The Collateral Source Rule in Marylan
Maryland has a collateral source rule. This means that when you are injured in an accident, you have the right to recover the full value of the cost of treatment and your other economic losses, even to the extent that those values exceed your out-of-pocket costs. Juries are instructed that they are not to reduce an award for past and future medical expenses and loss of earnings because they believe the plaintiff has or will receive reimbursement or payment from another source, such as a health insurance policy or paid sick days from an employer.
The collateral source rule is based on two main policy objectives. First, the tortfeasor should not obtain a windfall because the victim maintains an insurance policy and second it encourages people to maintain insurance policies. The rule often comes up in the context of an automobile accident or other personal injury case. Generally, there will be some type of collateral source that cover all or part of the medical expenses for an injured party. This might be health insurance or a Personal Injury Protection (PIP) policy. With PIP, the plaintiff does not have to reimburse the carrier for monies paid out to cover medical bills.
A health insurance policy is contractual and generally the insurer will have a lien on the settlement of a plaintiff’s case. With health insurance, there is usually a negotiated rate between the provider and the insurance company. This means whereas if you are paying out of pocket a specific medical procedure might cost you $1,500, the hospital only charges the insurance company $600. The patient may pay only a $10deductible. In making a claim against the defendant, the patient is entitled to be reimbursed the full $1,500, that is the retail cost of the procedure. The insurance company may have a lien for the $600 they paid the hospital, which means essentially that $900 goes into the plaintiff’s pocket.
There are some exceptions to the collateral source rule. For instance, evidence of a collateral source payment may be introduced where the plaintiff claims, falsely, that bills from an accident left them impoverished. There, evidence of a collateral source payment may be admissible for impeachment purposes. It seems, however, that the plaintiff could avoid these pitfalls by simply being truthful about their circumstances. In medical malpractice cases, a plaintiff may recover economic damages only for the amount paid for medical expenses, as opposed to the market value of those services rendered.
The collateral source rule is nothing new. It has existed in Maryland since 1899. The rules prohibits a defendant from introducing evidence at trial that the plaintiff has received or will receive or be entitled to receive compensation from sources other than the defendant to pay for medical bills and loss of earnings. The rule prohibits the fact-finder from considering payments by health insurance and by Medicaid or Medicare. The collateral source rule functions both as an evidentiary rule and as a substantive rule of law.
In some cases, as a result of the rule, plaintiffs may actually recover twice for their damages, such as lost wages or medical expenses. Some argue that that the collateral source rule provides important social policy by ensuring that tortfeasors pay for the losses that result from their actions.
If you are negotiating your own personal injury case (a really bad idea), then you can be certain that some adjusters will try to discount the value of your claim based on payment from collateral sources. This may result in a settlement offer that is significantly less than you would expect if you are represented by a competent attorney.
This article is intended to provide general information only and is not legal advice. If you have specific questions about your situation, you should seek the advice of an attorney.
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