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Tennessee Supreme Court Reaffirms “Collateral Source Rule” in Personal Injury Cases


If you are in a car accident and the other driver is later determined to be negligent, does the fact you have health insurance reduce the amount of damages you can receive for your injuries? The answer to this is basically “no.” A defendant cannot escape liability by simply because a third party may have already made payments to indemnify the plaintiff.

This principle is known as the “collateral source rule.” It has been a feature of American personal injury law dating back to the 19th century. The name itself comes from an 1871 decision by Vermont’s Supreme Court, which said “insurance is collateral to the remedy against the defendant and was procured solely by the plaintiff at his expense, and to the procurement of which the defendant was in no way contributory.” While the insurer might be entitled to reimbursement from the proceeds of a plaintiff’s final personal injury judgment, that does not alter the defendant’s responsibility to compensate the plaintiff for the full measure of any damages incurred.

Accident Victims Can Use Non-discounted Medical Bills as Proof of Damages

In recent years there have been attacks on the collateral source rule in the context of medical expenses. As anyone who has ever been to the hospital knows, medical pricing practices are far from normal. Uninsured patients pay one set of prices, while insured patients benefit from contracts between health care providers and the insurance companies that steeply discount the uninsured patients’ rate. So in a personal injury case, which set of prices does the court use to determine the extent of the plaintiff’s damages?

The Tennessee Supreme Court recently addressed this question. We previously discussed this particular case when it was before the Tennessee Court of Appeals. The underlying lawsuit is rather straightforward. The plaintiff was in a car accident with the defendant. The plaintiff sustained serious injuries and subsequently sued the defendant for negligence.

The plaintiff’s lawsuit contained copies of her medical bills, which indicated charges of approximately $52,000. The defense asked the judge to admit evidence showing the plaintiff’s insurer only paid about $18,000 to satisfy those bills in full. The judge sided with the defense and said the plaintiff’s undiscounted medical bills were not relevant to the determination of her “reasonable” medical expenses.

The complicating factor here was a 2014 decision by the Tennessee Supreme Court that said a hospital could only seek a medical lien against a personal injury judgment for the amount accepted from an insurance company, not the undiscounted price billed to the patient. In the present case, the defense argued the same rule should apply to the patient’s recovery in a personal injury case. The Court of Appeals declined to extend the rule that far, but held the defense could still present the discounted insurance bills to the jury as evidence to rebut the plaintiff’s arguments for medical expenses.

The Supreme Court said, however, that would permanently–and without legal justification–alter the collateral source rule. In a November 17 opinion, the justices emphasized their 2014 decision only applied to cases involving hospital liens, which are governed by a separate statute in Tennessee. Nothing in that ruling affected the common-law collateral source rule in personal injury cases. As a result, the plaintiff can submit her original, full-price medical bills at trial, and the defense may not use the discounted insurance company bills as rebuttal evidence.

Do You Need Help From a Tennessee Car Accident Attorney?

The Supreme Court’s decision reaffirms an important principle of Tennessee personal injury law and ensures plaintiffs may seek full recovery of any damages sustained due to a defendant’s negligence. If you have been injured in a car or truck accident and require legal assistance from a skilled Knoxville personal injury lawyer, contact the offices of Fox, Farley, Willis & Burnette, Attorneys at Law, at 866-862-4855 today.



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