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What is the Collateral Source Rule in Personal Injury Cases?

Updated: Sep 28

Introduction


The purpose of civil compensatory damages is to “make the victim whole.” But what if the victim is able to recover more than his out-of-pocket special damages because he has a third party to pay for his medical care?

That issue was at the crux of the Louisiana Supreme Court’s seminal decision in Bozeman v. State, 03-1016 (La. 07/02/04); 879 So.2d 692, in which the court upheld the Louisiana Second Circuit Court of Appeal’s holding that the victim was not allowed to recover the “write-off” amount between what the healthcare provider charged for its

services and what her insurer, Medicaid, paid for those services because the victim did not part with any of her patrimony to receive the Medicaid benefits. Bozeman at 705.


But what if the victim did pay for health insurance? Would the plaintiff be able to recover the difference between what the healthcare provider charged and what it was paid by Medicare or a private insurer such a Blue Cross? Bozeman declares that the victim is entitled to the “benefit of the bargain” and may reap the harvest which results from

having health insurance. Id. at 706.


What about VA Benefits?


While Bozeman makes it clear that the plaintiff insured by Medicaid cannot recover the write-off amount from healthcare providers, what about the plaintiff whose medical care is provided by the Veterans Administration, for which the plaintiff does not pay a monetary premium?


In Smith v. Roy O. Martin Lumber Co., 03-1441 (La. App. 3 Cir. 04/14/04); 871 So.2d 661, the plaintiff filed a disputed worker’s compensation claim. While the claim was pending, he underwent back surgery at the Veterans Administration (VA) hospital for the work-

related injury. The plaintiff was never charged for the surgery. The VA did not intervene in the claim, nor did it informally request reimbursement for the surgery from the worker’s comp claim proceeds.

The Third Circuit Court of Appeal affirmed the trial court’s ruling that the injured worker was entitled to the costs associated with his back surgery at the VA because he had a “natural obligation” to pay the VA.


In the same vein as Smith, courts have concluded that a plaintiff, not the tortfeasor, should be allowed the benefit of healthcare services received from sources for which he did not pay.


The following is a list of other types of cases in which the collateral source rule has been applied to the benefit of the injured party:


1. Medicare payments - Womack v. Traveler's Insurance Co., 258 So. 2d 562 (La. App. 1st Cir., 1972).

2. Sick leave and annual leave payments - Dunlap v. Armendariz, 265 So. 2d 352 (La. App. 4th Cir., 1972).

3. Retirement pension payments - Adam v. Schultz, 250 So. 2d 811 (La. App. 4th Cir., 1971).

4. Free medical services rendered as a professional courtesy - Spizer v. Dixie Brewing Co., 210 So. 2d 528 (La .App. 4th Cir., 1968).

5. Federal Social Security Benefits - Doerle v. State, 147 So. 2d 776 (La. App. 3rd Cir., 1962).

6. Insurance paid for by the employer for the employee as a result of a collective bargaining agreement in a F.E.L.A. case - Hall v. Minnesota Transfer Ry. Co., 322 F. Supp. 92 (D. Minn., 1971).

7. Suits brought under the Jones Act and Longshoremen's and Harbor Worker's Compensation Act - Tipton v. Socony Mobil Oil Co., 375 U.S. 34, 85 S. Ct. 1, 11 L. Ed. 2d 4 (1963). 

Bozeman v. State, 03-1016 (La. 07/02/04); 879 So.2d 692, 698-699.


Is evidence of payment by a collateral source admissible in court?


In Fuselier v. Everest Nat'l Ins. Co., 2021 U.S. Dist. LEXIS 139121 (W.D. La. July 26, 2021) the plaintiff filed a motion in limine to preclude the defense from introducing into evidence the fact that his past, present and future medical bills were paid by his worker’s compensation insurance and that he was receiving an insurance-negotiated reduction on those bills. The trial court ruled for the plaintiff and granted the motion as to his future medical bills, as well as past medical bills paid by health insurance or plaintiff’s counsel; however, the “write off” amount was not admissible.


Worker’s Compensation


In Simmons v. Cornerstone Invs., LLC, 2018-0735 (La. 05/08/19); 282 So. 3d 199, the Court held that, as plaintiff’s patrimony was not diminished because he did not pay for the worker’s compensation insurance, he could not recover the “write-off” amount.


Attorney Payments for Medical Treatment


In Hoffman v. 21st Century N. Am. Ins. Co., 2014-2279 (La. 10/02/15); 209 So. 3d 702 the Louisiana Supreme Court held that the collateral source rule did not apply to attorney-negotiated write-offs or discounts for medical expenses obtained as a product of the litigation process. Hoffman at 706.


The plaintiff in Hoffman was awarded $2,478.00 in special (out-of-pocket) damages arising out of injuries sustained in an auto accident.


He appealed, arguing that he should have received $4,528.00 in medical specials because that is how much he was charged by his healthcare providers.


As evidence of his out-of-pocket damages, the plaintiff introduced into evidence a $3,000 statement from an imaging center which indicated he had been charged $1,500 each for two (2) MRIs; however, the defense introduced a statement from the imaging center which showed an “ATT W/O” of $1,025.00 for each study. Hoffman at 704.


The plaintiff argued that, under the collateral source rule, he was entitled to the amount written off in accordance with his attorney’s negotiated discount with the provider. Id.

In ruling in favor of the defense, and denying the plaintiff’s request to receive the written off amount, the Supreme Court focused on the fact that the plaintiff had not lost any of his patrimony to receive the benefit; in fact, he was not even aware of the arrangement between his attorney and the imaging center. Hoffman at 706.


Conclusion


The collateral source rule is a mechanism by which a plaintiff is allowed to benefit from the fact that he has insurance for his accident-related injuries; however, he must pay for that insurance with some part of his patrimony. If the insurance has not been earned by the plaintiff, such as Medicaid, worker’s compensation insurance or an attorney-negotiated discount, then the collateral source rule does not apply and the plaintiff is only able to recover the actual amounts paid for healthcare necessitated by the acts of the tort-feasor.


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Gaynell Williams LLC Attorney at Law offers a free initial consultation to discuss your case. The first consultation can be in person or it can be virtual, on the Internet. Call Gaynell Williams today at (504) 302-2462 for a free consultation as soon as possible. We will work around your schedule. New Orleans lawyers Gaynell Williams LLC Attorney at Law have offices in Gretna and Downtown New Orleans by appointment only.


This information has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorney in connection with any specific situation under Louisiana law and the applicable state or local laws that may impose additional obligations on you.


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