in a meeting and people were throwing around this term. He didn't want to sound stupid and ask them to explain it so he said nothing.
What is a lien?
The definition of a lien is a legal interest in someone else's property. A lien usually operates to secure a debt.
How do Liens arise?
A lien arises in one of two circumstances. First, a lien can arise because a law gives a legal right to lien a piece of property either real property (land) or personal property. Here are a couple of examples of how this works.
- A contractor comes out to do work on your home. A dispute arises over the work and payment and they file a mechanics lien against your property. Odds are your state has a mechanics lien law.
- In Indiana, if you are injured in an accident and go to the hospital, the hospital has a lien on any settlement money under the Hospital Lien Statute.
So this is the first way a lien is created and that is by a specific law or statute that is on the books.
The second way to establish a lien is by contract.
Here is an example of how this could work. The relationship that you have with your car insurance company is contractual. You pay a premium and they provide you with insurance coverage that you purchased.
If you were involved in an accident and went to the emergency room to get checked out. The hospital will get paid by your auto insurer if you purchased medical payments coverage. Actually, med-pay is primary coverage and must be billed before health insurance or Medicare. If your insurance company pays the bill it will have a right to repayment of the medical expenses if you get a settlement from the other driver because the right is part of the contract terms. This is called a subrogation or med-pay lien.
So to recap. A lien is a legal interest in real or personal property and the right to lien a piece of property can come from a specific law or contract.
If you have any questions about how a lien would work in your Indiana personal injury matter, call Guy DiMartino Law at (219) 690.8997.