Legal Dictionary

collateral source rule

Legal Definition of collateral source rule


  1. A rule of tort law which holds that the tortfeasor is not allowed to deduct from the amount he or she would be held to pay to the victim of the tort, any goods, services or money received by that victim from other "collateral" sources as a result of the tort (e.g.. insurance benefits).

Definition of collateral source rule

Further reading

The collateral source rule, or collateral source doctrine, is a common law evidentiary rule that prohibits the admission of evidence that a victim's damages were or will be compensated from some source other than the damages awarded against the Defendant. For example, in a personal injury action, evidence that the Plaintiff's medical bills were paid by medical insurance, or by Workers' Compensation, is not generally admissible.

The collateral source doctrine has come under attack by "tort reform" advocates. They argue that if the Plaintiff's injuries and damages have already been compensated, it is unfair and duplicative to allow an award of damages against the tortfeasor. As a result numerous states have altered or partially abrogated the rule by statute.[1]

However, the collateral source doctrine dates back to 1854, and is intended to promote justice and to assess remedies for fault against the tortfeasor, rather than allowing him to avoid responsibility for setting the losses in motion. In addition, many insurance or other payment sources that do pay for damages gain a lien or subrogation interest in the ultimate recovery. This means that the injured person must pay back his health insurer before he collects anything. If evidence of the collateral source is admitted and the fact-finder reduces the award to compensate for the already-paid damages, which can result in undercompensation for the injury, as the lien holder will generally attempt to recover the full value of any lien, thus leaving the plaintiff uncompensated for lost earnings, pain, anguish, or other non-economic damages.


  1. "Collateral source rule reform". NAMIC. Retrieved 2008-02-07.


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