What is the Collateral Source Rule?

If you have been injured due to another's negligent or wrongful acts, and are suing the defendant for damages, then you might be wondering how your health insurance coverage affects your ability to recover damages - is there any interference, and will insurance reimbursement force you to claim reduced damages? These are completely legitimate concerns. After all, it seems like common sense - if you have had your medical expenses reimbursed by your insurer, then one might reasonably believe that there are no remaining medical expenses to claim as damages.

This is actually not the case, fortunately. In fact, even if your insurer has reimbursed your medical expenses, you may claim the expenses as damages and recover fully - this is known as the collateral source rule. Thus, injured plaintiffs have access to a loophole for securing a significant recovery that recompenses them for more than their suffered losses.

The collateral source rule is rather unique, and many injured plaintiffs are not aware of what it entails. Let's take a brief look at how it works.

How the Collateral Source Rule Works

The collateral source rule ensures: 1) that the jury cannot be presented with evidence about the existence of insurance or other third-party reimbursement mechanisms, and 2) that if you receive compensation from a source independent of the defendant, that compensation will not reduce your total damages recoverable in a verdict or settlement.

How does this work? Let's consider a quick example.

Suppose that you are injured in a slip-and-fall accident on a retail store premises. You have substantial medical expenses, but all expenses are covered by your insurance, and you are fully reimbursed. During the lawsuit, the defendant suspects that you have had your medical expenses fully reimbursed, and attempts to introduce such evidence into litigation. You can prevent the defendant from doing so - in fact, the jury must come to a resolution on damages without any consideration of your insurance reimbursement.

Even if the jury were to be allowed to "see" the truth of your reimbursement, it would not be allowed to reduce your total damages recovery. You could still secure damages for your medical expenses in full, despite the fact that you were reimbursed for such expenses by your insurer.

Medical Expense Damages Only Recoverable for the Actual Payout

In California, and many other states, it's important to note that - even though the collateral source rule exists - you cannot recover damages for the listed cost of the medical services provided. You may only recover damages for the actual cost of the medical services that were covered by your insurer.

Confusing? Consider the following.

Suppose that you are injured in a slip-and-fall accident on a retail store premises. You suffer serious injuries to your neck, shoulders, and back, requiring significant surgery (which will cost roughly $150,000). Now, even though the hospital has billed you $150,000, the total cost for the insurer might be less after they have negotiated the cost down with the hospital - ultimately, the cost may end up somewhere around $75,000, for example.

In California, you would therefore only be entitled to sue and recover for the $75,000 - not the initial $150,000. Insurers frequently negotiate the cost of medical services down before reimbursing such expenses. As such, keep that in mind when making a claim for damages in your lawsuit.

Schedule a Free Consultation with an Experienced San Jose Personal Injury Attorney

If you have suffered an injury due to the negligence or wrongful conduct of another person or entity, then California law may give you the right to sue and recover damages as compensation for your injuries. Litigation can be complicated by a number of different factors, however, and as such, it's worth connecting to an attorney who has had provable success in obtaining damages on behalf of their injured clients.

Here at the Law Offices of Brian O'Grady, we have served injured clients throughout California for over three decades, assisting them from beginning-to-end of the litigation process. We are committed to providing comprehensive legal representation - unlike many other firms, we approach litigation with the preparedness of going to trial. This gives us a significant advantage when it comes to negotiating a favorable compromise during settlement discussions.

Interested in speaking with an experienced San Jose personal injury attorney?

Call the Law Offices of Brian O' Grady at (650) 318-6131 or submit an online form today to setup an appointment. Consultation is free, and all communication with Attorney O' Grady is confidential.

We look forward to speaking with you.