Collateral Source Rule

The collateral source rule is vital to protecting your ability to collect an award after an accident. However, many people haven’t heard of it or misunderstand it and miss out on money that should be theirs as a result. Working with a lawyer who knows how it works can help you increase the amount of damages you can collect in the wake of an accident.

How Does the Collateral Source Rule Work?

After an accident, you could receive payouts from a variety of sources. In a lawsuit, the collateral source rule prevents any compensation from another source (other than the defendant) from reducing the number of damages that can be recovered from the defendant. This rule only applies in certain cases, such as where the victim receives compensation from their insurance company for medical bills.

Why the Collateral Source Rule Exists

The main reason for the collateral source rule is to keep the defendant from benefiting from any payments the victim gets from their own insurance company. In Georgia, bills paid by workers’ compensation, “beneficient bosses,” or “helpful relatives” can also apply, as outlined in Hoeflick v. Bradley, 282 Ga. App. 123 (2006).

The collateral source rule also ensures people aren’t afraid to obtain private insurance that could compensate them after an accident—separate from personal injury cases. If someone has purchased their own insurance beforehand, they won’t be penalized with reduced compensation in the event of a personal injury accident.

The rule ensures defendants are still held responsible for all of the damages their negligence caused. Victims with private insurance may receive compensation for their insurer as they wait for the results of the personal injury case. Under the collateral source rule, the defendant should not be able to receive a lesser judgment just because the victim received separate compensation.

Example of the Collateral Source Rule

Say someone gets into a car accident and suffers severe injuries and vehicle damage. Another driver in the accident is found to be fully at fault for the accident. The victim’s medical bills and other damages total $150,000.

The victim’s own health insurance ends up covering the total cost of their medical bills. Under the collateral source rule, the victim can still seek damages from the at-fault driver for their full $150,000 in damages. The at-fault driver would not be able to present evidence of the victim receiving payment from their health insurance for the medical costs.

Collateral Source Rule Exceptions

There are instances where the collateral source rule does not apply. The main exception is a subrogation agreement with the victim’s insurance company.

Under subrogation:

• The victim may be required to repay their insurance company for the damages they covered after the victim receives a reward from their personal injury case.
• The insurer may be allowed to sue the defendant or the victim for the damages they paid.
• The victim’s case may be dramatically reduced, in some cases.

Some insurance companies may agree to a discounted reimbursement. Other times, they may require the victim to completely omit medical expenses from their personal injury lawsuit.

Collateral Source Rule Reform

In response to critics of the rule who argue it is unfair for a victim to be awarded damages twice, several states have passed laws reforming the collateral source rule. Exceptions vary by state. In Georgia, the collateral source rule remains active in tort cases like personal injury claims.

Waiting on Your Payments After an Accident? We Can Help.

If you were hurt in an accident you didn’t cause and received payments from your own insurance or other people, you may still be entitled to full compensation from the at-fault party. To learn your options, call John Foy & Associates. We will evaluate your case for FREE and discuss how we can help you. Call (404) 400-4000 or contact us online today for your FREE consultation.