Louisiana Record

Wednesday, April 8, 2020

Insurance CEO pushes for tort reform focus on eliminating 'collateral source rule'

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By Zeta Cross | Feb 27, 2020


In the upcoming legislative session, when lawmakers take on tort reform, the No. 1 issue Jeff Albright is hoping lawmakers tackle is the “collateral source rule,”  he told the Louisiana Record.

Albright, the CEO of the Independent Insurance Agents & Brokers of Louisiana (IIABL), said elimination of the collateral source rule would help reduce Louisiana’s high auto insurance rates. The Omnibus Premium Reduction Act introduced by state Sen. Kirk Talbot, R-River Ridge, would limit or eliminate the collateral source rule in Louisiana. 

“The single most important piece of Talbot's bill is collateral source.If we want auto insurance rates to go down,” he said, “we have to curb lawsuit abuse.” 

The collateral source rule prevents a defendant from introducing evidence at trial that a plaintiff has received payment from a third party. For example, if a person with first-rate health insurance is injured in an accident, and his personal insurance pays his medical bills, that person can still file a personal injury claim against the defendant who caused the accident. At trial, whether or not the injured person has had his medical bills paid makes no difference. Critics say plaintiffs who win lawsuits can wind up with damages that are two or three times the cost of what their medical bills were. 

“Our laws are favorable to plaintiffs and encourage lawsuits,” Albright said. 

Another way the collateral source rule hurts Louisianans, Albright said, is the process for medical billing. What hospitals bill is often far more than what they actually accept in payment from an insurance company, he said. A hospital may bill $100,000, while in the end accepting much less– perhaps as little as $40,000. The injured person may pay nothing more out of pocket than his or her deductible. Yet when the case goes to trial, damages will be based on the bill, rather than on the much lower figure of what the hospital actually accepted.

“What health insurers bill and what providers pay are radically different. We call the difference phantom damages,” Albright said.

Albright believes that damages in an accident should be based on the cost of making the injured person whole. “Why should a (party) get an extra $60,000?” Albright said.

Critics of the collateral source rule say that it permits plaintiffs to recover for the same expense twice. Proponents of the rule claim that it prevents defendants from escaping full responsibility for their negligent acts.

Albright strongly disagrees. “Change the law to say that people should only recover what is actually paid, not what is billed. They are abusing the system to legally get a higher payout, and the result is we are all paying higher premiums,” Albright said. 

Many states have eliminated or limited the collateral source rule. Albright hopes Louisiana will soon join them.

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Independent Insurance Agents & Brokers of Louisiana