Back in 2009, when David Patterson was New York's governor, the New York State legislature passed General Obligations Law § 5-335 to protect a plaintiff who settles an action to recover damages for personal injuries from being subject to certain subrogation or reimbursements claims by health benefit providers.
To that end, General Obligations Law § 5-335 provides, in pertinent part, as follows:
"When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff's entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.
"Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider" (General Obligations Law § 5-335[a]).
The reason for the statute, which was - and still is - highly unpopular with health insurers, was dual: (1) the liens being asserted by health insurers made it far more difficult to resolve personal injury lawsuits, as the liens threatened to wipe out large portions, if not all, of the potential settlements to injury victims; and, (2) the health insurers had already been paid their premiums in exchange for the coverage they provided, and therefore should not be permitted to obtain a windfall.
This rule is not without exception, however.
Critically, when read carefully the statute specifically provides that the lien is ineffective Thus, in cases where the plaintiff received medical benefits from an entity, such as Medicare or Medicaid, those liens will still be valid under New York law.