The Collateral Source Rule in Personal Injury Litigation

James P. Moceri & John L. Messina, The Collateral Source Rule in Personal Injury Litigation, 7 Gonz. L. Rev. 310 (1972).


The so-called Collateral Source Rule provides that any benefits received by an injured party from a source which is entirely independent of and collateral to a wrongdoer who is legally responsible for the injuries will not serve to reduce the damages otherwise recover- able from the wrongdoer. The application of this rule to various factual circumstances has given rise to a substantial amount of litigation;  for the rule is an attempt to resolve a basic conflict between two guiding principles of tort law, namely, (1) the limitation of compensation to the injured party to the amount necessary to make him whole, and (2) the avoidance of a windfall to the wrongdoer if a choice must be made between him and the injured party.

The Collateral Source Rule has been applied as both a rule of damages and a rule of evidence. The rule has been in existence in American Law for at least one hundred years. One of the earliest cases to apply it was Althorfe v. Wolfe, where the court refused to diminish damages in a widow’s wrongful death action by the amount of the proceeds of her husband’s life insurance policy.

The rule covers a variety of benefits received by the plaintiff including salary continued during disability, gratuitous payments or services received by the plaintiff, insurance benefits, pension or retirement benefits and government or Veteran’s benefits. The rule has even been applied to exclude evidence of the plaintiff’s remarriage. If a widow or widower chooses to find solace in a second spouse, this is an exercise of privilege and any mitigation of the party’s damages comes from a source wholly collateral to the wrongdoer whose acts resulted in the death of the prior spouse.

Despite its salutary effects, the Collateral Source Rule is not universally applied and is not without its critics.

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