17th Apr 2014
An injured party after a loss may recover money from an external source. [Arambula v. Wells (1999) 72 Cal.App.4th 1006, 1009 (injured party received gratuitous payment of lost earnings)] These funds are wholly independent from, and collateral to, the tortfeasor. Insurance coverage maintained by a plaintiff is separate and distinct from the monetary loss directly caused by the act of the tortfeasor. This distinct separate source is deemed “collateral” to the alleged wrongdoer. [Barnes v. Western Heritage Ins. (2013) 217 Cal.App.4th 249, 261]
The collateral funds are often made available to the plaintiff by the plaintiff’s foresight in purchasing insurance to pay for the possible medical expenses or property damage arising from an accident or loss. [§ C40:3 Property damage – Collateral source rule] However, plaintiff’s “foresight” is not a required element for the collateral source rule to apply. There are many illustrations of separate and distinct collateral funds made available to a plaintiff [unrelated to plaintiff’s foresight] upon the happening of an accidental loss, see Barnes v. Western Heritage Ins. (2013) 217 Cal.App.4th 249, 261 (med-pay benefits under defendant’s CGL policy paid irrespective of fault hence the med-pay insurance would not reduce plaintiff’s damages); receipt of weekly salary [§ C40:5.01]; social security benefits [§ C40:5.3]; Medi-cal and Medicare [§ C40:5.5].
Wholly independent of the tortfeasor
While the name of the rule under discussion herein contains the word “collateral”, the rule is usually more understandably applied by knowing that “ if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor”. [Barnes v. Western Heritage Ins. (2013) 217 Cal.App.4th 249, 261] The typical example given is where a plaintiff purchases insurance coverage for a loss caused by a wrongdoer and the plaintiff’s insurance company pays the plaintiff for the loss. [Dodds v. Bucknum (1963) 214 Cal.App.2d 206, 214] In this illustration, plaintiff’s insurance is wholly and independent from, and collateral to, the tortfeasor, and the tortfeasor is not permitted to benefit from the plaintiff’s prudence. [Barnes v. Western Heritage Ins. (2013) 217 Cal.App.4th 249, 261] Where the tortfeasor maintains his own insurance coverage to cover the plaintiff’s loss, such insurance is NOT wholly independent from, and collateral to, the tortfeasor, and those insurance benefits are deducted from plaintiff’s recovery. [Barnes v. Western Heritage Ins. (2013) 217 Cal.App.4th 249, 261]
References in bold are to Mr. Cornblum’s text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, published by ThomsonReuters. Those with WestLaw can search using the database CAINLAWDDR.