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Collateral Source Rule

The collateral source rule is a legal doctrine that typically prohibits the admission of evidence that a plaintiff has received compensation or benefits from a source other than the defendant who is being sued for damages. The rule is designed to prevent a defendant from benefiting from any compensation that the plaintiff received from a collateral source, such as insurance or other benefits, and to ensure that the plaintiff is fully compensated for their losses.

Under the rule, a plaintiff may still recover damages from a defendant even if they have received compensation from another source, and the defendant may not argue that the plaintiff’s damages should be reduced by the amount of the collateral source payment. The collateral source rule varies somewhat from state to state, and there are some exceptions to the rule in certain circumstances.

This rule refers to a legal principle that ensures compensation received by an injured party from a source independent of the defendant, such as an insurance company, will not decrease the amount of damages that can be recovered from the defendant in a lawsuit. This rule may apply when the victim receives payment from their insurer to cover medical expenses or other costs related to the injury. It is important to note that the collateral source rule only applies to specific situations and may have exceptions or limitations.


To illustrate how the this works, consider a scenario where someone is involved in a car accident and sustains severe injuries and vehicle damage. The other driver is determined to be entirely at fault for the accident. The total damages incurred by the victim, including medical bills, amount to $150,000.

Fortunately, the victim’s health insurance covers the entire cost of their medical bills. Despite this, the victim can still pursue compensation from the at-fault driver for the full $150,000 in damages. The defendant would not be allowed to introduce any evidence showing that the victim received payments for medical expenses from their insurance.

Exceptions to the Collateral Source Rule:

The collateral source rule has exceptions in Texas. One significant exception is when the victim has a subrogation agreement with their insurance company. This means that the victim may have to pay back their insurance company for the damages they covered after receiving a reward from their personal injury case. The insurer may also sue the defendant or the victim for the damages they paid. In some cases, this can result in a significant reduction of the victim’s case. Some insurance companies may agree to a discounted reimbursement, while others may require the victim to exclude medical expenses from their personal injury lawsuit altogether.

It’s worth noting that these exceptions are not absolute and depend on the specific circumstances of each case. It’s important to consult with an experienced personal injury attorney in Texas to understand how the collateral source rule and its exceptions may apply to your case.