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The Collateral Source Rule

The “collateral source rule” is a legal rule that prevents a defendant from introducing evidence that a plaintiff has received payment from a third party. For example, a plaintiff is injured in an automobile accident with a defendant. The plaintiff is hospitalized for his injuries. The plaintiff’s health insurance provider pays all of the plaintiff’s hospital bills. The plaintiff files a personal injury action against the defendant. Under the collateral source rule, the defendant cannot offer any evidence at trial regarding the payment of the plaintiff’s hospital bills by the health insurance provider. Therefore, if the plaintiff wins the case, he may be able to recover the amount of his hospital bills from the defendant, even though the health insurance provider has already paid that amount. The collateral source rule is not limited to insurance payments. The rule applies to most payments to a plaintiff by third parties.

Critics of the collateral source rule claim that it permits plaintiffs to recover for the same expense twice. Proponents of the rule claim that it prevents defendants from escaping full responsibility for their negligent acts.

Many states have abolished or limited the collateral source rule.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.

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