At trial the insurance defense attorney hired by the at-fault driver wants to tell the jury about the discounts and Medicaide 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 “tort-feasor” as the law calls him, is responsible for making the injured person whole.

This includes making sure her medical bills are paid. Medicaide and the 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 tort-feasor, the payment should not be deducted from the damages [monetary compensation] which he would otherwise collect from the tort-feasor. 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.”

It is an evidentiary rule which 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, Medicaide 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 Modified Or Eliminated The Rule

The legislatures of twenty eight (28) states have either abolished or modified the collateral source rule.

These states are as follows: Alabama, Alaska, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Michigan, Minnesota, Missouri, Montana, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, West Virginia.

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.

At the National Association of Mutual Insurance Companies website you can find a list of the states that have modified the rule with a summary of the modification:

http://www.namic.org/reports/tortReform/CollateralSourceRule.asp

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 twenty two states that still have the collateral source rule in full or one of fourteen that have retained it in part, you need to know about and understand it.

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.