Smith v. Mahoney – Collateral Source Rule Weighed in Injury Lawsuit

North Carolina has a strong legal foundation for the collateral source rule. This means a plaintiff’s receipt of benefits for his or her injury or disability from collateral sources (those other than the defendant) generally isn’t admissible. courtroom

Courts in this state have invoked the collateral source rule to exclude evidence of workers’ compensation benefits, medical expenses paid by an employer insurance benefit, and sick leave pay.

The idea is that jurors shouldn’t be swayed to award less just because the victim had insurance. Typically, the only way courts will allow collateral source evidence to be admitted in tort cases is when it is offered for a legitimate purpose. As the American Bar Association notes, North Carolina hasn’t taken a position on write-downs and write-offs. Each state has its own guidelines when it comes to the collateral source rule. The question in the recent Delaware Supreme Court case of Smith v. Mahoney was whether the collateral source rule is applicable when Medicaid pays for an injured party’s medical expenses.

In that state, courts have applied the collateral source rule to gratuitous write-offs by doctors and payments made by private health insurers. In those situations, courts allowed plaintiffs arguing for the reimbursement of medical expenses to present the jury with the cost of health care services, rather than the amount actually paid to the provider. By the operation of this rule under those circumstances, plaintiffs can recover amounts that are paid by no one.

However, the state high court drew a line when it came to extending the collateral source rule to Medicare patients, finding that it couldn’t be used to increase the injured party’s recovery of prior medical costs beyond what was actually paid by the federally funded Medicare program. While the court didn’t overturn its collateral source precedent, it did question whether charges paid by no one were necessary to make a plaintiff whole.  Furthermore, the discounting required by Medicare stems from the economic agreement between the government and the health care provider. The plaintiff isn’t involved. Thus, the court held that, for the purposes of determining the reasonable value of medical services, the amount paid by the federally funded program would suffice.

In Smith, the court ruled this would also be its stance for Medicaid patients. For much the same reason as it did with Medicare, the court ruled that when a plaintiff’s expenses are paid by Medicaid, the collateral source rule can’t be applied. The court also held that future medical expense estimates aren’t subject to Medicaid reimbursement limitations because there is always uncertainty with regard to future coverage, since the program is income-based.

The underlying case involved a woman injured in two car accidents. She was employed when she was injured, but she also qualified for Medicaid. Her doctor initially charged her $23,000 for his medical services, but he later accepted $5,200 from Medicaid. He asserted a lien for the latter amount on any personal injury lawsuit settlement or verdict.

The plaintiff filed a lawsuit against two defendants and sought to collect $23,000 in medical cost reimbursements.

The Superior Court apportioned 90 percent fault to one defendant and 10 percent to the other and awarded the plaintiff $25,000 for past medical expenses, $10,000 for future medical expenses, and $15,000 for pain and suffering.

However, the Superior Court then issued an opinion following post-trial motions, which held that the collateral source rule couldn’t be applied in this case, and therefore, the plaintiff was only entitled to receive $5,200 in medical cost reimbursements. The state supreme court affirmed.

Although this ruling doesn’t have a direct effect on North Carolinians, it’s worth examining because state high court justices weighing similar issues will often look at the legal reasoning of other high courts.

Contact the Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.

Additional Resources:

Smith v. Mahoney, Nov. 3, 2016, Charlotte Personal Injury Attorney Blog

More Blog Entries:

Chang v. Carnival Corp. – Limits on Cruise Ship Injury Lawsuits, Oct. 18, 2016, Charlotte Personal Injury Attorney Blog

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