The Collateral Source Rule in Utah Personal Injury Litigation: Why Juries Cannot Consider Insurance Payments

Introduction

When an individual suffers harm due to someone else’s negligence, they have the legal right to seek compensation for their damages, including medical expenses. However, a key principle in Utah personal injury law—the collateral source rule—dictates that compensation received by a plaintiff from sources independent of the defendant, such as health insurance, cannot be considered by a jury in determining damages. This rule is designed to prevent tortfeasors from benefiting from the plaintiff’s insurance coverage and to uphold key public policy objectives.

This article will explore the legal basis, policy justifications, and exceptions to the collateral source rule in Utah, as outlined by case law, including Mahana v. Onyx Acceptance Corp., 2004 UT 59, 96 P.3d 893, and Wilson v. IHC Hosps., Inc., 2012 UT 43, 289 P.3d 369. Additionally, we will examine how Utah statutes have modified this rule in specific cases, such as medical malpractice claims.

What Is the Collateral Source Rule?

The collateral source rule prevents a defendant from reducing their liability by introducing evidence that the plaintiff has received compensation for their losses from a third party. In Mahana v. Onyx Acceptance Corp., the Utah Supreme Court articulated the rule as follows:

“The collateral source rule provides that a wrongdoer is not entitled to have damages, for which he is liable, reduced by proof that the plaintiff has received or will receive compensation or indemnity for the loss from an independent collateral source.” (¶ 37)

Similarly, Wilson v. IHC Hosps., Inc. reaffirmed this doctrine, noting that even if an injured party receives insurance benefits covering their medical expenses, the tortfeasor remains fully liable for the entire cost of those expenses.

The Policy Justifications for the Collateral Source Rule

Two main policy rationales support the collateral source rule:

1. Preventing Wrongdoers from Benefiting from Plaintiffs’ Insurance

   
   

   • As stated in Wilson, “[p]ublic policy favors giving the plaintiff a double recovery rather than allowing a wrongdoer to enjoy reduced liability simply because the plaintiff received compensation from an independent source.” (¶ 31)

     
     

   • This prevents negligent parties from escaping full responsibility for the harm they caused.

     
     

2. Encouraging the Maintenance of Insurance

   
   

   • The rule incentivizes individuals to obtain and maintain insurance by ensuring that their coverage will not reduce their ability to recover damages from a responsible party.

     
     

   • If insurance payments reduced a plaintiff’s recovery, it would discourage individuals from securing health insurance or other protective measures.

     
     

Jury Consideration of Insurance Payments: Why It’s Prohibited

In personal injury trials, defendants often attempt to introduce evidence that a plaintiff’s medical expenses have already been covered by insurance, Medicaid, or other sources. Utah courts have consistently held that such evidence is inadmissible.

The reasoning is simple: allowing jurors to consider collateral source payments could lead them to reduce the damages award, effectively benefiting the defendant at the expense of the plaintiff’s foresight in securing insurance coverage.

As Wilson explains:

“Reference to the absence of any significant out-of-pocket medical expenses necessarily implies that the expenses have been paid by collateral sources.” (¶ 39)

This principle ensures that the calculation of damages focuses solely on the harm caused by the defendant, rather than the plaintiff’s ability to mitigate that harm through independent means.

Utah Statutory Modifications to the Collateral Source Rule

While the common law collateral source rule applies broadly in Utah, the Utah Legislature has enacted exceptions in specific cases. Most notably, in medical malpractice claims, Utah Code § 78B–3–405 alters the traditional approach:

• The statute requires courts to reduce a plaintiff’s award by the amount they have received from collateral sources after liability and damages have been determined.

  
  

• However, this reduction does not apply to collateral sources with subrogation rights—meaning if the insurer has the right to seek reimbursement from the plaintiff’s recovery, the plaintiff’s award remains unaffected.

  
  

Thus, while juries in medical malpractice cases still do not consider insurance payments, trial courts apply statutory reductions post-verdict in some circumstances.

Case Study: Wilson v. IHC Hosps., Inc.

In Wilson v. IHC Hosps., Inc., a medical malpractice case, the defendant hospital repeatedly referenced the fact that the plaintiff had not incurred any out-of-pocket expenses for his medical care. This led to multiple violations of the collateral source rule:

• The defense cross-examined the plaintiff’s life care planner about government programs that covered medical expenses (¶ 40).

  
  

• The defense asked the plaintiff’s father about the cost of medical equipment, implying that much of it was covered by third-party sources (¶ 41).

  
  

• In closing arguments, the defense stated, “They’re not claiming one cent of out-of-pocket expenses ... so you don’t need to worry about that.” (¶ 42)

  
  

The Utah Supreme Court found these references to collateral source payments improper, noting that they could mislead the jury into reducing damages based on an irrelevant factor—the plaintiff’s receipt of third-party benefits.

Implications for Plaintiffs and Defendants in Utah Personal Injury Cases

For plaintiffs, the collateral source rule ensures that their damages are fully compensated, regardless of their insurance status. However, they must be prepared to object to any improper references to insurance payments during trial.

For defendants, attempting to introduce evidence of collateral source payments can lead to reversible error and possible sanctions. Defense attorneys should avoid making any direct or indirect references to insurance benefits.

Conclusion

The collateral source rule plays a critical role in Utah personal injury litigation by ensuring that wrongdoers are held fully accountable and that plaintiffs receive the damages they are legally entitled to. Utah courts have consistently enforced this rule, with limited statutory exceptions in medical malpractice cases. The rule reinforces the importance of maintaining insurance while preventing juries from making unfair reductions in damages based on the plaintiff’s insurance coverage.

At The Legal Beagle, we are committed to protecting the rights of Utah personal injury victims. If you or a loved one has been injured due to someone else’s negligence, contact us today for a free consultation to discuss your case and understand your rights under Utah law.