What is a collateral source rule?

The collateral source rule is a rule of law in California that prevents an insurance company from reducing an injury claim by any amount received from a third party, such as a worker’s compensation claim, medical insurance, or other governmental benefits. The purpose of the collateral source rule is to ensure that an injured party receives full compensation for their injury, without their damages being reduced by benefits they may have received from outside sources or their own resources. In California, the collateral source rule applies to both workers’ compensation claims and tort claims. In a workers’ compensation claim, the collateral source rule prevents the insurance company from seeking to reduce benefits that the injured employee has received from another source. In a tort claim, the collateral source rule prevents the insurance company from seeking to reduce a claim by payments the injured party has received from another source, such as medical insurance, Social Security Disability Benefits, or other sources of compensation. The collateral source rule is a key aspect of insurance law in California. It helps to ensure that an injured party does not suffer a financial loss due to an insurance company reducing their claim by the amount of benefits received from a third party. This ensures that an injured party receives full compensation for their injuries, regardless of any other compensation they may have received from outside sources.

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