Judge Vance issued an Order yesterday regarding collateral source. What is the collateral source rule? Well, for years, Alabama had this rule in effect. It basically said that if John Doe is in a car crash with Mary Smith and John Doe was at fault, John Doe could not tell the jury that Mary Smith had health insurance to cover her medial bills. Mary Smith would tell the jury that her total medical bills were $10,000.00 (or whatever they are), and the jury would decide how much John Doe owed Mary Smith in compensation. At that point, Mary Smith would have to pay back her health insurance carrier out of her recovery.
Several years ago, the Supreme Court of Alabama abolished the collateral source rule, and this has created a mess as well as an unfair advantage to wrongdoers and insurance companies. Now, if Mary Smith tells the jury that her bills were $10,000.00, she looks like a liar because John Doe will tell the jury that Mary Smith had BlueCross BlueShield (BCBS) and that BCBS only paid $5,000.00 for the bill. The jury sits there wondering why Mary Smith is wasting their time when her medical bills have been paid, and they think she wants something for nothing, i.e.: she is trying to play the "litigation lottery" and profit off of the collision. This is what the insurance companies want. This is tort reform!
Judge Vance has seen through all this and written a very good Order to address this issue. Someone is going to get a windfall regardless of whether there is a collateral source rule in effect or not. The question is, "Who gets the windfall?" Should the wrongdoer be rewarded for his conduct, or should the victim be rewarded for her injuries? For example, let’s assume the old rule is in effect, and Mary Smith can tell the jury that her bills were $10,000.00, and the jury awards a $30,000.00 verdict. Mary Smith will have to pay her attorney 1/3 plus his expenses, and she will have to pay back BCBS about $3,000.00 (assuming BCBS only paid $5,000.00 for the $10,000.00 bill based upon their contract with the providers). Additionally, Mary Smith probably had several co-pays or deductibles and other damages such as lost wages and pain and suffering. In that situation, Mary Smith will net approximately $15,000.00 or so for her time, trouble, inconvenience, lost wages, and pain.
Now, what if the collateral source rule were abolished. The jury would know that BCBS paid $5,000.00 for the medical bills, and they would likely render a verdict in the range of $5,000.00 to $15,000.00. Let’s say it’s $15,000.00. The attorney would receive 1/3 plus expenses. BCBS would receive approximately $3,000.00. Mary Smith would walk away with approximately $5,000-$6,000.00. Significantly less. The attorney clearly gets less as well, but too much is made of what the attorney gets or doesn’t get. Shouldn’t we concern ourselves with the victims, not the attorneys? The attorneys are just getting paid for doing a job.
So, the victims and the attorneys lose when the collateral source rule is not in effect, and the insurance companies lose when it is in effect. This rule was sufficient for 100 years or so, but now it’s not because insurance companies want to save money.
Let’s look at one last example. What if the collateral source rule is not in effect and the injured party has no health insurance? In that case, Mary Smith can tell the jury that her medical bills are $10,000.00, and the jury is likely to award the $30,000.00 verdict. Why should the verdict change based upon whether or not Mary Smith has health insurance? Should the windfall go to the injured victim or to the wrongdoer and his insurance company? Our laws always protected the victim, but now, they seem to lean toward the insurance companies.
Fortunately, Judge Vance sees it the other way. Let’s hope his ruling stands. Insurance companies have the funds. Injured victims usually don’t. For a copy of Judge Vance’s Order, e-mail Jon Lewis at firstname.lastname@example.org.