Let’s say you were injured in a car wreck. As a result of your injuries, you have back surgery before the lawsuit settles. If you have health insurance, that surgery may be paid for by your health insurer. However, your health insurance company pays only part of the bill; they pay some agreed-upon amount with the medical provider. The collateral source rule allows the injured person to argue for the amount paid for the surgery plus 40% of the difference of the billed amount. An example is shown below:
- Joe is injured in a car wreck, has health insurance, and undergoes a $100,000 back surgery by ABC Back Drs.
- His health insurance pays $20,000 of the $100,000 billed by ABC Back Drs. Joe doesn’t owe the difference ($80,000) to ABC Drs. because they have a contract with his health insurance to accept that amount.
- Joe can argue he is owed $20,000 plus 40% of the amount not paid (40% times $80,000 = $32,000) by the party that injured him. Therefore Joe could collect $52,000 for his medical expenses.
The case below shows how the Collateral Source Rule concepts apply to Workers’ Compensation benefits.
Mr. EJ Howard was injured while driving a company car down the Evangeline Thruway in Lafayette Parish, Louisiana. Howard was on the job when he was involved in the wreck. Because he was on the job at the time of the accident, his employer’s workers’ compensation insurer covered some of his medical bills. They also covered some of his recovery time after surgery, but the bills were still accumulating. Wanting to be made whole for his damages, Howard filed a lawsuit against the negligent driver (Marcus Slaughter), Slaughter’s employer, and their insurance company in Lafayette.
Slaughter was found solely at fault for the accident. Howard won the lawsuit, but the trial court denied him an award for all his medical expenses. The Court did so because it thought those expenses were covered by his workers’ compensation benefits paid by his employer’s insurer. Howard didn’t think the court’s ruling was correct, so he appealed. He appealed his case to the First Circuit Court of Appeals on the theory that his claim for medical expenses could not be denied based on the “Collateral Source Rule.”
Fundamentally, the collateral source rule provides independent sources of compensation (such as workers’ compensation benefits) cannot be used to reduce the damages owed to the injured party by the injuring party. The driver who struck Howard cannot escape responsibility for his actions because Howard’s employer-provided workman’s compensation benefits. The collateral source rule is enshrined in Louisiana Revise Statute 23:1101A and provides that a recipient of workers’ compensation benefits is not prohibited from recovering from a third party who is otherwise liable for the injury caused to the recipient.
The Supreme Court of Louisiana stated that the primary policy reason to apply to collateral source rule is tort deterrence, but the court also considers whether the victim paid for the collateral source (workers’ compensation benefits are not deducted from workers’ pay) or if receiving the collateral source would not award the injured party a double recovery or windfall (award more than should be owed to the injured party). Cutsinger v. Redfern, 12 So.3d 945 (La. 2009). The court found that tort deterrence is the primary goal in enforcing the collateral source doctrine, even if the injured party does not pay for that collateral source.
Tort deterrence is when a government imposes laws and awards judgments to encourage drivers to drive carefully and avoid accidents. Louisiana courts consider how the injured party got the collateral source (workers’ compensation benefits), but they have and often rule primarily on the question of does awarding monetary damages to the injured party make them whole and is the injuring party deterred from committing the injuring act, such as driving ignorantly? In this case, Howard did not get a double recovery, even though he did not pay for the workers’ compensation benefits. The Court of Appeals reversed the lower court’s decision and awarded Howard medical expenses, lost wages, and general damages already awarded.
What does this mean for people like Howard? Howard’s collateral source was workers’ compensation benefits, but this could also be health insurance or other financial resources. Occasionally, that insurer could sue in place of Howard, which means that Howard might be prohibited from suing for recovery from the injured party. Howard and the opposing party were driving in their company vehicles while on the clock; not all cars and drivers have robust insurance policies from which an innocent injured party could recover damages. Medical bills pile up after any severe auto accident, and workers’ compensation is not always the end of the road to recovery. A skilled lawyer will help guide you through these tough laws and facts.
Additional Sources: Howard v. Nat’l Union Fire Insurance Co
By: Ethan W. Seitz
Additional Berniard Law Firm articles: on the Collateral Source Rule: Evidence of Health Insurance Write-Offs Should Not Be Excluded at Trial