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Insurance · Bodily Injury Claims

What is the 'collateral source rule'?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

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 Adjusters must check all collateral sources before paying
  3. C The at-fault driver's insurer is always the primary source
  4. D A plaintiff's recovery is NOT reduced because they received compensation from an independent source (their own health insurance, disability benefits, etc.)

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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About this topic: Bodily Injury Claims

Bodily injury claims turn on medical documentation, causation and the valuation of pain and suffering and lost wages — the areas adjusters are tested on most heavily because the dollar amounts and the litigation risk are highest. This is one of 3 Insurance Adjuster questions on bodily injury claims, each with a full explanation on a single study page.

New to this exam? Our Insurance exam guide explains the format, scoring, and how to prepare.

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