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THE COLLATERAL SOURCE RULE IN ALABAMA: TIME FOR A CHANGE

I. THE COLLATERAL SOURCE RULE AT COMMON LAW

The collateral source rule is a rule that bars the admission of certain types of evidence in

court.1 Generally, under the collateral source rule, the benefits a plaintiff receives from a source

wholly independent of and collateral to the defendant tortfeasor will not be considered in

determining the liability of the defendant nor diminish the damages otherwise recoverable from

the defendant.2 In defining the collateral source rule, the Restatement of Torts states that

[p]ayments made to or benefits conferred on the injured party from other sources are not

credited against the tortfeasors liability, although they cover all or a part of the harm for which

the tortfeasor is liable. 3 Although at its inception the collateral source rule only applied to

insurance proceeds, the application of the rule has been extended to include the following types

of benefits: (1) Insurance policies, whether maintained by the plaintiff or a third party and

whether or not the insurance company retains a right to subrogation; 4 (2) Employment benefits,

which may be gratuitous,5 contractual, or arising by statute;6 (3) Gratuities, including cash and

the reasonable value of gratuitous services provided;7 and (4) Social legislation benefits,

including social security benefits, welfare payments, and pensions under special retirement acts.8

By and large, the collateral source rule is both a procedural rule of evidence and a

substantive rule of damages.9 As a procedural rule of evidence, the collateral source rule serves

as an evidentiary preclusion device,10 rendering inadmissible any evidence of the plaintiffs

receipt of benefits from a source other than the defendant, which fully or partially reimburses

him for his loss.11 As a substantive rule of damages, the collateral source rule prevents the trier

of fact from reducing any damages award by the amount of compensation the plaintiff received

from a collateral source.12


Generally, the nature of the collateral benefits is irrelevant to the application of the

collateral source rule.13 However, in order for the benefits the plaintiff receives to be considered

compensation for tortious harm, the common law collateral source rule requires the defendant

tortfeasor, or someone acting on the defendants behalf, to give the benefits as a direct result of

the tortious harm.14 All other benefits the plaintiff receives are collateral and thus not credited to

the defendant.15 Accordingly, under the common law collateral source rule, benefits the plaintiff

receives from sources wholly independent from the defendant are precluded from consideration

when determining damages.16

Consequently, a plaintiff who incurs medical expenses, suffers lost wages, or experiences

other compensable losses, may sue the tortfeasor for the entire amount of his injuries, even if the

plaintiff has been reimbursed for those losses, for example, by medical insurance, by his own

relatives, by his employers generosity, or even through the kindness of strangers. 17 Only

benefits the plaintiff receives from the original defendant, the defendants agent, or a joint

tortfeasor, will reduce the defendants liability.18 This is true regardless of whether or not an

insurance company retains a right to subrogation.19

At one time or another, each of the fifty states has adopted some form of the collateral

source rule.20 Despite the rules long history, the collateral source rule eventually became the

target of state legislatures and lobbyists who insisted on its abrogation in an effort to control

rising insurance and litigation costs and increasingly high jury awards. 21 As a result, many states

enacted statutes modifying the collateral source rule or abrogating the rule altogether.22

However, state efforts to abolish the rule have been in vain, as time and time again courts have

struck down, on state constitutional grounds, statutes abrogating the rule in whole or in part. 23

Alabama is no exception. Like many other jurisdictions, the statutes 24 abrogating the collateral

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source rule in Alabama have faced constitutional challenges.25 In 2000, however, the Alabama

Supreme Court upheld as constitutional two of the statutes that modify the collateral source rule

in Alabama state courts,26 rejoining Alabama with the majority of other jurisdictions that modify

the traditional rule in some way. This article addresses the problems that remain in Alabamas

statutory modification of the collateral source rule. Part II of this article analyzes the

justifications and the criticisms of the collateral source rule. Part III explores the widely varied

statutory modifications of the collateral source rule in other states. Part IV examines the history

and current state of the law in Alabama after Marsh v. Green.27 Finally, Part V provides a

practical solution to the problems the current Alabama statutes face.

