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Collateral Source Rule Under Attack in Indiana

The Indiana Supreme Court issued a troubling opinion last week in Stanley v. Walker, ruling that the discounted price actually paid for medical care by insurance is admissible as evidence.

Ah, what about the collateral source rule? Well, the Indiana Supreme Court thinks they have us covered. The court says this evidence can only be introduced to the extent that discounted amounts can be introduced without referencing insurance. I dissent.

This is an appeal of an accident case of what was probably a decent verdict: $70,000 on $11,570 in medical bills (does not appear to be a serious injury case, but the opinion is not clear). His medical bills actually received by the health care providers were adjusted by write-offs negotiated by his insurance company, Anthem Blue Cross Blue Shield, to $6,820.

Defendant’s lawyer agreed that he could not ask questions about Plaintiff’s collateral source rule, which, as I understand it, is similar to Maryland’s rule. But the defense lawyer did argue that neither the Plaintiff nor his insurance company was responsible to pay the written-off sum, and accordingly, the write-offs did not constitute an insurance benefit under Indiana’s collateral source statute.

From this creative argument – which I applaud on either side of the v – Defendant’s lawyer contended that he could introduce evidence of reductions as indicia of the actual expenses. Plaintiff’s lawyer’s response – that carried the day below in the trial court and to the Indiana Court of Appeals – was that because collateral source payments were insurance benefits that Plaintiff paid for, they are not admissible. Plaintiff claims that the Defendant should not be the beneficiary of Plaintiff’s bargaining power through the insurance companies because – again this bears repeating – he was the one who paid the insurance premiums for the last 50 years, not the Defendant (okay, I’m making up the 50 year thing – you get the point).

The Indiana Court of Appeals cited Griffin v. Louisiana Sheriff’s Auto Risk Association, 802 So. 2d 691 (La. App. 2001) to underscore Plaintiff’s argument:

This rationale can best be understood by analyzing the write-offs in two situations: one in which a tortfeasor injures an uninsured victim and the other in which the same tortfeasor, in the same manner and to the same extent, injures an insured victim. Unless the write-offs are considered collateral sources, the tortfeasor would be relieved of his liability to the insured victim to the extent of the amount of the write-offs. The argument that there is no underlying obligation for plaintiff to pay the amount of the write-offs and, therefore, the plaintiff should not be allowed to benefit from a non-existent debt, fa[i]ls because the effect of this reasoning results in a diminution of the tortfeasor’s liability vis-à-vis an insured victim when compared with the same tortfeasor’s liability vis-à-vis an uninsured victim.

Another Louisiana case, Bozeman v. Louisiana, 879 So.2d 692 (La. 2004) tightens this analysis further:

If we were to permit a tortfeasor to mitigate damages with payments from plaintiff’s insurance, [the] plaintiff would be in a position inferior to that of having bought no insurance, because his payment of premiums would have earned no benefit. [The defendant] should not be able to avoid payment of full compensation for the injury inflicted merely because the victim has had the foresight to provide himself with insurance.

The Indiana Supreme Court disagreed, relying on the fact that under the current system we have in this country, a doctor’s medical bills do not equate to cost. But this makes every medical bill unreasonable on some level. Should the law be that you cannot introduce medical bills because the whole system is screwed up? I just don’t think it makes any sense.


Look, I think the Defendant has every right to claim the medical bills are excessive. They certainly are in some cases and “the doctor overcharged” has to be fair game in every case. Bring a witness, lay a foundation for the fair value, and let the jury decide the value of the medical services. But just tossing up a document and saying “Hey, this is what we think the medical bills are” without laying a foundation for the numbers seems just ridiculous.

The other reason why this is a bad idea: more juror confusion. Juries are not told about whether the Defendant has insurance, whether the Plaintiff has health insurance, whether there are caps on damages, what the police report said and a whole host of other things that leaves them thinking the lawyers on both sides did not present all of the evidence. Does it help this problem to give them numbers suggested as the fair value of medical services without being able to tell them where the numbers are coming from?

Justice Brent E. Dickson writes a long dissent underscoring the logic articulated in this blog post plus a number of other theories why this is bad law that does not honor the letter or the spirit of the collateral source rule statute that I never would have thought of on my own. It is worth reading.

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  • Alabama Clerk

    Alabama has gone even further with this. Multiple laws have been passed abolishing the collateral source rule in regards to medical or hospital expenses. Juries are allowed, at their own discretion in each case, to determine whether an insurance company “truly” has any subrogation rights. This generally has resulted in verdicts for the plaintiff in amounts slightly higher than the total amount of co-pays and prescriptions.

    The Alabama Supreme Court got it right at first, declaring these laws unconstitutional for violations of due process and equal protection clauses. This only lasted a few years, until a newly elected supreme court surfaced.

    At least Indiana gives us a little company in our misery