What is the Collateral Source Rule?
The collateral source rule (also known as the collateral source doctrine) is a common law rule first established by the Georgia Supreme Court over 150 years ago in the case of Northwest R. Co. v. Smith, 74 Ga. 131 (1885). It holds the principle that when a plaintiff is injured by a defendant’s negligence, any compensation the plaintiff receives from a third party as a result of the plaintiff’s injuries should not decrease the plaintiff’s recovery from the defendant. The purpose is to prevent those who are negligent toward another from profiting from that negligence. Specifically, if a plaintiff suffers medical expenses as a result of the defendant’s negligent conduct, the issue of damages for the plaintiff’s medical expenses is necessarily tied to the plaintiff’s right to pursue those medical expenses. The ability to pursue those medical expenses can come from either health insurance, payments from a collateral source, or a write-off from the original provider. Practically, when there is evidence of collateral source benefits in an amount the jury must take into account in determining damages for medical expenses, the amount of those benefits should not be disclosed to the jury . Instead, the defendant bears the burden of proving by a preponderance of the evidence (a "more likely than not" standard) the amount of those benefits and where they came from. It is then up to the trial judge to hear that evidence outside the presence of the jury and determine whether it can be corroborated and whether it is a collateral source under Georgia law, using the statutory list of the types of collateral sources that are not admissible as evidence. The relevance and application of the collateral source rule is not limited only to cases of medical expenses. For example, if a plaintiff is injured as the result of the defendant’s negligence, and later recovers workers’ compensation benefits against his or her employer for the same injury, that too would be a collateral source from which the plaintiff would not be able to recover from the defendant in the negligent action. After the plaintiff introduces evidence of the workers’ compensation benefits he or she has recovered, the defendant bears the burden of proving by a preponderance of the evidence the amount and existence of those benefits – and the trial judge determines outside the presence of the jury whether those benefits are a collateral source under Georgia law.
Overview of the Collateral Source Rule in Georgia
The collateral source rule has a long and rich history in the common law, tracing back over a century to at least an 1823 decision from our Supreme Court. The rule developed over time in an evolving set of legal realities – in Georgia and beyond – to stand for the premise that a party cannot receive a dollar from here and then be entitled to keep the same dollar from there – to put it in the unvarnished words used by the Georgia Supreme Court itself in an 1835 case.
The basic tenets of the rule are unchanged. Still, the details within different jurisdictions vary widely; and, here, we will focus on how the collateral source rule is applied within the state of Georgia.
Georgia law is clear that evidence of payments from sources other than the litigating party, for which the defendant is not liable, must be excluded from evidence to avoid tainting the jury with outside information they must consider in assessing damages in the case.
E.g., Williams v. Mazur, 344 P.2d 929 (Ga. 1959); see generally O.C.G.A. § 24-4-32 (1982)("[e]vidence of circumstances mitigating damages is not admissible").
As has been explained in various cases up to the present day, the rule is deeply rooted in public policy and provides a great benefit to society as a whole; as one court explained:
The plaintiff — under the application of the rule — is compensated in full for his injuries, but the benefit to society is in the prevention of similar accidents in the future at the hand of those wrongdoers who are no more deserving of any insurance windfall than the plaintiff himself.
Wardlaw v. United States Steel Corp., 228 Ga.App. 735, 492 S.E.2d 859 (Ga. App. 1997).
Of course, the relevant considerations in any case are dictated by the particular facts at issue. But, the bottom line is that Georgia law will not tolerate defendants receiving a double benefit for their own bad acts – and, instead, strives to keep such costs borne by wrongdoers and to provide a full recovery for injured individuals, regardless of whether or not their losses are cushioned by collateral sources.
Exceptions to the Collateral Source Rule in GA
While the collateral source rule is generally well-settled in Georgia, it is not without exceptions and we will explore those here. First, it is clear that Georgia law does allow a reduction in the amount of recovery for "collateral sources" like health insurance or lost wages, which were voluntarily paid or furnished by some party unrelated to the defendant tortfeasor after an accident:
Evidence of payments and expenses which have been made for or on behalf of a person can be introduced to reduce or mitigate damages. Ga. R. Evid. 414; see, e.g., Wiggins v. Willis, 192 Ga.App. 804(2) (386 SE2d 883) (1989) (the collateral source rule does not prohibit the admission into evidence of collateral source payments where those payments are made because of a contract or pre-existing duty between the victim and a third party).
