Letter: Collateral Source Rule Is Fair, Just and Necessary

The following letter was written in response to an article in the December 2012 Tennessee Bar Journal, “Time to Examine Tennessee’s Collateral Source Rule?” by William S. Walton.

The Collateral Source Rule dates back to the 1800s in this country to prevent wrongdoers from benefitting at the expense of responsible citizens, health care providers, and the public at large. Legislatures and courts across the nation have examined and supported the collateral source rule to protect the public at large. The collateral source rule is fair to responsible citizens, health care providers, and the general public:

  • Wrongdoer speeding down the highway while texting slams into a family causing them to sustain significant injuries. Wrongdoer has $1 million liability insurance coverage to pay the damages, including medical bills, but the jury hearing this case will not know that.  The family’s medical expenses are over $300,000. This family has maintained health insurance, paying thousands in premiums over the years.
  • The collateral source rule does not allow the jury to know the family had health insurance, nor that defendant had a million dollars’ liability insurance. Health care providers treating this family are not paid from Wrongdoer’s liability insurance because they deny liability and refuse to pay the claim.

Unfairness without the Collateral Source Rule:

  • Innocent victims would not be allowed to recover the full amount of medical expenses. This is grossly unfair, unjust and improper as this family has paid approximately $350,000 in premiums but are being punished and not able to collect their full damages.
  • Had they been irresponsible without health insurance, Wrongdoer’s liability insurance carrier would have to pay the full amount of their medical bills. This is unjust, unfair and improper.

Unfairness to the Health Care Providers:    

  • Health care providers treating this family accept reduced payments due to Wrongdoer’s negligence by driving too fast while texting and causing this crash. His liability insurance company should not be able to escape responsibility because health care providers could not wait to be paid, instead submitting these bills to the health insurance company receiving payment at a reduced amount. Instead of $300,000 for services rendered, they receive $150,000. The jury should be able to award the full amount of reasonable and necessary medical expenses and health care providers should be able to recover the full amount of their charges.
  • Health care providers did not cause this family’s injuries but are punished while the wrongdoer gets a discount. This hurts health care providers while Wrongdoer’s liability insurance company is enriched, encouraging them to deny claims and string them out as long as possible.
  • It is grossly unfair if victims are on TennCare, as health care providers are stuck with TennCare rates. If the court awards the full amount of medical bills, the doctors and hospitals should be able to recover the full amount of their bills.  Doctors and hospitals should be allowed  full payment from the wrongdoer and their insurance carrier if the court awards those damages, and not reduced rates.  Why should health care providers be punished while wrongdoers and their liability insurance company hold onto their money for as long as they can drag it out?

The Collateral Source Rule Protects Charitable Organizations:

  • If the family was uninsured and Wrongdoer’s insurance company denied liability and the family’s church raised money for this family, found a doctor and a hospital willing to provide free treatment and services, then their medical bills could not be awarded against Wrongdoer and the charity dollars from the church, doctor and hospital, would not be recoverable. This is wrong on so many levels.
  • There is good reason why the collateral source rule has been the law in this country since the 1800s. To prevent wrongdoers from escaping responsibility and by denying claims of innocent victims for four to five years allowing the liability carrier to benefit and abuse charity, health care providers and the general public.
  • If the negligent Wrongdoer kills your spouse, should Wrongdoer get a free pass because you invested in life insurance?  
  • If you are injured and cannot work, should the person responsible for stripping you of your ability to work, pay less because you invested in disability insurance?
  • If you are injured and must seek medical care, should the person who sent you to the emergency room gain a financial advantage because you invested in health insurance?
  • Should health care providers be stuck with discounted fees because the wrongdoer causing the need for treatment delayed paying the claims?
  • Should churches and charities absorb the cost the wrongdoer caused because the liability carrier would not pay?

The answer to these is “No.” The collateral source rule has been around for hundreds of years because it is sound policy, just and based in righteous fairness.
— Stan Davis, Nashville.