We often think that health insurance will pay for all our medical needs, no matter why we need care. But, that’s not how it works when you file a lawsuit for a personal injury. In those cases, it's not your insurance company, but the responsible party (also known as the "negligent" or "liable" party) who should pay your medical bills. So, that means that if a third party (like the “defendant” in your case) is legally responsible for your injury, that third party should pay for your medical bills instead of your insurance company.
When your health insurance pays for medical bills caused by a third party, it suffers an economic loss. As a result your health insurance has a claim against the third party just like you do. However that claim shifts to you once you receive money from the third party, because you received compensation for the medical bills which your insurer – rather than you – actually paid.
Most healthcare plans, whether provided by the government (federal or state programs) or by your employer, have a right to a reimbursement claim or lien on any settlements you receive if your plan originally paid for the medical care you needed for your injury. You agreed to reimburse your insurance company when you signed the policy forms and began using the coverage. This recovery right is outlined in the plan documents, but most people aren’t aware of this requirement.
A healthcare provider – such as a doctor or hospital where you were treated – may also put a lien on your settlement, if your medical bills haven’t been paid. Those liens will be for the specific costs of the treatment you received due to your injury, and may continue to accumulate through the date of settlement.