Collateral Source Rule

What is a Collateral Source Rule?

The collateral source rule is critical for ensuring your ability to collect an award following an accident. Many people have never heard of or do not understand what the collateral source rule is. This misunderstanding can cause them to lose money that should have been theirs.

Hiring a lawyer who understands the legal system can help you increase the amount of compensation you can receive after being involved in an accident that wasn’t your fault.

What is the Collateral Source Rule?

Following an accident, you may be eligible for compensation from a variety of sources. The collateral source rule prevents compensation from a source other than the defendant from reducing the number of damages that can be recovered from the defendant in a lawsuit. This rule only applies in certain circumstances, such as when the victim receives medical bill compensation from their insurance company.

Why Does the Collateral Source Rule Exist?

The primary purpose of the collateral source rule is to prevent the defendant from benefiting from any payments made to the victim by their own insurance company.

The collateral source rule also ensures that people are not afraid to acquire private insurance that could compensate them following an accident. In the event of a personal injury accident, someone who has purchased their own insurance will not be penalized with reduced compensation.

The rule ensures that defendants are still held liable for all of the damages caused by their negligence. Victims with private insurance may be compensated by their insurer while they await the outcome of their personal injury case. The defendant should not be able to receive a lower judgment simply because the victim received separate compensation under the collateral source rule.

Collateral Source Rule Example

Assume someone is involved in an auto accident and suffers serious injuries as well as vehicle damage. The other driver involved in the accident is found to be entirely to blame. The victim’s own health insurance eventually pays for the entire cost of their medical bills.

The victim can still sue the at-fault driver for the full amount of damages under the collateral source rule. The at-fault driver would be unable to present evidence of the victim receiving payment for medical expenses from their health insurance.

Collateral Source Rule Exemption

In some cases, the collateral source rule does not apply. A subrogation agreement with the victim’s insurance company is the main exception. This means: 

  • After receiving a settlement from their personal injury case, the victim may be required to repay their insurance company for the damages they covered.
  • The insurer may be permitted to sue the defendant or victim for the damages paid.
  • In some cases, the victim’s case may be drastically reduced.

Some insurance companies may be willing to accept a reduced reimbursement. Other times, they may demand that the victim exclude all medical expenses from their personal injury lawsuit.

Collateral Source Rule Reform

In response to critics of the rule who argue that awarding damages twice is unfair, several states have passed laws reforming the collateral source rule. Exceptions differ from state to state. In tort cases, such as personal injury claims, the collateral source rule is still in effect in Georgia.

If you were injured in an accident that you did not cause and received compensation from your own insurance, you might still be eligible for full compensation from the person or entity who caused the accident.

Contact a personal injury lawyer to help assist with your compensation recovery.

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