II. ARGUMENTS FOR AND AGAINST THE COLLATERAL SOURCE RULE

The collateral source rule originated prior to the Civil War 28 during a time when very few

collateral source benefits existed.29 The framers rule designed the rule to preserve an injured

partys right to pursue civil action against a tortfeasor without losing the right to receive

insurance payments for medical care.30 Despite the noble intentions of the framers, the purpose

of the collateral source rule has evolved and continues to face critical commentary.31

A. Justifications for the Collateral Source Rule

Proponents of the collateral source rule argue that an injured plaintiff has the right to

recover the full value of the harm a tortfeasor causes. 32 Although critics contend that the

collateral source rule results in a double recovery for the plaintiff, proponents of the rule counter

that plaintiffs rarely obtain a double recovery because oftentimes, the source of the collateral

benefits retains a right to subrogation, or reimbursement from whatever award the plaintiff

recovers from the tortfeasor.33 Additionally, certain contracts and laws often provide that the

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plaintiff must reimburse the collateral source to the extent he or she recovers from the

tortfeasor.34

In addition, proponents argue that any award received is necessarily reduced by a certain

percentage for attorneys fees. The argument is that after paying his attorney, the typical plaintiff

will not have realized a double recovery.35 Further, if plaintiffs are themselves responsible for

obtaining the benefit of a collateral source, such as by paying premiums for insurance coverage,

a double recovery merely serves to give the plaintiff the benefit of the bargain.36

Proponents of the rule also claim that reducing the plaintiffs damages by the amount of

collateral benefits received actually amounts to a windfall for the defendant. 37 Advocates of the

rule argue that without the collateral source rule, culpable defendants are relieved of liability in

the amount of the plaintiffs insurance coverage. 38 Absent the collateral source rule, the

defendant thus benefits from the insurance the plaintiff has purchased, essentially allowing the

defendant to take advantage of a source created by the plaintiff himself. 39 Proponents insist that

by allowing a windfall to the defendant, the defendant profits from his unlawful acts.40

Consequently, instead of private insurance protecting the insured, the insurance effectively works

to protect the culpable defendant from liability.41 Proponents further insist that the rule rewards

plaintiffs for obtaining insurance, and as a matter of public policy, the law should encourage

people to purchase insurance.42

Lastly, supporters of the collateral source rule reason that if there must be a windfall, the

interests of justice are greater served if the windfall benefits the injured party rather than

relieving the defendant of responsibility for his wrongdoing.43 Placing the full burden of loss

squarely on the wrongdoer effectively deters tortious conduct.44

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Plaintiffs are not the only supporters of the collateral source rule. Courts have also

justified the collateral source rule on the basis that such collateral evidence is prejudicial. 45 The

argument is that since such evidence does not make the defendants liability more probable or

less probable, any evidence of such payments is irrelevant in a civil suit against the tortfeasor. 46

This reasoning is equated to the rule of evidence47 that bars the admission of evidence that the

defendant carries liability insurance48 - if a jury is more likely find a defendant liable if he is

insured, a jury will likewise be more likely to find a culpable defendant not liable if they know

the plaintiff has already received compensation.49

B. Criticisms of the Collateral Source Rule

One of the most common criticisms of the collateral source rule is that it violates basic

tort principles. Critics of the rule argue that the application of the rule allows the plaintiff to

recover twice for a single loss once from the collateral source and again from the defendant

resulting in a windfall to the plaintiff, thus violating tort laws make-whole principle. 50

Opponents argue that such a double recovery contravenes the intentions of compensatory

damages to compensate the plaintiff for his loss rather than to punish the defendant.51

In addition to being punitive and yielding windfalls, detractors argue that the

collateral source rule unduly increases insurance premiums and the costs of trial. 52 Some also

urge that if tort awards are too high, potential victims are less likely to take efficient

precautions against injury and are less likely to mitigate damages.53

Further, opponents argue that the collateral source rule misleads juries. 54 Withholding

from the jury information that the injured party has been compensated results in damages being

calculated based on incomplete information, thus causing jury verdicts to be illusory and

inflated.55 Opponents argue that the protection the collateral source rule provides to plaintiffs

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corrupts jury deliberations and dishonors the jurys function to fairly compensate an injured

party.56

Finally, regarding the argument advanced by proponents that any double recovery a

plaintiff may realize is offset by attorneys fees, opponents of the collateral source rule point out

that tort law forbids attorneys fees from being included in any award for compensation. 57

