Collateral Source Cases

Brien Roche

Collateral Source Cases-Tort

The collateral source rule is a rule of evidence.  It should be called the source of payment rule. It says that any collateral or side payment made to the plaintiff is not admissible.  In other words a collateral source is a payment from an insurer, a governmental entity, a pension plan, other third party payor or anyone other than the defendant.  Therefore these types of payments are collateral.  They are collateral to (not from) the defendant. They are benefits that the plaintiff somehow earned or has otherwise received.  The rule intends to put the full burden of the loss on the at-fault party.  In other words that at-fault party does not get any benefit from any payments that the plaintiff may have received from this collateral or side source of payment.  Accordia of Virginia Insurance Agency v. Genito Glenn, LP, 263 Va. 377, 560 S.E.2d 246 (2002).

Under this rule, the defendant cannot present any facts as to any such payments made to the plaintiff.  Likewise any reduction in the plaintiff’s medical bills or write-offs by healthcare providers or insurance carriers cannot be introduced.  Acuar v. Letourneau, 260 Va. 180, 531 S.E.2d 316 (2000).

Also in a wrongful death action, payments made to the decedent’s mother from life insurance are not admissible.  Walthew v. Davis, 201 Va. 557, 111 S.E.2d 784 (1960).

Likewise in a case where the insurer is also the tortfeasor, then payments made by the insurer may be admissible.  For instance in a case against Kaiser for medical malpractice, the bills paid by Kaiser were admitted as damages due to Kaiser’s failure to timely object. Karsten v. Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc., 36 F.3d 8 (1994)

Attempts To Breach Collateral Source

Defense lawyers have been seeking to use Obamacare as a further invasion of the collateral source rule.  The claim being made by the defense is that any payments for future health care costs should be capped at what is called the “out-of-pocket limit” under Obamacare.  That limit is $6,350.00 for an individual plan and $12,700.00 for a family plan in 2014.  However there are a number of reasons why the Affordable Care Act (Obamacare) would not apply in these cases:

• The Act does not require everybody to have insurance
• The Act does not permit people to buy insurance at any time
• The out-of-pocket limit does not cover all types of care
• The maximum out-of-pocket limit does not apply to bills from providers that are not in-network
• Many of the requirements of the Act do not apply to certain types of plans
• There are different levels of health insurance coverage under the Act and therefore it is impossible to determine what reimbursement rate might apply to any individual claim
• It is highly speculative as to whether or not the Act will even be in effect in the future and what form it may be in, what the reimbursement rates may be, what the out-of-pocket limits may be
• Any risk associated with that uncertainty should be borne by the wrongdoer in this case and not by the innocent plaintiff
• The courts that have addressed the issue have concluded that the Act is not a basis for an offset against collateral payments. Brewster v. S. Home Rentals, LLC, 2012 WL 6101985 (M.D. Ala. 2012); Vazquez-Sierra v. Hennepin, 2012 WL 7150829 (Minn. 2012); Lopez v. Sunrise, 977 N.Y.S.2d 667 (2013); Leung v. Verdugo, 2013 WL 221654 (2013)
• The collateral source rule is alive and well in Virginia.

Collateral Source Cases-Contract

In addition in 2019 the Virginia high court said the collateral source rule applies in a breach of contract case when the plaintiff has been reimbursed by an insurer for the full amount it seeks in damages. Dominion Resources Inc v Alstom Power Inc 297 Va. 262 (2019). Call, or contact us for a free consult. Also for more info on collateral source matters Wikipedia pages. Also see the post on this site dealing with injury issues.

Restitution

If the underlying case is a criminal matter, restitution may be ordered. Money received by the plaintiff pursuant to a restitution order is not a collateral source. As such it may serve as a credit against any judgment. Most claims adjusters however are not going to understand that concept. Therefore as a practical matter the amount of restitution should not reduce the amount received by a plaintiff in settlement. See Virginia Rule of Evidence 2:408(a)(1) which states that payments such as this should not be admissible. The amount of restitution actually paid however would be a credit against any judgment. 

D.C. Law

In the District of Columbia the law is much the same as in Virginia.  That is, payments from a collateral source are not allowed to diminish recoverable damages from the wrongdoer.  Hardi v. Mezzanotte, 818 A.2d 974, 984 (D.C. 2003)  In that case the court said that the rule applies where either a payment is made to the plaintiff from a source wholly independent of the wrongdoer or when the plaintiff may have contracted for what may be a double-recovery.  This likewise applies to Medicare benefits.  In D.C. v. Jackson, 451 A.2d 867, 872 (D.C. 1982) the court said that Medicare benefits are collateral even where the U.S.A. is the wrongdoer.  

In addition the plaintiff is entitled to recover the full measure of damages for the total amount billed and not just for the amount that was paid.  That is, any write-off or unpaid amount may be recovered by the plaintiff as compensatory damages as stated in Hardi at 983-985.