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The Collateral Source Rule

Will Tennesseans Be Penalized for Being Responsible?

Jimmy Chiarella
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If someone gets hurt in Tennessee, and that injury is caused by the negligence or recklessness of somebody else, that person can recover the reasonable value of the medical treatment needed. To make sure this right is available equally to everybody, Tennessee has the Collateral Source Rule, which provides that a jury will consider the reasonable value of the medical service.

The reason health insurance covers many of these medical bills is because you have paid for the coverage. Either you are paying the monthly premium straight out of your pocket, or you are receving health benefits through your employer and making less money at work in order to have it.

Under the Collateral Source Rule, the medical costs considered to compensate you for your injury are the total reasonable value of your medical treatment, not the amount paid by your health insurance. Next year, however, the General Assembly will likely take up legislation to do away with the rule altogether. If it passes, the person who caused your injuries would be able to introduce evidence that an outside (or “collateral”) source, like health insurance, had paid your medical bills. This would be tremendously misleading to a jury trying to decide what fair compensation is.

The effect would greatly reduce the recovery of those with health insurance compared to somebody who had not worked to pay for health insurance. Here’s an example: Sam owns a local hardware store and has paid for his family’s health insurance for years. The other person, Dave, does not work and has no health insurance. Both are hit by a drunk driver and incur $50,000 in medical bills. But because Sam has paid thousands of dollars over the years for health insurance, his medical bills are paid (less deductibles and copays). Dave has no health insurance to pay any of his medical bills. Because Dave could show a jury the full $50,000 in medical bills, his jury will think his case is worth a whole lot more than Sam’s. Therefore, because Sam has worked hard to buy health insurance over the years, he will receive significantly less compensation than Dave for essentially the same injuries. Moreover, Sam’s health insurance company has the legal right to get back the money they paid if Sam recovers anything, so Sam’s recovery will be reduced even more.

The goal of our civil justice system is to hold the wrongdoers who cause harm responsible for the full amount of damages. If the Collateral Source Rule is abandoned, the drunk driver in our example will not be held fully responsible. He will be able to benefit from Sam’s hard work. That is why I encourage all to let your representative know you are against any effort to abandon the Collateral Source Rule in Tennessee.

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