Opponents argue that the right to prohibit attorneys fees from being part of an injured partys

compensation is a right held by the legislature and should not be a function of the collateral

source rule.58

III. STATUTORY MODIFICATIONS OF THE COLLATERAL SOURCE RULE IN


OTHER STATES

Currently, at least forty (40) of the fifty (50) states have some form of statutory scheme

abrogating or modifying the common law collateral source rule in some way, allowing some or

all evidence of collateral source benefits to be admitted at trial. 59 A closer review of the

countless state laws abrogating and/or limiting the scope of the collateral source rule

demonstrates the seemingly arbitrary and subjective nature of the tort-reform movement. 60 For

example, of the states that have modified the rule, some states abrogate it in all civil actions 61

while others abrogate it only in personal injury actions.62 Several states, including New

Hampshire,63 Georgia,64 Kentucky,65 and Kansas,66 have attempted to abolish or restrict the

collateral source rule, only to have their supreme courts overturn the statute on state

constitutional grounds.

Some states have modified the traditional rule only in cases involving specific causes of

action. For example, many states abolish the collateral source rule only in products liability or

medical malpractice cases.67 Other states abrogate the rule in cases such as those against certain

public employers,68 cases against the state,69 or cases brought under state no-fault statutes.70

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Other states have passed statutes that abolish the collateral source rule only in limited

situations. For example, some states abolish the collateral source rule only in cases involving

insurance benefits to which a third-party retains a right of subrogation. 71 These provisions

prevent the unfair double-reduction of the plaintiffs award, which might otherwise occur.

Several states have abolished the collateral source rule with respect to insurance benefits but not

as to social legislation benefits such as social security.72 Other states have abolished the

collateral source rule with respect to certain types of insurance benefits while maintaining its

application to other types of benefits such as life insurance and other types of death benefits. 73

Some statutes provide that collateral source evidence will not be considered in cases where the

claimant or his family paid for the benefit, 74 and some of these statutes also refuse to consider the

collateral source evidence if the claimant constructively paid for the benefit, such as when the

state or federal government provides the benefit.75

Some state statutes abrogate the collateral source rule based on the amount of damages

awarded. For example, some states abolish the collateral source rule only when the total

compensatory award exceeds a certain threshold amount. 76 Additionally, at least one state has

limited the abrogation of the collateral source rule so that no damages award can ever be reduced

by more than 50% of its original amount in the absence of the rule.77

State statutes also differ on how a jury should handle the collateral source evidence.

Many statutes require a jury to reduce the plaintiffs damages by the value of the collateral

source benefits the plaintiff received,78 while others admit evidence of collateral benefits

received but a reduction in damages is discretionary.79 Statutes also differ as to whether a jury is

allowed to hear collateral source evidence at all. Many statutes allow the jury to consider the

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collateral source evidence80 while others provide that the evidence can only be heard by the judge

in post-trial proceedings.81

IV. THE HISTORY OF THE COLLATERAL SOURCE RULE IN ALBAMA

The traditional collateral source rule originated at common law and became subject to

modification by judicial action and legislative enactment.82 While the collateral source rule has

long been favored at common law,83 the United States Supreme Court did not formally adopt it

until the 1854.84 It was then that the Court held that the injured partys receipt of insurance

benefits was irrelevant to the liability of the wrongdoer, who had no direct relationship with the

insurer, and whom the Court held was bound to make satisfaction for the injury.85 Although

the Court did not use the term collateral to characterize the types of benefits the plaintiff

received, the Courts reasoning provided the foundation for what later became known as the

collateral source rule.86

A. Alabama Code sections on the Collateral Source Rule

The leading treatise on the law of evidence in Alabama 87 describes the collateral

source rule as being analogous to the rule of evidence 88 that any indication that a

defendant carries liability insurance is not admissible. 89 Over 50 years after the United

States Supreme Court adopted the rule, the Alabama Supreme Court formally adopted the

common law collateral source rule in the 1910 case of Long v. Kansas City, Memphis &

Birmingham Railroad Co.,90 when it held that evidence of a collateral source, i.e., a

payment to a plaintiff by a non-party for an element of damages claimed by that plaintiff,

was not admissible. The common law collateral source rule in Alabama remained in

effect for almost 70 years via numerous Alabama cases until the Alabama legislature

modified it in 1979, when the oldest pieces of legislation abrogating the collateral source

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rule in Alabama91 became law. These statutes, now sections 6-5-522 92 and 6-5-52493 of

the Alabama Code, only apply to products liability actions. Section 6-5-522 provides the

general rule, abolishing the collateral source rule in all product liability actions in

