In virtually every personal injury case, the plaintiff suffers injuries that require medical treatment. If the plaintiff is fortunate enough to have medical insurance, a portion of his or her medical expenses will likely be covered by that insurance. When a personal injury settlement is reached, or when the plaintiff receives a favorable judgment at trial, what effect do these covered expenses have on the injured person's compensation? Let's look at some of the factors that could come into play.
Consider Premiums and Deductibles
It's important to keep in mind that the benefit of having medical expenses covered by insurance coverage is at least partially offset by the cost to the plaintiff of procuring and maintaining the insurance. It is indeed the unusual case where a plaintiff's medical bills are paid 100% by his/her insurance company after the cost of premiums and deductibles is figured in.
Let's consider the case of Plaintiff Doe, who incurred $20,000 in medical and hospital bills as a result of the injuries he suffered in a car accident. His insurance policy, which costs him $400 per month, has a deductible amount of $5,000 and pays 80% of all allowable charges. So, for the year in which the accident occurred and during which treatment was received, Plaintiff Doe incurred medical bills and premium payments of $24,800 while his insurance company paid a total of only $12,000 to his medical providers, leaving him with a net bill for $12,800. The question then becomes: Can Plaintiff Doe recover the full amount of his $20,000 in medical bills, only the lesser amount of his actual net out-of-pocket expenses, or some other amount? The answer is "it depends."
What is the "Collateral Source Rule"?
The biggest variable in determining if Plaintiff Doe can recover damages for his medical expenses paid by his insurance company is whether the law of the state where the personal injury lawsuit is brought follows what is known as the "collateral source rule."
The "collateral source rule" provides that payments received by an injured party from an independent (or collateral) source -- such as an insurance company (or workers compensation, Social Security or Medicaid) -- do not reduce the amount for which the defendant is financially responsible.
This rule also prohibits the defendant from introducing evidence of these collateral source payments. In states where a "collateral source rule" exists, the plaintiff in our example above can recover the amount of all of his provable medical expenses regardless of whether some or all of them have been paid by a third party.
Medical Liens on Your Settlement/Judgment
Before you begin to question whether this rule gives a windfall to a plaintiff whose medical bills have been largely paid by someone else, consider the fact that in most situations, insurance companies, workers compensation carriers, Social Security and Medicaid will place a lien on any recovery the plaintiff receives in a personal injury lawsuit, for the full amount of medical benefits for which payment was previously made.
For example, if Plaintiff Doe's insurance company paid $12,000 of his $20,000 in medical expenses, its lien would be for $12,000 and it would be entitled to receive that sum from the proceeds of Plaintiff Doe's settlement or judgment. As a result of the enforcement of such a lien, Plaintiff Doe does not in fact receive a windfall from the award of the full amount of his medical expenses.
If suit is brought in a state that does not have a collateral source rule, evidence of the plaintiff's receipt of payment from, or reimbursement by, a third party is admissible in court and the jury will be instructed to reduce any award of medical expenses by the payment or reimbursement amount. When this reduction occurs, the plaintiff is not being awarded damages against which an insurer's lien can be enforced, so ultimately the plaintiff will end up with essentially the same net amount of damages as he/she would receive in a state having a "collateral source rule."
Bottom line: When you pursue a claim for medical expenses in a personal injury case, you are unlikely to receive a windfall, or "double recovery", by virtue of the prior payment of these expenses by an insurer or other third party given the way providers' liens and state laws operate. Learn more: What If There are Liens on My Personal Injury Case?
But liens aside, remember that in many ways, the nature and amount of your medical bills validates the seriousness of your injuries and sets the bar for establishing your damages.