One of the basic tenants of tort law is that of the Collateral Source Rule (CSR). Under the CSR, the fact that an injury victim uses their own medical insurance (defined to include medical insurance, HMO benefits, automobile insurance medical payment coverage, Medi-Cal benefits, Medicare benefits, VA benefits or any coverage of medical bills by a collateral source) to cover their medical bills does not result in a credit to the tortfeasor for the amount of such payments.
The tortfeasor (and their liability insurance carrier) remain liable for the full amount of the reasonably incurred medical bills, and without credit for the fact that the injury victim's collateral sources have paid all or part of the bills.
The only limitation on the CSR in regard to medical bills is that the tortfeasor is never responsible for more than the "adjusted" amount of the bills, that being the net sum that the medical care provider has accepted as payment in full from either the injury victim and/or their collateral source, as opposed to what the gross amount of the bill is.
The rationale for the CSR is that the tortfeasor should not benefit from the prescience of their victim in having the forethought to have collateral source coverage.
Most collateral sources have reimbursement rights (aka "subrogation") for the amount of the benefits expended should the injury victim obtain a settlement or recovery, so that is another reason that the tortfeasor should not receive credit for collateral source payments.
The CSR also applies to claims for loss of earnings or wages due to having been injured. As such, if the injury victim receives state disability benefits, private disability benefits, or sick pay benefits from their employer, the tortfeasor does not receive credit for such payments.
One interesting wrinkle to the applicability of the CSR to disability retirement income benefits was recently addressed by myself in an article that I authored in the Fall 2017 issue of The Gavel, the official publication of the Orange County Trial Lawyers Association.
The article is reprinted on my website at http://www.stridlaw.com/gazette.php
