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Insurance · General

What is the 'collateral source rule'?

Correct answer

A plaintiff's recovery is NOT reduced because they received compensation from an independent source (their own health insurance, disability benefits, etc.)

  1. A An insured cannot recover from both their own insurer and a third-party insurer for the same loss
  2. B A plaintiff's recovery is NOT reduced because they received compensation from an independent source (their own health insurance, disability benefits, etc.)
  3. C Adjusters must check all collateral sources before paying
  4. D The at-fault driver's insurer is always the primary source

Why this is the answer

The collateral source rule (adopted in most states) holds that a defendant's liability is not reduced because the injured party received compensation from an independent source (their own health insurance, etc.). This can affect bodily injury negotiations significantly — the at-fault party cannot offset their liability by pointing to the victim's own insurance payments.
Source: Adjuster Exam, Collateral Source Rule

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