If you have been injured in an accident (that was caused by the negligent or wrongful actions of another party), then you may be entitled to significant damages. Importantly, however, many injured plaintiffs have access to some form of third-party reimbursement. For example, if you are injured in a car accident, then you may not actually pay any of your medical expenses out of pocket if you have comprehensive health insurance coverage.
How does reimbursement affect your damage recovery in a lawsuit?
In Alabama, and in most other states, the common law “collateral source rule” made evidence of any third-party reimbursement — such as health insurance, disability insurance, and property insurance — inadmissible as evidence in litigation. Such evidence was traditionally deemed irrelevant and potentially confusing to the jury.
This had an enormous, positive influence on damages recovery for injured plaintiffs who were otherwise reimbursed for their losses. Generally speaking, one’s billed losses are much higher than the actual losses. For example, you may be charged $100,000 for medical treatment, but have the entire amount reimbursed due to health insurance coverage — in the end, your insurer may have only paid $25,000 to the hospital (after negotiating the cost down). According to the common law collateral source rule, however, you would be entitled to claim $100,000 in medical expenses damages, and the defendant could not introduce evidence of the reimbursement to counter your claim.
With regard to all civil actions (including personal injury and medical malpractice), the law was changed in 1987. The enactment of section 12-21-45 of the Alabama Code removed many of the automatic protections granted by the collateral source rule and made it more difficult for plaintiffs to recover maximum compensation for their injuries.
What section 12-21-45 did was essentially allow evidence of third-party reimbursement to be admitted into evidence. Juries may be confused, but the statute is an expression of the legislature’s intent to allow juries to make the determination of whether the damages are fair given the circumstances.
In 1996, the Alabama Supreme Court ruled that the abrogation of the common law collateral source rule as expounded by section 12-21-45 was unconstitutional and therefore illegal, but then in 2000, the same court overturned their earlier decision and decided that the statute could continue to apply (thus limiting the application of the collateral source rule).
Essentially, the Court found that by allowing third-party reimbursement evidence to be admissible, but not providing any guidance on how such evidence will necessarily affect the damages recovery of the plaintiff, the statute gives juries substantial discretion to determine how to divide damages to prevent a financial windfall.
There is a fundamental conflict in the collateral source rule that must play out in front of a jury now: whether the plaintiff should receive a financial windfall, or whether the defendant should receive a financial windfall. If the plaintiff’s damages are not reduced by their receipt of reimbursement, that might be considered a windfall. On the other hand, if plaintiff was forward-thinking enough to obtain sufficient insurance coverage ahead of the accident, then that should be rewarded — further, the defendant may be able to escape having to pay a high amount of damages, thus limiting their liability unfairly.
Here at Cross & Smith, our attorneys boast decades of experience handling a wide range of Alabama injury disputes, from car accident claims to product liability lawsuits, and more. We believe that effective legal advocacy involves client-oriented advocacy, and to that end, we work closely with our clients to ensure that our case strategy is specific to their particular needs and preferences.
Our approach to litigation has served us well over the years. We have secured well over $100 million (in total) on behalf of our injured clients, through negotiated settlements and favorable case verdicts. This consistent track record of success gives us a competitive advantage during early negotiations, as defendants understand that we are capable of obtaining maximum compensation for our clients.
Call (205) 391-9557 or submit an online claim form today to schedule a free and confidential consultation with an experienced Tuscaloosa injury attorney at Cross & Smith. We look forward to assisting you with your claims.