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Tennessee Supreme Court upholds the Collateral Source Rule in personal injury cases

By Kyle Roby
English, Lucas, Priest and Owsley

emergency-room-photo-300x199When you are injured in an accident, you may sue to recover the costs of reasonable and necessary medical treatment following the incident. How do you determine what those costs are and the reasonableness of them? Is it the medical bill itself? Is it what your health insurance paid? Is the other side entitled to a credit or set-off if the cost of your medical bills are reduced by insurance payments or the hospital charges a different rate for your health insurance? These are some of the questions you may have when trying to determine what is the reasonable cost of medical treatment in a personal injury case.

In most states, Courts will follow what is known as the collateral source rule. The collateral source rule is a rule of evidence that prohibits the admission of evidence that the plaintiff or victim has received compensation form other than the damages sought against the defendant. Typical examples of a collateral source are medical bills paid by health insurance or payments made by workers compensation.

Recently, the Tennessee Supreme Court was faced with the question of what was the reasonable cost for medical services in personal injury cases. This case, Dedmon vs. Steelman, is an important win for Tennessee patients and personal injury victims. The Tennessee Supreme Court heard the case in April and issued a ruling on November 17, 2017.

Handling medical bills in court cases

It may help you to offer an illustration of how medical costs are calculated. Let’s say a man trips and falls in a grocery store. He breaks his leg. He is hospitalized for four days. The hospital bills the patient for $10,000 per day for a total of $40,000. If an insurer was picking up the costs, the bill for all four days would be heavily discounted. The question becomes does a plaintiff claim the $40,000 as reasonable charges or is it the heavily discounted amount paid by the health insurance?

This issue was first decided under the Tennessee’s Hospital Lien Act. Under the act, a hospital can claim a lien for the services it provided to the inured party. In the 2014 case West vs. Shelby County Healthcare Corp., the Tennessee Supreme Court ruled that a medical provider who placed a lien for services rendered and accepted payments from an insurance company, could not then seek the difference from the injured party and were required to release the lien. Insurance companies then sought to use this ruling in West v. Shelby County against personal injury victims. The insurance companies wanted to limit the amount of medical bills a person could claim by arguing if hospitals can’t recover the actual amount of medical bills as “reasonable cost” then the person injured likewise could not recover them as well. The insurance companies argued that the “reasonable cost” is what was paid, not what was charged.

In Dedmon vs. Steelman, the Court was asked to determine what was the reasonable cost: the amount of the medical bill or the amount paid by the insurance company. The Court in Dedmon said, “We are asked in this appeal to consider applying the principles in West v. Shelby to the determination of reasonable medical expenses in personal injury cases. Doing so involves the collateral source rule, which excludes evidence of benefits to the plaintiff from sources collateral to the tortfeasor and precludes the reduction of the plaintiff’s damage award by such collateral payments.”

The Dedmon Court said:

We hold that the collateral source rule applies in this personal injury case, in which the collateral benefit at issue is private insurance. Consequently, the plaintiffs may submit evidence of the injured party’s full, undiscounted medical bills as proof of reasonable medical expenses. Furthermore, the defendants are precluded from submitting evidence of discounted rates accepted by medical providers from the insurer to rebut the plaintiffs’ proof that the full, undiscounted charges are reasonable. The defendants remain free to submit any other competent evidence to rebut the plaintiffs’ proof on the reasonableness of the medical expenses, so long as that evidence does not contravene the collateral source rule.

By refusing to allow the discounted bills to become evidence of the amount owed to a plaintiff in a lawsuit, the court is keeping the collateral source rule in tact in Tennessee.

Keep in mind that damages in a personal injury case can go far beyond medical bills. If you are suing someone in a personal injury case, you may pursue lost wages, emotional distress and pain and suffering. Each has a monetary value depending on the circumstances of the case.

An experienced attorney can provide a free case review for you if you are considering filing suit for an injury. If you’d like to discuss your personal injury case with a qualified attorney, please contact me, attorney Kyle Roby, at (270) 781-6500 or kroby@elpolaw.com.