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California to Review Collateral Source Rule


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Posted on 22 Apr 2011



For decades plaintiffs in personal injury have benefited from a legal doctrine called the collateral source rule. The rule permits plaintiffs who prevail in personal injury lawsuits to recover the full amount of medical expenses expended in their cases, regardless of whether a third party paid less than the billed amounts.

The third parties are inevitably insurance companies, which nearly always negotiate with health care providers, or their billing agents, to pay less than whatever the provider charges. This is why you may a surgical procedure bill of $100,000, but only $45,000 has been paid although the bill has been satisfied. The result is a collateral benefit to the insured, or plaintiff.

In the above example, losing defendants are still required to pay plaintiffs the full $100,000, according to the collateral source rule. Insurance companies, which usually defend these cases, or self-insured corporations, have fought the rule for years, contending that it provides a windfall to plaintiffs.

Three recent cases, Howell v. Hamilton Meats and Provisions, Inc; Yanez v. SOMA Environmental Engineering, Inc.; and King v. Willmet, all upheld the collateral source rule and refused to reduce the amount the plaintiffs had received in their cases . The California Supreme Court, however, will hear the appeals of these cases and possibly determine the future applicability of the rule.

An adverse decision could discard or limit the rule and score a major victory for insurance companies and a severe setback for plaintiffs.

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