Sally is injured in a car accident. Her injuries make her unable to work. She receives substantial discounts from her health care providers and her remaining bills are paid by Medicaid.
At trial the insurance defense attorney hired by the at-fault driver wants to tell the jury about the discounts and Medicaid payments. Will the trial judge allow him to do so?
No, says the "collateral source rule." At least not if she lives in one of the states that still support the rule.
Collateral Source Rule Explained
The term "collateral" as used here means simply "additional." The at-fault driver or "tortfeasor" as the law calls him, is responsible for making the injured person whole. This includes making sure her medical bills are paid. Medicaid and the health insurance discounts are "additional sources" that have helped make Sally whole by paying her medical bills.
In the American legal system laws can be made by legislatures, administrative agencies, and by courts. The law created by courts is known as "common law." The collateral source rule was court created in 1854.
The essence of this rule is summarized in Black's Law Dictionary as follows:
"...if an injured person receives compensation for his injuries from a source wholly independent of the tortfeasor, the payment should not be deducted from the damages [monetary compensation] which he would otherwise collect from the tortfeasor. In other words, a defendant tortfeasor may not benefit from the fact that the plaintiff has received money from other sources as a result of the defendant's tort."
The collateral source rule is a "rule of evidence." This means that the injured person has the right to ask the judge to keep evidence of collateral source payments away from the jury.
The most common collateral sources are medical insurance, workers compensation, VA medical benefits, Medicaid and other government programs.
Medical Discounts
While some states have refused to give medical discounts the protection of the collateral source rule, the majority opinion is just the opposite. A majority of states permit a plaintiff to recover the amounts billed for medical care, even when those amounts are discounted by the health care provider pursuant to a contract with the injured person's health insurer.
States That Have Eliminated The Rule
Here is a list, as of the date of this article, of the fourteen states that have completely abolished the rule: Alaska, Colorado, Connecticut, Idaho, Indiana, Iowa, Kansas, Michigan, Minnesota, New York, North Dakota, Ohio, and Oregon.
The other 36 states have retained the rule in whole or in part. Even if you live in a state where the rule has been abolished or limited by the legislature, you should check on the current status as some state supreme courts have overruled the legislature and reinstated the rule.
Conclusion
If yours is one of the states that still has the collateral source rule in full or in part, you need to know about it and understand how it applies to your case.
Insurance companies will try to reduce your compensation by amounts which your health insurance has paid. Be alert, don't let them put the evidence in front of the jury.
Disclaimer
This article is for informational purposes only and is not intended to substitute for legal advice. Seek an opinion from an experienced injury attorney in your state of residence.
Rex Bush is founder of Bush Law Firm near Salt Lake City, Utah where he handles personal injury cases in Utah and throughout the United States. For more information on personal injury issues visit his website: Personal Injury Utah.
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