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Understanding the Collateral Source Rule

When you are injured in a Los Angeles accident you can become overwhelmed. In addition to dealing with a painful injury, you’ll also be burdened with a lot of financial stress. Between medical bills and lost income, your accident could potentially cost you tens of thousands of dollars. If someone else caused your accident and injury, you have the right to hold them accountable. By filing a personal injury lawsuit, you can demand compensation for your injuries and costs.

The defendant named in your lawsuit will try to minimize the amount of money you receive. They may even want to point out that you have already received compensation from a third party. However, thanks to the collateral source rule, defendants are actually prohibited from bringing this up in your case. The fact that you receive compensation (e.g., workers compensation benefits, social security disability, or insurance benefits) should have no impact on your ability to recover damages from the defendant.

What is the Collateral Source Rule?

The collateral source rule is a legal doctrine that has been around for more than a century and a half. The purpose of the collateral source rule is to protect accident victims. It helps to ensure that victims are able to get all of the money they need after sustaining an unexpected injury.

How does the collateral source rule work? The rule prohibits defendants from introducing evidence that a victim has already been compensated for an injury from a third party. There are two primary functions of the rule. The first is evidentiary and the second is subjective.

Evidence of Payment Prohibited

The first function of the collateral source rule is evidentiary. This simply means that the rule implicates the rules of evidence in a case. Specifically, defendants in a personal injury matter are prohibited from introducing evidence if it is used to show that a victim has already been paid for an injury.

Example: Joe is injured in a car accident and is forced to miss time at work. He qualifies for workers compensation benefits and begins to receive them. He files a personal injury lawsuit against Mary, who is responsible for causing the accident. He requests damages for lost wages. mary knows that he is receiving benefits to offset those costs. However, she cannot introduce evidence to show that he is getting paid. The collateral rule prohibits this.

Victim Damages May Not Be Reduced

The second function of the collateral source rule is substantive. Substantive issues have to do with rights and obligations in civil cases. The collateral source rule protects a victim’s right to recover all of the compensation they need after an accident. As a result, the rule prohibits a victim’s damages from being reduced simply because they have received compensation from someone other than the defendant.

Why is it important to prohibit a defendant from introducing evidence of payment from a third party? It helps to ensure that a negligent party is held responsible for their harmful actions.

Exceptions to the Collateral Source Rule

There are two main exceptions to the collateral source rules. Both have to do with medical malpractice cases. Evidence of payment or benefits from a third party may be introduced if you have been injured because of medical malpractice, but:

  1. Have received insurance benefits to cover billed medical costs.
  2. Are the recipient of reduced medical fees.

Why do these two exceptions exist? There can be huge discrepancies between how medical services are billed and what they actually cost. It is important to make sure that you consult with an attorney if you have been injured because of medical malpractice. You can be sure that the hospital or provider will try to introduce any evidence of payment from a third party. This can really hurt your chances of getting the money you need.

Are you struggling with a painful injury after a Los Angeles accident? Do you want to learn about your legal rights and options? Call our Los Angeles personal injury lawyers today to schedule a free consultation.

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