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Jon Lewis
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Alabama Car Accidents – Collateral Source Rule

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In Alabama, the Supreme Court has abolished the collateral source rule. What does this mean? A collateral source is sources of compensation a person might have other than the person who caused the wreck.

For example, if you are in a wreck caused by another individual and you go to the hospital and doctors for treatment, your health insurance carrier is a collateral source. So, if Blue Cross pays the hospital and doctor bills, your bills are paid by your own insurance carrier.

How does this affect your case? Let’s say John Doe runs his vehicle into Mary Smith’s vehicle, and Mary Smith has a broken arm. Mary Smith has Blue Cross insurance and they pay all of her medical bills which total $10,000.00. However, since Blue Cross has contracts with these providers, they really only pay $5,000.00 and the rest vanishes into thin air.

The collateral source rule said that the defendant could not tell the jury that your medical bills were paid by Blue Cross because it’s a collateral source, and the defendant could not have the advantage of using the fact that you were fortunate enough to have such coverage. In that regard, Blue Cross had a claim for subrogation so that you wouldn’t recover twice.

About 6-7 years ago, the Supreme Court of Alabama abolished the collateral source rule, and the defendants can now get that fact into evidence, i.e.: they ask the plaintiff, "Did you have health insurance? Were your bills paid?" When the Plaintiff answers, "Yes," the jury is wondering why the plaintiff has made a claim when there are no bills outstanding (of course there are co-pays and deductibles). This signficantly hurts the plaintiff’s case even thought here also remains a pain and suffering and, potentially, punitive damages.

How does this work? In the case above, the plaintiff no longer tells the jury that her medical bills are $10,000 because the plaintiff will look like a liar when the jury hears that her medical bills were paid by Blue Cross, and she only has to reimburse Blue Cross $5,000 if she wins the case. So, the defendant now gets the benefit of the plaintiff having health insurance even though the defendant caused the wreck. In addtion, the plaintiff cannot tell the jury that the defendant had car insurance – that fact is inadmissible in a court. So, the plaintiff is left telling a jury that the bills were paid by Blue Cross and that she owes Blue Cross $5,000 (only if she wins) along with the amount of the premiums paid for said coverage. That hurts the plaintiff’s case, and why? The plaintiff didn’t cause the collision.

Should the fact that the plaintiff had health insurance matter to the jury? What if you had two people involved in the exact same accident with the exact same injuries, and one of them had health insurance while one didn’t? The one without health insurance would owe her providers $10,000, and the one with health insurance would have no outstanding bills. The jury would decide the case involving the person without health insurance much differently than the person with health insurance. Is that fair? I would argue it is grossly unfair.

This is just a way for insurance companies to confuse juries. The old way was much better. The jury decided the case based upon the medical damages and not what was paid to satisfy the bill, and the health insurer recovered their money regardless.

Judge Vance, in Jefferson County, Alabama, recently issued an order reverting the law back to the institution of the collateral source rule. This issue will certainly make it back to the Supreme Court of Alabama. Let’s hope the Supreme Court cleans up this mess and gives injured plaintiffs a fair shake again.