Collateral Source Rule


Definition - What does Collateral Source Rule mean?

The Collateral Source Rule is a law that states that parties who are being sued for damages will still owe the damages if the plaintiff wins the case, even if the plaintiff is receiving compensation for the losses from other sources such as an insurance policy. In other words, the Collateral Source Rule mandates that tortfeasors still have to pay even if the losses have already been covered.

Insuranceopedia explains Collateral Source Rule

The Collateral Source Rule is required because defendants in civil suits may try to avoid paying damages if they know or suspect that the losses have already been covered by an insurance policy. However, as the law currently stands, no exemption is given to tortfeasors for paying damages if the plaintiff's insurance policies have already covered losses. This means that plaintiffs can sometimes receive double payments for the losses they sustain by recouping losses from both an insurer and a defendant.

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