Alabama state courts.94 Section 6-5-524 provides an exception to the general rule and

invokes the collateral source rule in product liability actions in which the plaintiff can

show that he is obligated to repay the medical or hospital expenses which have been or

will be paid or reimbursed, effectively protecting the right of subrogation of the

collateral source.95 Thus, in a product liability action where an insurer has paid a

plaintiffs medical bills, and where that insurer retains a valid right to subrogation, 6-5-

524 prohibits the jury from hearing any testimony that the plaintiff has received such

insurance benefits.96

While the two original statutes only apply to product liability cases, in 1987 the Alabama

legislature passed two additional statutes that modify the collateral source rule in other types of

cases. Section 6-5-54597 applies to medical malpractice cases and 12-21-4598 applies to all

personal injury or death cases in which the plaintiff seeks damages for medical or hospital

expenses. Both of these statutes provide that evidence that the plaintiffs medical or hospital

expenses have been or will be paid or reimbursed shall be admissible as competent evidence. 99

Additionally, like the earlier statutes pertaining to product liability cases, these statutes also

allow the plaintiff to introduce evidence of the cost of obtaining medical insurance as well as any

subrogation rights the plaintiffs insurer retains.100

While sections 6-5-545 and 12-21-45 effectively allow collateral source evidence to be

admitted as competent evidence, the statutes do not address the effect such evidence should or

must have on an award of damages. Although the earlier statutes applicable to products liability

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cases clearly require that such collateral source evidence shall be admissible as competent

evidence in mitigation of such medical or hospital expense damages,101 no such language is

present in sections 6-5-545 and 12-21-45. The Alabama Supreme Court had declared that the

absence of such language effectively allows the jury, at its discretion, to consider or disregard all

or part of the collateral source evidence, along with the plaintiffs costs and reimbursement

obligations, in awarding damages.102 As a result, the effect of Alabamas modified collateral

source rule under the current statutory scheme is highly discretionary on a case-by-case basis.103

Since sections 6-5-545 and 12-21-45 only abolish the collateral source rule with respect

to medical or hospital expenses, the traditional collateral source rule still applies to all other

types of collateral benefits, such as disability or social security payments, or gratuities, for

example.104 To illustrate how sections 6-5-545 and 12-21-45 operate under the current Alabama

law, consider a plaintiff who sustains injuries as a result of medical malpractice 105 or in an

automobile accident.106 Before the injury-causing event, the plaintiff paid $2,000 in premiums to

obtain medical insurance coverage. As a result of the injury-causing event, the plaintiff claims

$10,000 in damages, including $5,000 in medical expenses, which the plaintiffs insurance

company has paid and now retains a right to subrogation out of the damage award. Under the

current Alabama law codified in the aforementioned statutes, during trial the judge shall admit

evidence that the plaintiffs insurance paid his medical expenses, that the plaintiff paid $2,000 in

insurance premiums, and that the insurance company retains a right to subrogation. 107 However,

evidence that the plaintiff received other collateral benefits, such as disability payments, is not

admissible. After such evidence is admitted, the current statutes are not clear on exactly what

effect, if any, this evidence should or must have in calculating damages. Some judges require a

damages award be offset by the amount of collateral benefits received, while others allow the

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jury to consider or disregard, at its discretion, all or part of this evidence in awarding damages.

Thus, the effect of Alabamas modified collateral source rule under the current statutory scheme

is highly discretionary on a case-by-case basis.108

B. Constitutional Challenges to Code Section 12-21-45

Nine years after being enacted, the Supreme Court heard, for the first time, constitutional

arguments against sections 12-21-45 and 6-5-545 and the legislative efforts to modify the

collateral source rule in Alabama. 109 In 1996 in American Legion Post No. 57 v. Leahey, 110 the

Alabama Supreme Court ruled that 12-21-45,111 allowing the admission of evidence that a

plaintiffs medical or hospital expenses have been or will be paid or reimbursed by a collateral

source, was unconstitutional because the admission of such evidence violated the right to a trial

by jury, the right to a remedy and access to the courts, equal protection, due process, and the

principle of separation of powers, all of which are guaranteed by the State Constitution. 112

Because of their similarities, the court also held 6-5-545113 unconstitutional by implication.114

