Insurance Company Releases are Invalid if a Hospital Lien Is Not Paid.
Liability insurers sometimes pay claims without checking for hospital liens or they obtain a release from the claimant with language saying the claimant assumes responsibility for payment of any liens. However, lawmakers realize that is a “fox guarding the henhouse” situation.
The Texas hospital lien statute, for instance, provides that a release is invalid if the lien doesn’t actually get paid.
An invalid release means the insured (usually an at-fault driver or vehicle owner) is still “on the hook” – the insurance company “protected” their insured by getting a worthless piece of paper!
Texas Property Code Sec. 55.007. Validity of Release.
(a) A release of a cause of action or judgment to which a lien under this chapter may attach is not valid unless:
(1) the charges of the hospital or emergency medical services provider claiming the lien were paid in full before the execution and delivery of the release;
(2) the charges of the hospital or emergency medical services provider claiming the lien were paid before the execution and delivery of the release to the extent of any full and true consideration paid to the injured individual by or on behalf of the other parties to the release; or
(3) the hospital or emergency medical services provider claiming the lien is a party to the release.
(b) A judgment to which a lien under this chapter has attached remains in effect until the charges of the hospital or emergency medical services provider claiming the lien are paid in full or to the extent set out in the judgment.