The Collateral Source Rule, Explained
The collateral source rule governs whether insurance, Medicare, Medicaid, or other third-party payments offset a defendant's liability for damages. Some jurisdictions preserve the traditional rule (no offset); others have modified or abrogated it by statute.
The traditional rule
Under the traditional rule, a tortfeasor does not benefit from payments the plaintiff received from collateral sources such as insurance (Restatement (Second) of Torts sec. 920A). Damages are calculated without offsetting those payments.
Modifications and exceptions
Many jurisdictions have modified or abrogated the rule by statute, permitting or requiring offsets for specific types of collateral payments. The specifics vary widely by state and by category of payment.
Medicare, Medicaid, and liens
Federal and state programs have separate lien and reimbursement statutes (Medicare Secondary Payer Act, state Medicaid liens). These interact with, but are distinct from, the collateral source rule.
Frequently Asked Questions
Does the collateral source rule apply to future damages?
Generally yes, though offsets for anticipated collateral payments are imposed in some jurisdictions. Confirm state-specific rules.
Related
References
- Restatement (Second) of Torts sec. 920A (Am. L. Inst. 1979). law.cornell.eduCase Law
- Medicare Secondary Payer provisions, Social Security Act, United States Code (2018). law.cornell.eduCase Law
- Centers for Medicare & Medicaid Services. (n.d.). Medicare secondary payer. U.S. Department of Health and Human Services. cms.govGovernment
Recommended next step
Discuss how this applies to your case
KWVRS provides independent, objective analysis for plaintiff and defense counsel nationwide. Tell us about the matter and we will scope the appropriate deliverable, or explore the relevant practice area below.