…However, the rule does allow recovery of the entire amount billed at full value where there is no evidence that the victim was ever obligated to pay the full value.
Further, as any personal injury lawyer in Georgia knows, when the amount billed for medical services exceeds the amount actually paid, the reduced amounts paid can also be used to mitigate damages:
The jury may consider the amount paid by the plaintiff’s insurer as the substitute collateral source and may reduce its award by way of such savings to the plaintiff. This is so even when the plaintiff was not contractually obligated to pay the medical expenses his insurance has covered. This is particularly true if the plaintiff never intended to pay the bills and they were, in fact, not paid. (Emphasis added.)
In Myers v. SmithKline Beecham Corp., 617 F.3d 768 (11th Cir., 2010), in an action against a vaccine manufacturer for personal injuries suffered by a minor, the court observed that Georgia law allows trial courts to reduce the medical-plaintiff’s economic damages in two ways: (1) by deducting from the total damages the amounts already paid to medical services providers, regardless of whether the plaintiff was contractually obligated to pay the medical providers; and (2) by deducting from the total damages the amounts discounted to the insurer, again regardless of contractual obligations.
According to the court, the existence of "collateral source offsets" is determined by Georgia law, and the possible applicability of the offset is a matter committed to the district court’s discretion.
How it Affects Personal Injury Cases
The impact of the collateral source rule on personal injury cases in Georgia is significant. It shapes the way damages are calculated and provides important implications for both plaintiffs and defendants.
In personal injury cases, the collateral source rule means that juries will consider medical bills and other expenses that the plaintiff has incurred due to their injury without deducting any insurance payouts or benefits received. The rule means a higher number of damages awarded, which is an obvious benefit to the plaintiff’s argument. In fact, defendants will often use the rule to minimize the potential damage award by arguing against the inclusion of certain medical expenses that they believe should not be considered due to insurance coverage .
The method by which damages are calculated is a crucial factor in personal injury cases and can vary widely depending on the facts of the case, the strength of the evidence presented, and the persuasiveness of the arguments made to the jury. In general, damages in personal injury cases can include medical expenses, property damages, loss of wages, and pain and suffering. Each of these categories has their own complexities and considerations, and they are all subject to dispute between the plaintiffs and defendants.
The overall implications of the collateral source rule are that plaintiffs enjoy a solid benefit when it comes to claiming damages, whereas defendants look for ways to minimize the impact of the rule in court to ensure a fair appeal. The end result of this is that the amount of damages awarded can vary widely from one case to another.
Recent Changes and Case Examples
As a result of the 2014 amendment to O.C.G.A. § 51-12-1.1, the application of the collateral source rule in Georgia is evolving.
For instance, in Huy Nguyen v. Vu Nguyen, 341 Ga. App. 649, 650-651 (2018), the plaintiff was found responsible for 50% of the causes of the rear-end car accident even though the defendant driver was determined to be 100% liable for the accident. Both parties claimed to have suffered soft tissue injuries from the accident. Each party’s medical provider had billed their respective insurance carriers $1,072.63. The defendant driver argued that under O.C.G.A. § 51-12-1.1, he was entitled to a credit for the amount the plaintiff allegedly could and should have obtained through her own insurance carrier, which would reduce his liability for the full amount of the medical bills paid by both parties’ insurers, even though the plaintiff’s insurance was not billed or paid.
But the trial court relied on the testimony of a defense medical expert over conflicting testimony from plaintiff’s treating physician and excluded the plaintiff’s unpaid medical expenses from evidence based on O.C.G.A. § 51-12-1.1. The Court of Appeals held that it was an error to exclude plaintiff’s unpaid medical expenses simply because plaintiff did not bill her own insurance coverage. Judge McFadden reasoned: "O.C.G.A. § 51-12-1.1 clearly refers to what ‘shall be credited against a plaintiff’s claim for damages’ but is silent as to whether a defendant may make such a claim for damages that is based upon payments of medical expenses that were never claimed by the plaintiff or her medical provider. Moreover, OCGA § 51-12-1.1 is not properly read to require a party to take steps to seek payment from an insurance provider before seeking a recovery of the costs of its medical care. " (Emphasis added).
