Health Insurer Claims vs. Hospital Liens in Alabama

By the FigureMyTax Editorial Team · How we calculate

A hospital lien is created by statute and must be perfected in the probate court; a health insurer's claim comes from your policy and from equitable doctrines such as made-whole and common fund.

The hospital lien statute

Ala. Code 35-11-370 gives a hospital a lien for all reasonable charges for the care, treatment and maintenance of an injured person who entered the hospital within one week after the injury. It attaches to the person's actions, claims, judgments and settlements, "subject, however, to any attorney's lien", which Ala. Code 34-3-61 makes superior to every lien but tax liens.

How a hospital perfects the lien

Under 35-11-371, the hospital files a verified statement with the probate court of the county where it is located, giving the patient, the dates, the amount claimed, and credit for payments by any health care payor, and mails copies by registered or certified mail within one day. For a patient with private health coverage, the hospital must first submit an accurate, properly coded claim to the payor and may perfect within 20 days after a denial; for Medicare, Medicaid or an unknown payor, within 20 days after discharge. The hospital may also perfect outside those limits by giving actual notice.

Why your health insurer usually comes first

Because the statute requires the hospital to bill the health care payor first and to credit what it pays, a hospital lien in a case with private coverage is usually limited to what insurance did not cover. The statute reached this form through acts adopted in 2019 and 2021. Insurance payments then create the insurer's own claim against your settlement.

How the insurer's claim differs

A health insurer's claim is not created by the lien statute. It rests on your policy and on equity: Alabama applies the made-whole rule from Powell and the common-fund rule from Alfa v. Head. The hospital lien sections we read contain no made-whole or fee-sharing language, so do not assume those protections carry over. See the made-whole post for the insurer side.

Settling around a lien is risky

Section 35-11-372 says a release or settlement is not valid against the lien unless the lienholder joins it, and treats acceptance of a settlement without a lien release as prima facie impairment. The hospital may sue whoever made the settlement for the reasonable charges, with costs and attorney's fees if it wins. After a judgment, the court may determine the amount due on a lien on petition (35-11-373). The lien statute does not apply to workers' compensation money (35-11-374).

Run the numbers

Enter each claim in the Alabama medical lien calculator to see what is left after fees, costs and every lienholder.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Alabama's rules apply to your specific case with a licensed Alabama attorney.