The Collateral Source Rule in Delaware Auto Accident Lawsuits
By maintaining joint and several liability and not employing any limited tort scheme, like its neighbor Pennsylvania does, Delaware tends to favor plaintiffs in auto injury cases. The collateral source rule is another aspect of Delaware law that is favorable to plaintiffs. Under the collateral source rule, an injured party can plead the full value of medical bills, not just what was actually paid by a private health insurance company.
Here’s an example to show how this works. A Delaware resident is injured in a car accident in Dover that was the fault of another driver. The injuries are serious and require extensive medical treatment which exhausts the resident’s coverage limit of $15,000, the minimum required under Delaware PIP (Personal Injury Protection) law . The resident’s private health insurance then kicks in and pays for additional $20,000 in medical treatment bills. The health insurance company doesn’t actually pay $20,000 on behalf of its insured. Rather, it pays only the usual and customary charges or allowed amounts per agreements with medical providers. The total comes to about $12,000, or 60%. The remaining $8,000 is written off, after any coinsurance or copayments are made.
In his auto accident lawsuit against the other driver, the resident can claim the full $20,000 in medical bills for his medical expenses, even though his health insurance company only paid $12,000. If he wins his lawsuit, his financial recovery for the medical bills alone means he gets an excess or windfall of $8,000.
Other states like Pennsylvania, would only allow the plaintiff to plead the $12,000, not the full amount. The reasoning behind Pennsylvania’s rule is that the injured plaintiff should not obtain a windfall.
Delaware looks at this situation differently and is not concerned solely with whether the plaintiff gets a windfall. Instead, Delaware still employs the collateral source rule so that tortfeasors, i.e., at-fault drivers in car accident cases, bear the full cost of their negligent conduct. Tortfeasors should not benefit merely because the injured party was responsible and obtained appropriate insurance.
Delaware Supreme Court Upholds Collateral Source Rule in Auto Injury Cases, Except for Medicaid
The collateral source rule only applies to insurance policies that were purchased by the injured plaintiff, i.e., private medical insurance. It does not apply to public or government sources of benefits like Medicare or Medicaid. The Delaware Superior Court already ruled on this point in Rice v. The Chimes, Inc., a 2005 case.
More recently, the Delaware Supreme Court issued two opinions which addressed the collateral source rule in personal injury cases where the injured plaintiff received Medicare or Medicaid. See Stayton v. Delaware Health Corporation, a 2015 case which held that the collateral source rule did not apply to payments made by Medicare via the federal government. See Smith v. Mahoney, a November 2016 case which applies to Medicaid. In the Smith case, the injured plaintiff’s medical bills totaled roughly $25,000, for which Medicaid paid a little over $5,000. She pled the full $25,000. After a jury reached a verdict in her favor, the court reduced her award for past medical bills to what was paid by Medicaid.
Collateral Source & Future Medical Bills
It is important to note that the collateral source rule applies to future medical treatment bills. In serious injury cases, it is common to plead and prove that the plaintiff will require future medical treatment. The value of the future medical treatment can be introduced into evidence. Even if the plaintiff receives Medicare or Medicaid, the collateral source rule does not apply to limit an award for future medical bills.
For more information, visit the Delaware Auto Injury Law Library.
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