The collateral source rule is a common law rule that has been applied to personal injury cases to prevent a defendant, also known as a tortfeasor, from introducing evidence to a jury of collateral source payments (such as health insurance) that could reduce the defendant’s liability to an injured party. Its purpose was to hold the defendant liable for the entirety of his or her negligent behavior, rather than benefiting from a collateral source.
Does the Collateral Source Rule Still Exist in Missouri and Kansas?
Within the past few years, the collateral source rule has become a thing of the past, which has worked to reduce a plaintiff’s potential recovery if the plaintiff had the benefit of health insurance. The collateral source has been referred to as a windfall for the plaintiff. Unfortunately, the move away from the collateral source rule seems to have become a windfall for the defendant. In reality, the ones that are really benefitting are the big insurance companies.
The collateral source rule still exists but in a much more limited capacity. Now it only prevents defendants from introducing the source of the collateral payment. For example, a defendant can introduce evidence that out of $15,000 in medical expenses, only $5,000 was paid and the other $10,000 was adjusted or written off. The defendant, however, cannot introduce evidence of whether the plaintiff’s medical expenses were paid by private health insurance, Medicaid, or Medicaid.
What Has Caused the Shift Away From the Collateral Source Rule?
In Missouri, Tort Reform plays a large role in the shift. In 2009, RSMO § 490.715 was modified to partially incorporate and partially do away with the collateral source rule. RSMO § 490.715.5(2) reads:
In determining the value of the medical treatment rendered, there shall be a rebuttable presumption that the dollar amount necessary to satisfy the financial obligation to the health care provider represents the value of the medical treatment rendered. Upon motion of any party, the court may determine, outside the hearing of the jury, the value of the medical treatment rendered based upon additional evidence, including but not limited to:
- The medical bills incurred by a party;
- The amount actually paid for medical treatment rendered to a party;
- The amount or estimate of the amount of medical bills not paid which such party is obligated to pay to any entity in the event of a recovery.
Notwithstanding the foregoing, no evidence of collateral sources shall be made known to the jury in presenting the evidence of the value of the medical treatment rendered.
In other words, plaintiff can submit evidence of the medical bills actually charged by the provider before any payments or adjustments by health care providers, and defendant will present evidence of the bills actually paid. Health insurance companies have contractual agreements with healthcare providers to reduce or adjust their bills, and although plaintiffs typically pay for this benefit, plaintiffs may not be reaping the rewards of their purchase. Both numbers can be presented to the jury, and the jury decides which amount represents plaintiffs’ actual damages.
In Kansas, the Martinez v. Milburn Enterprises, Inc. case cut a hole in the collateral source rule. The Kansas Supreme Court held that a defendant is permitted to present evidence that the injured party’s medical bills were adjusted by a health care provider and the question of “reasonable value” of the medical expenses is a question of fact for the jury. Similar to Missouri, it has become a rebuttable presumption where both parties can put on evidence of the medical bills charged versus paid and the jury makes the ultimate decision.
How Has the Shift Away From the Collateral Source Rule Had on Settlement Negotiations?
Since most cases do not go to trial, but rather settle through negotiations, this is the important question. The answer is the shift has worked to an injured plaintiff’s detriment, because now insurance companies will make low-ball offers to injury victims who have the benefit of health insurance. The insurance companies feel comfortable taking their chances at trial that a jury will reduce a plaintiff’s compensation because an injury victim’s health insurance paid a portion of their bills and the rest of the bills were adjusted away, so the plaintiff has been made whole with the smaller amount. This has rendered health insurance a double edged sword.
If you are the victim of a Kansas City auto accident caused by someone else’s negligence, you would not want to be without health insurance because otherwise you may not be able to afford treatment, and the negligent party’s insurance company does not pay bills as they accrue. The insurance company does not pay a dime until the injured party is done treating at which time the insurance company will make a lump sum settlement offer to cover medical expenses incurred, wage loss and pain and suffering. If a plaintiff’s injuries are catastrophic and require 1-2 years of treatment, the injured party may be stuck with significant medical bills. The injured party needs the health insurance to treat, but the health insurance adjustments are also benefitting the defendant’s insurance company by reducing the plaintiff’s potential recovery.
If you have been seriously injured in a Missouri or Kansas auto accident due to someone else’s negligence, don’t hesitate to contact the experienced Kansas City car accident attorneys at Castle Law Office for your FREE consultation to see how we can help you get the compensation you deserve for your injuries. Call us at 816-842-7100 now.