In reaching its conclusion, the court analyzed similar statutes from other jurisdictions and

noted the confusion among and the conflicting results reached by other federal and state courts

on the issue.115 The court stated that ultimately, three problematic aspects of 12-21-45 were

persuasive in holding the statutes unconstitutional: (1) the statute attempts to change the law of

evidence without providing for the effect on the law of damages; (2) the statute does not

sufficiently protect insurers subrogation rights; and (3) the statute allows the admission of

evidence that the plaintiff is insured without allowing admission of evidence that the defendant is

insured.116

Considering the first aspect, the court noted that the statute changes the law of evidence

by allowing the admission of certain types of evidence during trial, but does not attempt to

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change the law of damages, in that the statute does not direct the jury as to the effect it may give

to such collateral source evidence.117 It is unclear from the statute whether an award of damages

is required to be offset by the amount of the collateral source, or whether such an offset is

discretionary. The court stated that if the statute was intended to require the jury to reduce the

award by the amount of the collateral source payment, such a requirement violates 11 of the

Alabama Constitution, guaranteeing the right to a trial by jury.118 On the other hand, if the statute

does not require the jury to reduce the award by the amount of the collateral source payment, but

instead was intended to give the jury the option of awarding the full amount of proven damages,

awarding only the difference between the proven damages and the collateral payments, or

awarding some amount in between, the statute then effectively violates due process

considerations because the jury would have uncontrolled, standardless discretion in the award of

compensatory damages, thus causing inconsistent treatment of collateral source benefits from

case to case.119

Considering the second problem, the court stated that under either interpretation of the

statute,120 the right of the plaintiffs insurer to subrogation is not protected.121 Although evidence

of the plaintiffs cost in obtaining insurance and evidence of an insurers subrogation rights is

admissible,122 the statute does not mandate, or even suggest, that the jury is required to award the

full medical and hospital expenses to the plaintiff simply because the insurer is entitled to

recover those expenses.123 The court noted that, to the contrary, because of irrational biases

against insurers or because of rational assumptions that insurers are obligated to pay such

expenses in consideration for premiums paid, a jury is probably less likely to award the full

amount if it knows that the award will be paid to an insurer.124

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Considering the third problem, the court held that since the statute allows the jury to hear

evidence that the plaintiff is insured, but is not allowed under the Alabama Rules of Evidence to

hear evidence that the defendant is insured,125 the statute effectively denies the plaintiff the right

to a trial by jury.126 In support of this conclusion, the court cites a previous Alabama Supreme

Court decision,127 which states that the right to trial by jury may be regulated by the

Legislature . . .; but legislative restrictions or amplifications must not be of such a character as to

deny or impair any of the fundamental requisites of a jury; that is, they may not . . . introduce

regulations leading away from impartiality.128 Such impartial treatment overturns the careful

balance that courts have always observed and tends to bias the jury in favor of the defendant,

whom it may assume carries no liability insurance, leading away from impartiality.129

Finally, in holding 12-21-45 unconstitutional, the court further concluded that the

statute violates equal protection and due process guarantees of the state constitution. The statute

violates the guarantee of equal protection because it diminishes awards to insured plaintiffs, even

if their insurer is subrogated to the recovery, while providing no reduction of awards to plaintiffs

who are self-insured.130 Additionally, since the statute does not allow the admission of collateral

source payments for damages to property, the court found that the statute unfairly affects

plaintiffs who suffer personal injuries compared to those with only property damage. 131 Finally,

the court stated that the statute violates due process guarantees insofar as the statute is unduly

vague, unreasonable, or overbroad, stemming from the fact that the statute does not provide for

the effect that the admitted collateral source evidence should have on the law of damages.132

C. Leahey Overruled

Four years after being declared unconstitutional, the Alabama Supreme Court in Marsh v.

Green133 overruled Leahey, reinstated 12-21-45, and held that the statute abrogating the

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collateral source rule in civil tort cases did not violate the right to a trial by jury or any other

constitutional right.134 At issue in Marsh was the constitutionality of 6-5-545, the collateral

source statute that is virtually identical to 12-21-45 but applicable only in medical malpractice

actions.135 The court provided the following explanation for the collateral source rule:

Thus, the courts generally have held that benefits received by the Plaintiff from a
source wholly independent of and collateral to the wrongdoer will not diminish
the damages otherwise recoverable from the wrongdoer. This is known as the
collateral source rule. Under it, the wrongdoer cannot take advantage of the
contracts or other relation that may exist between the insured person and third
persons. Thus, while a plaintiffs recovery under the ordinary negligence rule is
limited to damages which will make him whole, the collateral source rule allows a
plaintiff further recovery under certain circumstances even though he has suffered
no loss.136