For most cases, insurers had been billing their insureds’ providers directly in order to satisfy their obligations under health care add-on payment plans and that practice was the common practice at the time of the collision in Huy Nguyen. But insurers might not always cover or accept all of a patient’s medical bills and instead, use the insurer’s contracted rate with the provider, so obtaining full payment from an insurer is not necessarily assured.
Practically speaking, the Huy Nguyen ruling will likely result in more suits with soft tissue claims being brought in Georgia. In every case, plaintiffs who can show that their unpaid medical expenses were billed to their insurance carriers, without them having to collect the medical expenses from the insurers, should expect to get full compensation for those unpaid medical expenses from a jury. All Georgia insurers, in turn, will be looking for ways to require their insureds to collect their expenses from their own insurers.
Tips for Plaintiffs
The collateral source rule has a significant bearing on the total amount of medical expenses to be recovered by the plaintiff, so a few pointers on how to present and obtain evidence of the medical expenses may be helpful.
For example, if a treating physician or other provider accepts insurance as payment in full, then Georgia law will likely permit the introduction of a physician’s treatment charges as evidence of the reasonable value of the services, regardless of whether the plaintiff incurred actual liability for the amount charged. It follows, therefore, that plaintiffs should present medical expenses from providers who have written off (to the adjustment accounts) any amount in excess of the sums paid by the plaintiff or his insurance. This will help to guard against attempts to cap medical expenses recoverable under the common law "collateral source rule" as a matter of law. See Special Purpose, Inc. v. Robison, 301 Ga. App. 469 (2009). A plaintiff should also be aware that, specifically in regard to Medicare patients, the value of the services rendered to the plaintiff is not the amount actually billed to the plaintiff. Instead, it is the amount the doctor accepted from Medicare as full payment. See Guardsmark, Inc. v. Moore, 261 Ga. App. 570, 572 (1)(c) (2003). This may mean that Medicare coverage in fact operates as the superior collateral source, which is another thing for the plaintiff to consider. Moreover, it has been held by appellate court that the collateral source rule applies even when the plaintiff made no contributions to the payment of medical expenses due to the fact that the plaintiff’s health insurance provided for benefits to the employees of plaintiff’s spouse’s place of employment, and that the plaintiff’s health insurance premiums were paid by his wife’s employer . "Although the point is not discussed much in the parties’ briefs on appeal, we have not found a case where the collateral source rule was held to bar an award of medical expenses incurred by a plaintiff when he was not the person who purchased the health insurance or otherwise was not required to make any financial contribution to the payment of those expenses." {T]he record shows that the plaintiff had to pay nothing for the medical services he received by virtue of this insurance. Nothing in the record shows that the plaintiff was intentionally careless or otherwise negligent in accepting the use of insurance provided through his wife’s place of employment and from which he made no financial contribution. Indeed, there is nothing in the record to indicate that plaintiff knew anything other than that the hospital was taking its payments from insurance and that no one was billing the plaintiff for the medical expenses at issue. By accepting the use of insurance based on Mrs. Moore’s employment, the plaintiff availed himself of an employee benefit in the same way as would a person choosing a pension plan or a company-issued automobile in lieu of a portion of his salary. The value of those benefits cannot be disregarded under the deductible formula merely because the recipient does not pay for them. Although the employee contributions paid by Mrs. Moore’s employer are remote to the plaintiff’s actions, and though the plaintiff had no choices to make concerning the Medicare contributions if he wished to maintain his health insurance coverage, the consequences of failing to make those choices are remote to the general public in the same way that these remote consequences are remote to the tortfeasor. Maxwell v. N.C. Health Care Facilities, Inc., 265 Ga. App. 144 (2004).
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