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California Collateral Source Rule

Aug 18, 2022 | California

It’s natural to feel stress and confusion of what to do after receiving an injury in a car accident or other type of accident. You may be coping with financial hardship in addition to the physical and emotional effects of your injury. Many people have lost income as a result of their inability to work, while also facing mounting medical expenditures. Therefore, if someone else’s negligence caused the accident, you may be able to hold them liable for the financial losses.

What is the Collateral Source Rule?

It’s a legal principle that’s been around for centuries. Its goal is to safeguard persons who was received injures in car accidents. If a person is hurt, they are able to get all of the money they need as soon as possible. If a third party compensates said person, it should have no bearing on what the plaintiff pays. The rule performs two functions.

The evidential function is the first one. Simply put, it is a rule that implicates the rules of evidence and ensures that the defendant will not be able to bring up third-party payments made to the plaintiff. The substantive function is the second. This pertains to a person’s civil rights and obligations, as well as the victim’s right to recover the damages. In other words, just because a victim has received compensation from a third party does not indicate that it will lessen their losses.

What is the Result of the Collateral Source Rule?

The collateral source rule states that any compensation received by an accident victim from a source other than the defendant in a personal injury case cannot be deducted from the defendant’s final award.

There are essentially two things that result from the collateral source rule, which are as follows:

  • The rule stops the defendant from bringing up payments made by a third party for the plaintiff’s injuries
  • The rule protects the plaintiff’s right to recover damages from the defendant.

What is an Example of Evidence that Cannot Be Used Under the Collateral Source Rule?

An example of those evidence includes:

  • Payments from insurance companies who reserve the right to substitute to the rights of the plaintiff;
  • Gratuitous sources; or
  • Insurance companies who are unable to recover any of the money they paid the plaintiff.

Are There Any Exceptions to the Collateral Source Rule?

Yes, there are two exceptions to the collateral source rule, which are as follows:

  • In a medical malpractice lawsuit, the healthcare provider can choose to introduce evidence of any amount payable as a benefit to the plaintiff as a result of the personal injury;
  • If an insurance company has an agreement with a healthcare provider that the insurance company shall pay a reduced fee for services rendered to the plaintiff. Therefore, the plaintiff’s damages would be reduced to the amount the insurance company actually paid on the plaintiff’s behalf.

Can a Subrogation Clauses Become an Issue for Purposes of the Collateral Source Rule?

Yes, subrogation clauses inserted in policy contracts of insurance companies may be an issue for purposes of the collateral source rule. The reason why is because a subrogation clause can help an insurance company recover the costs of the benefits it has paid the plaintiff after an accident.

Los Angeles Personal Injury Attorney

Contact our Glendale personal injury lawyer today for a consultation and case review. Please feel free to give our office a call at 310-933-5171.