With this, the Alabama Supreme Court held that 6-5-545 was not unconstitutional, and it

overruled Leahey to the extent that it held 12-21-45 unconstitutional.137

The court justified its conclusion by stating that these concerns deal with the wisdom of

legislative policy rather than constitutional issues. Matters of policy are for the Legislature and,

whether wise or unwise, legislative policies are of no concern to the courts. 138 The court

pointed to the fact that in one of its former decisions, it held that a court cannot hold a statute

invalid because of its view that there are elements therein which are violative of natural justice

or in conflict with the courts notion of natural, social, or political rights of the citizen.139

The court went on to cite, in its entirety, Justice Houstons dissenting opinion in Leahey

and ultimately held that it need not follow the precedent of Leahey because when the

Constitution is misinterpreted, the doctrine of stare decisis is not entitled to the deference it

otherwise receives.140 In support of this conclusion, the court further cites a United States

Supreme Court opinion, which held that while the doctrine of stare decisis counsels against a

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reconsideration of precedent, the Court has been particularly willing to reconsider constitutional

cases because in such cases, correction through legislative action is practically impossible.141

D. After Marsh v. Green: The Future of Collateral Source Rule in Alabama

Although the Alabama Supreme Courts decision in Marsh revived both 12-21-45 and

6-5-545, it still left many questions unanswered on the interpretation and application of these

statutes. To illustrate the problems surrounding the interpretation of these statutes, imagine

Plaintiff A, Alan, and Plaintiff B, Bob, are both injured by medical malpractice or in an

automobile accident, and each suffer the exact same injuries. Alan and Bob are each treated at

Smith Hospital by the same physician and each receive the same care. Consequently, Alan and

Bob each receive the exact same bill from Smith Hospital for $4,000, and the same bill from the

physician for $3,000, totaling $7,000 each. Alan has medical insurance, and Bob does not.

Alans insurance pays for his medical services, $1,000 to Smith Hospital and $750.00 to the

physician, and each is obligated to accept these amounts per their respective contracts with the

insurance company for reimbursement. Since Bob does not have health insurance, he is

obligated to pay $7,000 out-of-pocket for his medical services. If both Alan and Bob bring suit

against the tortfeasor, the statutes offer no guidance as to how to determine the appropriate

measure of damages sustained by each Alan and Bob. Is the appropriate measure of damages the

amount charged by the hospital and physician, $7,000, which would result in the same damages

for both Alan and Bob? Or is the appropriate measure of damages different for each plaintiff,

with Alans damages being the amount paid by his health insurance carrier ($1,750.00) which is

in turn accepted as payment for the medical bills, and Bobs damages being the amount charged

by the hospital and physician ($7,000) which Bob is obligated to repay out-of-pocket, since he

does not carry insurance?142 Although the statutory law in Alabama clearly states that evidence

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that the plaintiffs medical or hospital expenses have been or will be paid or reimbursed shall be

admissible as competent evidence,143 the answer depends on an individual judges interpretation

of the law. Some judges in Alabama interpret the statute to mean that damage awards are

required to be offset by any collateral source benefits received, while others interpret the statute

to mean that any offset is discretionary and for the jury to decide. Additionally, others still

construe the statutes to require evidence of the existence of a collateral source and subrogation

right to be admitted, while at the same time, to not require evidence of the amount of the

collateral source or amount of the subrogation to be admitted.

The Alabama Supreme Courts decision in Marsh seems to suggest that the statutes

should only affect the law of evidence, and not the law of damages, thus requiring the admission

of such evidence while making any offset discretionary.144 The Marsh court criticizes the Leahey

courts disapproval that the statutes only affect the law of evidence and states that [t]his silence

can be viewed as a virtue, not a vice, because it leaves to the courts their historical function of

determining the limits of recoverable damages, through an evolving common law. 145 According

to the Marsh court, this silence gives both the plaintiff and the defendant an opportunity to

present competing arguments to the jury on how they should interpret the collateral source

evidence and, in turn, allows the jury to interpret the evidence as they may in reaching their

conclusion.146 Thus, under this view taken by the Marsh court, a jury would be allowed to hear

and consider all evidence of collateral sources and have discretion as to whether an award should

be reduced wholly or partially by the amount of collateral sources received, or not at all.

