FYI: Collateral Sources and How They Impact Your Recovery
All legal actions which involve a finding of liability trigger a rule called the Collateral Sources of Indemnity Rule, or more commonly, the Collateral Source Rule, Florida Statutes s. 768.76.
Providers of collateral sources have a statutory right of subrogation, a right to be reimbursed for payments made on your behalf. The right of subrogation functions as a lien on your injury case which only requires reimbursement when you accept a settlement or get a verdict which compensates you for the lost wages and/or medical bills paid at least in part by the collateral source provider.
The provider of collateral source benefits is limited in its recovery to the amount you recover from the at-fault party. You will not be responsible for any amount which exceeds the limits of the settlement or verdict. This amount will be reduced proportionately by any award of comparative negligence (fault attributed to you) and also by the percentage of attorney’s fees in relation to the net award recovered. In addition, the amount of the insurance policy limits will be considered in reducing the amount paid to the collateral source providers.
What IS and What ISN’T a Collateral Source?
Collateral sources are payments made on behalf of an injured person by the following providers:
- Social Security benefits (except Titles XVIII and XIX)
- Health, sickness or disability insurance benefits
- Medical Payments coverage on an auto policy
- Other sources of reimbursement or funding for healthcare services or wage loss
The following benefits are NOT considered collateral sources; however they must be reimbursed under different Federal law for any accident related benefits they pay:
- Life insurance benefits
- Medicare and Medicaid benefits
- Worker’s Compensation
- Medical services programs under the Department of Health
- Other benefits expressly excluded by the law
Waiver of Rights
The right of subrogation can be waived if the provider fails to provide our office with a letter that it has paid collateral source benefits and asserts its right of reimbursement within 30 days of receiving notice of the claim. Waiver of this right means the provider does not get paid back, but it doesn’t mean you are off the hook.
The tortfeasor (the person or entity who negligently caused your injuries) can ask the court to reduce the amount of a verdict in your favor by the amount of collateral source benefits which do not need to be repaid.
Collateral sources present one of the most common pitfalls for people dealing with an injury claim on their own because people often settle their case under the impression they get to keep the entire amount of the recovery until their health insurance (or other collateral source) provider files a lawsuit for reimbursement for the accident related medical bills they have paid.