Tennessee’s Collateral Source Rule, Explained

Personal injury cases can be complex, not to mention how emotionally draining they tend to be for victims. In Tennessee, navigating the legal landscape has its own unique set of rules and regulations that can make obtaining compensation a little more difficult. One such rule that significantly impacts personal injury cases is the Collateral Source Rule. This rule, which was reaffirmed in a 2017 court ruling, has remained steadfast in the state and applies to most personal injury cases other than medical malpractice claims. In this blog, we will delve into what the Collateral Source Rule is, how it works, and the implications it carries for personal injury victims in Tennessee, particularly for those involved in car accidents and other incidents that cause personal injury.

Understanding Medical Billing in Tennessee

To understand the Collateral Source Rule, we must first examine how medical billing works within Tennessee. For example, consider the difference in billing between those who do not have health insurance and those who do have coverage. Suppose an individual stays overnight in a hospital and, in return, receives a bill for $10,000. Without health insurance to cover the expenses of a hospital stay, that $10,000 bill won’t be reduced by any insurance negotiations. While the bill can often times still be negotiated through the provider’s billing department, it likely won’t be nearly as significant of a reduction compared to someone who carries insurance. The reasoning for this is, for those who have health insurance, a bill for treatment is often reduced or written off entirely due to agreements in place between a provider and the insurance company. In the same overnight hospital scenario where the individual carries health insurance, a $10,000 medical bill may be reduced to $1,000 after negotiations and reductions through the insurance company.

This clearly leaves a major discrepancy between what an insured and an uninsured individual would pay for medical bills and, thus, what they may be owed in compensation for their injuries. It also raises the question: should compensation be determined on the original, unreduced medical bill, or, assuming the plaintiff has insurance, should they only be entitled to the price that was negotiated between their insurance company and the medical provider? This is where the Collateral Source Rule comes into play.

Understanding the Collateral Source Rule

The Collateral Source Rule plays a crucial role in personal injury law in Tennessee. This rule dictates that in certain personal injury cases, the defendant cannot introduce evidence of payments or benefits the plaintiff received from a third-party for the plaintiff’s damages. Put simply, compensation for medical expenses should be determined by the original medical bill, not the reduced cost that was negotiated through insurance. The at-fault party will owe the full amount of the medical bill, and they cannot use reduced insurance or TennCare (Medicaid) rates to reduce the amount of compensation you’re entitled to.

In the context of a personal injury case, the Collateral Source Rule serves as a crucial protection for victims. It ensures that the compensation you receive from the at-fault party is not offset by the money received (or deducted from bills) by your health insurance coverage. This rule is intended to prevent wrongdoers from benefiting from the victim’s financial prudence; those who carry insurance should not be penalized for being cautious or doing the right thing.

Car Accidents and the Collateral Source Rule

Car accidents are among the most common types of personal injury cases in Tennessee. When a car accident occurs, and an injured party seeks compensation, the Collateral Source Rule plays a pivotal role. Here’s how the Collateral Source Rule comes into play for auto accidents in Tennessee:

Let’s say you are injured due to negligence following a car wreck in Nashville on interstate 440. You’re taken to Nashville General Hospital and undergo a major surgery. While a hospital stay is rarely cheap, you have good health insurance. The insurance company and the hospital determine that the surgery was medically necessary, and it is covered under your policy. While the bill for your surgery would be $5,000 without insurance, your insurance company, in negotiations with the hospital, reduces your bill to $500. As you’ve met your deductible at the time of the incident, you only pay $100 out-of-pocket. Without the Collateral Source Rule, the at-fault driver could present your payment of $100 as evidence that you should only be entitled to $100 in compensation for your medical bills. They can argue that, since that was the only amount you had to pay out-of-pocket for your injuries, you should not receive any further funds. However, this approach essentially penalizes those who carry insurance, which is unfair. If you pay your premiums, keep your insurance up-to-date, and take every precaution to make sure you are covered in a worst-case-scenario, you should not receive less compensation than someone would who did not carry insurance. This is why the Collateral Source Rule is so significant in personal injury claims. It prevents the at-fault driver from using your proactive approach and carrying health insurance against you to reduce the damages they owe you.

Exceptions to the Collateral Source Rule in Tennessee

It’s essential to note that, while the Collateral Source Rule still stands in Tennessee for most personal injury cases, there is an exception for medical malpractice cases. In medical malpractice cases, any compensation the victim receives from third-party sources, such as health insurance, will be deducted from the damages awarded by the court.

This exception to the Collateral Source Rule was in reaction to what is known as the “malpractice crisis”. As medical providers face increasing premiums for medical malpractice and larger payouts for negligence, the Medical Malpractice Act was put in place to theoretically ease some of the financial burden certain medical providers may face that could disrupt the public’s access to health care.

While put in place in part to help with the rising cost of medical care in the United States, this departure from the Collateral Source Rule in medical malpractice cases can significantly impact the amount of compensation a victim ultimately receives. Therefore, it is crucial for individuals pursuing a medical malpractice claim to understand how this exception applies to their case. Hiring an experienced medical malpractice attorney can help you understand your rights and guide you through the complexities of medical malpractice exceptions to the Collateral Source Rule.

Personal Injury Lawyers and the Tennessee Collateral Source Rule 

The Collateral Source Rule continues to be a significant factor in personal injury cases in Tennessee. This rule serves as a necessary protection for many personal injury victims, ensuring that they receive the highest amount of compensation possible for their losses, regardless of the other sources of financial assistance they may have while healing and recovering from the incident. It also prevents penalizations against those who carry insurance and holds those responsible for negligence to the highest form of restitution. However, the Collateral Source Rule also adds complexity to the legal process, making it essential for victims to seek an experienced Tennessee personal injury lawyer to navigate the intricacies of their cases effectively.

If you’ve been injured in a car accident, big truck accident, slip and fall, or another personal injury incident in Tennessee, it’s crucial to understand how the Collateral Source Rule applies to your situation. The Collateral Source Rule has been debated and even rescinded in other states throughout the US, and amendments surrounding this rule have come into play in recent years. Consulting with an experienced Tennessee personal injury attorney at Hughes & Coleman Injury Lawyers can provide you with the guidance and support you need to pursue the compensation you deserve while navigating the intricacies of the state’s legal system. Our team has been helping injured victims throughout Tennessee for over 35 years. We know the ins and outs of Tennessee legislation that may impact each aspect of your personal injury claim. Our team is knowledgeable on the ever-changing legal field and laws, and we are here to help.

Contact us today at 800-800-4600 for a free, no obligation consultation. We work on a contingency fee, which means you never pay us anything unless we’re able to obtain compensation for you. No out-of-pocket costs unless we get money for you.

Get Hughes & Coleman and Get it Done.