lawyer explaining the collateral source rule to clients

What Is the Collateral Source Rule and How Does It Affect Your Personal Injury Claim?

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By Yosi Yahoudai
Founder and Managing Partner

Accidents can cause injuries that keep you out of work and result in costly medical treatment. The victim might experience overwhelming financial burdens. 

If someone caused your accident or injury, you might receive compensation for your damages. A Los Angeles personal injury lawyer can help you file a claim against the party who caused your injury.

However, you might also have insurance that covers some of your expenses. Your insurance might be a quicker source of money to pay expenses. In California, the collateral source rule protects your right to receive money for damages caused by another party. You have the right to sue a party for causing you harm, even if you have insurance to pay for some of the damages. 

What Is the Collateral Source Rule for California Personal Injury Claims?

The collateral source rule prevents a defendant in a personal injury lawsuit from bringing up the fact that a private insurance carrier or other party paid you for damages arising from claims in the lawsuit. The rule prevents an at-fault party from avoiding liability for damages because you had the forethought to protect yourself by purchasing private insurance or receiving money from a third party. 

For example, suppose you have an insurance policy that pays your medical bills from a car accident. You filed a lawsuit against the driver who caused the accident. The collateral source rule prevents the defendant from submitting evidence that your medical bills were covered by insurance. 

Likewise, the collateral source rule also prevents the defendant from trying to reduce the value of your claim because you received money from a third party. In other words, the defendant is liable for all injuries and damages you sustain due to the defendant’s conduct.

Exceptions to the Collateral Source Rule in California 

There are two exceptions to the collateral source rule for personal injury cases in California:

Medical Malpractice Claims 

The defendant in a medical malpractice claim can present evidence of compensation by third parties. California law says a defendant in a case based on negligence by a healthcare provider can introduce evidence that the plaintiff received money connected to the injury. However, the plaintiff can then present evidence of any money the plaintiff paid to obtain the coverage, such as monthly insurance premiums.

Reduced Fees for Medical Services 

A defendant can present evidence showing that medical treatment costs were reduced. Therefore, the plaintiff would not be entitled to the total cost of the medical treatment the provider might typically bill. The plaintiff can only receive compensation for the actual amount paid for the medical bill.

For example, many insurance companies have agreements with medical providers to reduce fees billed to the insurance company. Another example would be a medical provider providing a discount to a patient that does not have health insurance coverage. 

Schedule a Free Consultation With Our Los Angeles Personal Injury Attorneys

At Javaheri & Yahoudai, our legal team diligently works to recover the maximum compensation for your personal injury claim. Contact us today to schedule a free case evaluation with an experienced Los Angeles personal injury attorney. We want to help you get the money you deserve after someone causes you injury.

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About the Author
Yosi Yahoudai is a founder and the managing partner of J&Y. His practice is comprised primarily of cases involving automobile and motorcycle accidents, but he also represents people in premises liability lawsuits, including suits alleging dangerous conditions of public property, third-party criminal conduct, and intentional torts. He also has expertise in cases involving product defects, dog bites, elder abuse, and sexual assault. He earned his Bachelor of Arts from the University of California and is admitted to practice in all California State Courts, and the United States District Court for the Southern District of California. If you have any questions about this article, you can contact Yosi by clicking here.