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Collateral Source Rule

Collateral Source Rule

The Collateral Source Rule: An Overview

The collateral source rule is a law in state wards that forestalls the reduction of damages awarded to an offended party for injury, illness, or disability by the amount previously recovered from an outsider like an insurer.

The rule shifts by state yet generally commands that damages awarded to an offended party in court can't be decreased by any amount that is paid from different sources, including health care coverage and [workers' compensation](/laborers compensation), that cover the damages.

How the Collateral Source Rule Works

In many states, the collateral source rule forestalls evidence that the offended party is getting compensation for wounds from different sources, like insurance, from being admitted in court. Different states permit such evidence at times, for example, real injury suits, yet not in that frame of mind, as medical malpractice.

This doctrine has been challenged in recent years by the people who contend that casualties ought not be able to sue tortfeasors for damages that have been repaid from another source. Those sources can incorporate health care coverage or property insurance, laborers' compensation, Social Security disability benefits, or life insurance.

Tort reform advocates go against the collateral source rule, contending that it energizes credible claims by dangling the prospect of double compensation.

Contingent upon state insurance laws, an insurer might reserve the option to pursue subrogation to get reimbursement for claims paid to a policyholder. For instance, assuming that a health care coverage policyholder is harmed in an accident and the insurer pays $20,000 to cover the medical bills, the insurer might sue to collect that $20,000 from the to blame party or that party's insurer.

Advantages and disadvantages of the Collateral Source Rule

The collateral source rule is one of the laws that has gone under examination from promoters of tort reform.

Pundits of the rule contend that it isn't reasonable to award a few offended parties double the amount of damages for an injury and that it energizes credible legal claims.

Advocates of the collateral source rule contend that a respondent in a suit for damages shouldn't escape the outcomes of negligence or malpractice just in light of the fact that the damages were covered by the offended party's insurer or by government benefits. They keep up with that the litigant's flippant behavior ought not be compensated in light of the fact that the offended party acted capably by getting insurance.

They additionally contend that the collateral source rule urges consumers to acquire insurance with the information that they are certain of reimbursement from one or the two sources.

Several states have acted to debilitate the collateral source rule or limit its appropriateness to certain types of cases.

Some insurance companies have added a subrogation clause to their contracts. This really requires an effective offended party to repay the company by the amount awarded for damages that were covered by the policy.


  • The collateral source rule keeps a monetary award from being diminished in the event that the costs are covered by another source.
  • The rule might forbid evidence of such payments from being introduced in court.
  • Each U.S. state has a collateral source rule and their subtleties fluctuate.