The view set forth in Marsh, that these sections are purely evidentiary and have no effect

on the law of damages, carries a good deal of support. In a 1992 Alabama federal court decision

in the case of Killian v. Melser,147 the court stated that had the legislature intended to affect a

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substantive change in the law of damages, it would used language similar to that found in 6-5-

522, which states that collateral source evidence shall be admissible as competent evidence in

mitigation of damages.148 The court noted that the intention of omitting such language in 12-

21-45 was to allow the defendant to introduce such collateral source evidence to the jury without

requiring any specific change in the computation of damages.149

Thus, because the statutes themselves state that evidence of collateral payments shall

be admissible,150 and because of the prevailing interpretation set forth in Marsh and Killian that

the statutes are purely evidentiary, having no effect on the law of damages trial judges in

Alabama should have no option but to admit such evidence. Currently, however, there is no

guiding case law on how the courts should instruct the jury regarding the treatment of such

collateral source evidence. Pre-Leahey, Alabama trial courts routinely instructed juries that the

way in which they treated evidence of collateral source reimbursements was left to their

discretion.151 This jury charge is consistent with the view that the statutes are purely evidentiary

and have no effect on the law of damages. The Marsh court did not express disproval of such

interpretation,152 and many Alabama trial court judges continue to instruct juries in this manner in

cases involving these statutes.153

An additional concern left unanswered by the statutes is exactly how much of the

collateral source evidence should be admitted: is a judge required under the statutes to admit

evidence of the amount of the collateral source payment, or may he only admit evidence of the

existence of a collateral source that maintains a valid right to subrogation? Not only do the

statutes themselves not address this question, but to date there is also no appellate case law

available to answer the question. Alabama judges have been notably frustrated by the

unworkability of this standard,154 and in 2001, it briefly appeared there would be some guidance

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on this issue when the Alabama Supreme Court released a preliminary opinion in the case of Hull

v. Jackson.155 However, the Supreme Court withdrew that preliminary opinion and directed

attention back to Marsh.156 Thus, the answer depends on the judge, creating even more

confusion and seemingly unpredictable and arbitrary jury verdicts in Alabamas courtrooms.

VI. CONCLUSION

In modifying the collateral source rule, the Alabama legislature merely affected the

evidentiary aspect of the rule without offering any guidance on the effect this modification

should have on the law of damages. This incomplete abrogation of the collateral source rule

raises due process concerns that individual judges and juries will determine, with no guidance

from the statutes or the Alabama Supreme Court, what portion 157 of her damages, if any, the

plaintiff should be able to recover.158

Thus, action from the Alabama Legislature and/or the Alabama Supreme Court is

warranted in order for these statutes to continue to pass constitutional muster. The Alabama

Legislature should draft a more specific and narrowly drawn statute clearly requiring the

admission of collateral source evidence for both plaintiffs and defendants, and clearly delineating

the effect, if any, the evidence will have on the law of damages. The Alabama Supreme Court is

more likely to hold a more clearly drafted statute as meeting the requirements of the equal

protection and due process clauses of the Constitution of the State of Alabama.

Until then, the Alabama Supreme Court should provide a definitive interpretation of the

statute, including what effect the collateral source evidence should have on the law of damages.

The most practical interpretation is to require awards to be offset by the amount of collateral

benefits received, less any amount the plaintiff himself paid to secure the benefit (e.g., insurance

premiums), unless the source of reimbursement retains a valid subrogation right. When the

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source of reimbursement retains a valid right to subrogation, evidence of collateral source

payments from that source should be barred. Such a construction would save the statutes from

due process problems and the practical problem judges and juries currently face on how to treat

such evidence at trial. This interpretation would also protect insurers rights to subrogation, an

issue the Leahey court had when holding the statutes unconstitutional. Additionally, this

construction would save the statutes from equal protection problems because all plaintiffs who

have had their medical expenses paid for by a collateral source, including an insurer, are treated

alike, and judges and juries are left with no unanswered questions as to how to treat such

evidence.

