The collateral source rule governs whether payments the plaintiff received from insurance, public benefits, or other third parties reduce the defendant's liability for damages. Some jurisdictions preserve the traditional rule, under which the defendant gets no credit; many have modified it by statute for specific categories of payment. The economist does not decide the rule; the report presents each collateral payment on its own schedule so counsel can apply the venue's rule.
Under the traditional rule, a wrongdoer does not benefit from payments the injured person received from sources independent of the wrongdoer, such as health insurance, disability insurance, or benefits the person earned through employment. Damages are measured without offsetting those payments, on the reasoning that the plaintiff, not the defendant, paid for the coverage and that any double recovery is better left with the injured person than with the party at fault. The rule also governs what the jury may hear about such payments.
Many jurisdictions have modified the rule by statute, permitting or requiring offsets for specific categories: some for health insurance payments, some for public benefits, some for workers' compensation, and some only in particular kinds of cases such as medical malpractice. Some frameworks distinguish payments already received from payments expected in the future, and some allow the offset only net of the premiums the plaintiff paid. The specifics vary widely by state and by category, change over time, and are a legal question for counsel to resolve against primary sources.
The economist measures the loss and keeps each collateral payment visible and separate. The lost earnings schedules show the gross loss; a separate schedule catalogs the disability benefits, workers' compensation indemnity, insurance payments, and other collateral sources in the record, with amounts and periods; and the summary shows the result with and without each offset. Counsel then applies the venue's rule, and the trier of fact sees a number built to that rule rather than one in which the offsets were silently netted or silently ignored. The mitigation and offsets page describes the schedule alongside the other deductions.
Collateral payments are distinct from post-event earnings. Wages the person earns after the event are part of the loss calculation itself, netted against but-for earnings in every framework, because the loss is the difference between the two streams. Insurance and benefit payments are not earnings; they are compensation from a third party for the same loss, and whether they reduce the award is what the collateral source rule decides. The lost earnings guide shows where each sits in the calculation.
Separate from the collateral source rule, some payers have reimbursement or lien rights against a recovery: health insurers under plan terms, public programs under their own statutes, and workers' compensation carriers under state law. Those rights affect how a settlement is distributed rather than how the loss is measured, and the economist's schedules of collateral payments are often the starting point for counsel's analysis of them. The workers' compensation case type page discusses the interaction in that setting.
This page is a general overview and not legal advice. The collateral source rule, its statutory modifications, and the related reimbursement rights differ by state and by case type. Counsel confirms the governing rule against primary sources, and the economist builds the schedules to it.
It depends on the jurisdiction. Some frameworks address only payments already received; others allow offsets for benefits reasonably expected in the future, sometimes only where the entitlement is certain. The report can present expected future benefits on their own schedule where counsel requests it.
Not on the economist's own initiative. The report shows the gross loss and the disability payments separately, and the offset is applied or not according to the venue's rule and counsel's instruction.
Benefits the person earned through employment, such as disability insurance provided by the employer, are generally treated as collateral in jurisdictions that follow the traditional rule, on the reasoning that they are part of the person's compensation. Statutory modifications vary, and counsel confirms the treatment.
Request a consultation on The Collateral Source Rule, Explained or call (201) 343-0700. Plaintiff and defense counsel.