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The Collateral Source Rule: What Insurance Companies Don’t Want You to Know

By Ilya Rabkin, Trial Attorney at the Pendleton Law Team

People injured in a car accident which results from someone else’s negligence often, justifiably, think, “why should I use my own health insurance to pay for my medical bills when I didn’t do anything wrong?”

Other times, people in this same situation do use their own health insurance and then attempt to resolve the claim with the auto insurance company on their own. People in this latter situation often hear the insurance company say something like, “oh don’t worry about your medical bills, we’ll take care of those, just send them to us when you get them in and we will pay them.”

That sounds like a good deal to the injured person, and they go on to think the insurance company is on their side and end up taking a settlement worth far less than the true value of their case.

We’re going to focus on the second situation in this article and explain how the insurance company is taking advantage of the unsuspecting person using their own health insurance after being involved in a car accident. In Virginia, there is a doctrine of law called, the Collateral Source Rule. This law makes it so that auto insurance companies are responsible for the full amount of medical bills incurred by someone injured by the negligence of their insured.

The Collateral Source Rule

A simpler way to think about the Collateral Source Rule is to think of it as “double dipping.” For example, a person injured in a car accident without health insurance who incurs $10,000 in medical bills will be reimbursed for all $10,000 of those. If a person is injured in a car accident and has health insurance and incurs those same $10,000 in medical bills, but because of his health insurance, only has to payback $2,000 of those, the auto insurance company is still responsible for reimbursing them for the full $10,000.

The person with health insurance gets to “double dip” and have their health insurance pay for their medical bills or a majority of them and have the auto insurance company reimburse them for the full amount. If you’re ever in a car accident, don’t deal with the insurance companies on your own, the trick covered here is just one of the many insurance adjusters use to undercut the true value of your case. Call 804-250-5050 for a free, no-obligation consult on your personal injury case.