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What Is the Collateral Source Rule in a Personal Injury Claim?

The collateral source rule is a state law that favors the plaintiff in a personal injury case. It prevents the amount already recovered from a third party from being deducted from damages awarded for injury, illness, or disability. Some criticize that this rule allows the plaintiff to receive two awards, one from the liable party and the other from the insurance provider. As a result, they receive a windfall greater than the amount required to pay their medical bills and make them whole. However, others contend that in cases where the insurance provider provided the third-party compensation, the victim had paid premiums for a long time to have that coverage in place. Liable wrongdoers should not attempt to reduce their obligations by taking advantage of their victim’s prudent financial planning. A well-experienced medical malpractice attorney is cautious of invalid deductions in the claim value owed to their client.

The implication of the Collateral Source Rule

The compensation, or “damages,” that a plaintiff receives as a result of filing a personal injury lawsuit are subject to a long-standing legal principle known as the “collateral source rule.” It may significantly affect the amount the defendant must pay to compensate for the victim’s losses.

This rule prevails in every U.S. state, though the specifics differ from state to state. It implies that compensation that the plaintiff (injured person) received from a source other than the entity legally responsible for the injuries will not reduce the sum recoverable from the defendant. The ordinance applies in cases wherein a victim’s health or auto insurance covers the cost of their injuries-related medical care.

Under the collateral source rule, if you suffer harm due to someone else’s negligence or willful misconduct, your insurance provider (or another source) may cover all or part of the resulting medical expenses. However, the defendant who injured you is still legally responsible for paying for all medical costs associated with the incident. Aside from insurance, collateral sources include Medicaid, Social Security, workers’ compensation, and employee benefits like paid time off (PTO). In addition, the injured party is still eligible for reimbursement from the offender even if they receive donations of goods or services.

Another significant part of this state rule relates to the admissible evidence in court during a personal injury trial. The judge or jury cannot consider any sum paid by others, including payments from insurance companies. It is not wise to assist a tortfeasor defendant when calculating the total damages. The defendant must be made fully liable for their actions to uphold the duty of reasonable care that everyone has toward one another. And just because the plaintiff was fortunate enough to have insurance before sustaining injuries, the victim shouldn’t get less money.

Right to reimbursement for insurers and others

Collateral Source Rule
Collateral Source Rule

The collateral source rule guarantees that the full extent of the injured person’s harm is attributable to the negligent defendant. However, that doesn’t mean that those who have paid money to an injured person have no recourse for recovering that money. If you receive a fair personal injury settlement for your losses, your health and auto insurance providers, Medicare, and others can go for a personal injury lien. The lien enables them to get reimbursement from your court award if those sources have already paid for your medical care in the event of an injury.

For illustration, if you sustained injuries in an auto accident, and luckily, your health insurance plan covered $6,500 for medical care, your insurance company will have a $6,500 lien on any compensation you receive from the defendant. Similarly, if you had $12,000 in personal injury protection (PIP) coverage on your auto insurance after the same accident, the $6,500 in medical expenses would be covered by PIP. Therefore, if you receive a settlement or a court judgment, your auto insurance company could likely impose a $6,500 lien. The best part is that your attorney can significantly reduce these liens.

State Collateral Source Rule Reform

The execution and reforms of the collateral source rule vary among states. Over the years, many state legislatures passed laws that modified the application of this rule. These amendments create narrow and broad exceptions to the regulation depending on the place. For instance, collateral source evidence is admissible in a case alleging medical malpractice against a healthcare provider in California. The healthcare provider can present information about the sum due to the injured person from insurance companies and other sources as the defendant. The injured party can, however, also present proof of the payments they made to receive those insurance benefits in cases where the defendant presents this kind of evidence.

The California statute is comparable to other state laws and is a relatively limited exception to the collateral source rule. In contrast, the collateral source rule in Florida forbids introducing evidence of insurance coverage except for the benefits provided by the government. It means the defendant is free to disclose the Medicare and Medicaid benefits received by the plaintiff in court. In cases where an insurance company has a right to reimbursement, the injured party receives less money to cover their medical bills or lost wages. The plaintiff’s insurance company will only cover some proportion of the medical costs after the lawsuit’s verdict. The remaining costs will be written off and reimbursed to them.

Contact Best Personal Injury Lawyer For Your Personal Injury Compensation

A collateral source rule determines whether the defendant’s legal liability is subject to reduction because another party is paying damages. This rule differs from one state to another, as some prohibit the admission of evidence. Even if plaintiffs receive compensation for their injuries from other sources, they do not have to disclose them. Other states permit such evidence in situations like lawsuits for bodily injury but not in others, such as medical malpractice suits. A competent lawyer will have a comprehensive knowledge of the rule and its application in a particular state. If you incurred losses in a car wreck and seek a fair deal from an insurance company, contact a Personal Injury Lawyer Chicago through our website. We can help evaluate from punitive damage to medical malpractice claims and enable you to get the most deserving settlement. For free consultation contact us now at (312) 598-0917.

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