Posted on Oct 27, 2019

Is a defendant tortfeasor permitted by law to admit evidence that a plaintiff’s medical expenses have been reduced by insurance payments or write-offs at a jury trial? To what extent does the law protect individuals who have paid for health insurance coverage?

This issue of admissibility for medical expense payments is a prevalent point of contention in personal injury litigation. The sequence that a personal injury case takes affords an injured plaintiff with a preemptory payment for the medical expenses that they incur following an accident. For example, after a car accident, an injured driver may receive treatment for their injuries at a hospital or with a primary care physician. Prior to being treated, the medical service provider will obtain the plaintiff’s health insurance information. Rather than waiting to seek payment through the tortfeasor, the treatment provider will immediately bill the plaintiff’s health insurance carrier.

Admissibility of Health Insurance Payment Evidence at Trial

The practice of collecting payment from the plaintiff’s health insurance carrier prior to the resolution of the plaintiff’s personal injury case gives rise to an issue in subsequent litigation: when the case goes before a jury, and the plaintiff seeks to admit evidence of the medical bills that they incurred as a result of the accident, should the defendant be permitted to admit evidence of the payments that have been made to the medical bills? Defendants will often attempt to admit evidence of these payments to demonstrate to the jury that the plaintiff’s medical expenses are no longer as much as they once were, thereby diminishing the expenses owe by the plaintiff and theoretically the liability of the defendant.

Common Law Collateral Source Rule

The “collateral source rule” is a common law rule that sought to directly address this issue of whether or not a tortfeasor should be permitted to utilize this evidence of insurance payments. There is a general rule that tort damages are to be compensatory in nature only, and the collateral source rule is essentially an exception to this. See Washington ex rel. Washington v. Barnes Hosp.,897 S.W.2d 611, 619 (Mo. banc 1995). The collateral source rule exists as a defense for plaintiffs by preventing tortfeasors from reducing their liability through showing that health expenses have been paid by a “collateral source.” 

Smith v. Shaw, 159 S.W.3d 830, 832 (Mo. 2005), is a Missouri case in which the court addressed the collateral source rule and the framework by which it is to be interpreted in personal injury cases.

“The application of the collateral source rule prevents an alleged tortfeasor from attempting to introduce evidence at trial that the plaintiff's damages will be covered, in whole or in part, by the plaintiff's insurance. Id. The rule expresses the policy that a "wrongdoer should not benefit from the expenditures made by the injured party in procuring the insurance coverage." 159 S.W.3d 830, 832 (Mo. 2005) (citing Duckett v. Troester, 996 S.W.2d 641, 648 (Mo.App.1999)).”

In Smith, the sentiment of the collateral source rule is acknowledged, in that the court recognized that a plaintiff must not be penalized for carrying health insurance by way of a defendant mitigating their liability through such collateral payment evidence. Despite the inclusion of this rule, plaintiffs today are still not entirely protected from this tactic, as evidence of such payments are not entirely excluded from evidence.

Modern Applications of the Collateral Source Rule

Both Missouri and Kansas have developed a modern approach to the issue of collateral source payment evidence, which include deviations from the original common law collateral source rule.

Missouri Collateral Source Rule - RSMo § 490.715.

The collateral source rule has actually been codified in the state of Missouri through RSMo § 490.715. However, the statute does not necessarily act as a complete defense for plaintiffs. § 490.715 does provide the defendant with the ability to admit evidence that the plaintiff’s medical expenses have been paid in part by someone other than the plaintiff. However, the defendant is not allowed to identify the source of such collateral payment. Deck v. Teasley, 322 S. W .3d 538 (Mo. Banc 2010).

The statute further provides for a rebuttable presumption that the value of the medical treatment provided to the plaintiff is the amount that has been paid on behalf of the plaintiff in addition to whatever amount is necessary to satisfy the financial obligation to the health insurance provider.

Kansas Collateral Source Rule - Martinez v. Milburn Enterprises, Inc.

Martinez v. Milburn is a seminal Kansas case that addresses the role of the collateral source rule in Kansas personal injury cases. In evaluating the admissibility of evidence of collateral source payments, the court stated, “When medical treatment expenses are paid from a collateral source at a discounted rate, determining the reasonable value of the medical services becomes an issue for the finder of fact.” 233 P.3d 205, 222 (Kan. 2010).

The Martinez Court then further clarified the approach that Kansas courts are to take with collateral source payment issues:

"Stated more completely, when a finder of fact is determining the reasonable value of medical services, the collateral source rule bars admission of evidence stating that the expenses were paid by a collateral source. However, the rule does not address, much less bar, the admission of evidence indicating that something less than the charged amount has satisfied, or will satisfy, the amount billed."
— Martinez v. Milburn Enterprises, Inc., 233 P.3d 205 (Kan. 2010).

While the collateral source rule was initially constructed to as a means to protect plaintiffs from being penalized for carrying health insurance coverage, modern incarnations of the rule have been applied with variations that do not afford the same level of protection. In both Missouri and Kansas, remnants of the common law collateral source rule have been incorporated into the approach towards collateral source payments, but defendants are still afforded an opportunity to demonstrate the reduction of medical expenses before a jury in certain scenarios. Only future cases coming before the court will determine how both Missouri and Kansas will handle the ever evolving nature of health insurance in the United States and how evidence of personal health insurance policy payments should be handled at trial.

Note: This article is intended to provide a general summation on a legal topic and should not be construed as legal advice in any manner. Readers should consider speaking with an attorney prior to acting upon the information contained in this publication. Nothing in this article or database may be construed as creating an attorney-client relationship.