Health insurance payments should not reduce what an injured person is entitled to from the negligent driver for injuries and damages as a result of an automobile accident.  Most often the injured person’s health insurance, Medicaid or Medicare will pay the medical bills incurred as a result of a car accident.  The health insurance is called a collateral source. Under Wisconsin law, the collateral-source rule provides that an injured person’s recovery from the bad driver cannot be reduced by amounts received from collateral sources such as health insurance.

Since Cunnien v. Superior Iron Works Co., 175 Wis. 172, 188 , 184 N.W. 767 (1921) the general rule is that compensation received by the injured person from collateral sources, such as health insurance, should not affect the damages the bad driver or his auto insurance must pay. Payne v. Bilco Co., 54 Wis. 2d 424, 433 , 195 N.W.2d 641 (1972) . The idea behind the collateral-source rule is to deter negligent conduct like bad driving and not reward the negligent driver.  The collateral rule accomplishes this by requiring the negligent driver to pay for the damages he or she caused, even if the injured person recovers from a collateral source like health insurance. Under the rule, it is possible that an injured person may recover twice, a medical bill paid by health insurance and then reimbursement from the bad driver’s auto insurance. The rule was developed not to provide the injured party with a windfall, but instead, to prevent the bad driver from escaping his or her obligation to compensate the injured party merely because a collateral source also compensated the injured party.  In practice, there is no double recovery since the injured person usually has to pay back his health insurance because of subrogation law.

The collateral-source rule is not only a rule of damages, but a rule of evidence as well. Leitinger v. DBart, Inc., 2007 WI 84, ¶¶ 28, 30 , 302 Wis. 2d 110 , 736 N.W.2d 1 . “As a rule of damages, the collateral source rule denies a tortfeasor credit for payments or benefits conferred upon the plaintiff by any person [or entity] other than the tortfeasor.” So, as a rule of evidence, the collateral source rule generally precludes introduction of evidence regarding benefits a plaintiff obtained from collateral sources like health insurance payments, except in medical malpractice cases.

McCormick Law Office attorneys in Milwaukee, Wisconsin always review the case for collateral source payments and subrogation issues so that we can get the injured client the highest net settlement available.  With our client’s permission, we negotiate with health insurance to reduce their subrogation reimbursement and maximize our client’s recovery.