Similar statutes abrogating or modifying the collateral source rule in a similar manner in

other states have thus far passed constitutional muster. Using these statutes as a guide would be

helpful in drafting a new Alabama statute which would avoid the due process problems

associated with the statute being unduly vague . . . or overbroad. 159 For example, Utahs

statute, although specifically dealing with malpractice actions, provides that an award for

damages be offset by the total amount of all collateral source benefits received or that are

available to the plaintiff, with no reduction being made for collateral sources which retain a valid

subrogation right.160 Additionally, under the Utah statute, any amount the plaintiff or his

immediate family has paid to secure the right to any collateral source benefit received as a result

of his injury will offset any reduction in the award.161

Although it offers little guidance, the opinion in Marsh nevertheless currently controls

tort law in Alabama, unfortunately resulting in unpredictable and standardless jury verdicts in

Alabamas courtrooms. Until additional case law or legislative action more specifically defines

19
the interpretation of the collateral source statutes in Alabama, future litigation is likely to take

place over the statutes interpretation and constitutionality.

20
1a
J.D. Candidate, May 2010, Samford University, Cumberland School of Law, Birmingham, Alabama; B.S., August 2005,
Auburn University, Auburn, Alabama.

Michael Flynn, Private Medical Insurance and the Collateral Source Rule: A Good Bet?, 22 U. TOL. L. REV. 39, 40 (1990)
(citing C. MCCORMICK, CASES AND MATERIALS ON EVIDENCE 201 (2d ed. 1972)).
2
Theodore R. LeBlang, J.D., Survey of Illinois Law: The Collateral Source Rule, 29 S. Ill. U. L.J. 695, 695 (Summer 2005)
(citing Wilson v. Hoffman Group, Inc., 546 N.E.2d 524, 530 (Ill. 1989)).
3
Flynn, supra note 1, at 41 (citing Restatement (Second) of Torts 920A(2) (1977)).
4
Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an
accident after the insurer has paid out money on behalf of its insured. Subrogation clauses in insurance contracts indicate
that if the insurance company repairs a loss caused by a tortfeasor, the company has the right to pursue reimbursement from
that tortfeasor. See Kidd & Krauss, Collateral Source and Torts Soul, GEO. MASON U. LAW & ECON. RES. PAPER SERIES
No. 08-57, 35 (September 23, 2008), available at http://ssrn.com/abstract_id=1272678.
5
E.g., when an employer continues to pay an employees wages during his incapacity.
6
E.g., workers compensation acts or the Federal Employers Liability Act.
7
E.g., when a plaintiff is not charged for medical services rendered.
8
Marshall & Fitzgerald, The Collateral Source Rule and its Abolition: An Economic Perspective, 15-FALL KAN.
J.L. & PUB. POLY 57, 60 (Fall 2005) (citing Restatement (Second) of Torts 920A(2), cmt. c. (1979)).
9
Marshall & Fitzgerald, supra note 8, at 58 (citing James L. Branton, The Collateral Source Rule, 18 ST. MARYS L.J. 883
(1987)).
10
Marshall & Fitzgerald, supra note 8, at 58 (citing Elaine W. Shoben et al., REMEDIES, CASES AND PROBLEMS, 646 (3d ed.
2002)).
11
Flynn, supra note 1, at 40-42; Marshall & Fitzgerald, supra note 8, at 59 (citing James L. Branton, The Collateral Source
Rule, 18 ST. MARYS L.J. 883 (1987)).
12
Id.
13
Marshall & Fitzgerald, supra note 8, at 58.
14
Kidd & Krauss, Collateral Source and Torts Soul, GEO. MASON U. LAW & ECON. RES. PAPER SERIES No. 08-57, 1
(September 23, 2008), available at http://ssrn.com/abstract_id=1272678.
15
Id. at 11.
16
Marshall & Fitzgerald, supra note 8, at 58; See also Kidd & Krauss, supra note 14, at 11.
17
Flynn, supra note 1, at 42. See also Kidd & Krauss, supra note 14, at 11-12.
18
Id.
19
Flynn, supra note 1, at 42 (citing Restatement (Second) of Torts 920A comments a and c (1977)).
20
Marshall & Fitzgerald, supra note 8, at 59.
21
Pasman-Green & Richards, Who is Winning the Collateral Source Rule War? The Battleground in the Sixth Circuit States,
31 U. TOL. L. REV. 425, 429-430 (Spring 2000).
22
Id.
23
Id.
24
ALA. CODE 12-21-45 (1995). See also ALA. CODE 6-5-545, 6-5-522 (1993), which are applicable in medical
malpractice and product liability actions, respectively.
25
See American Legion Post No. 57 v. Leahey, 681 So. 2d 1337 (Ala. 1996).
26
See Marsh v. Green, 782 So. 2d 223 (Ala. 2000).
27
782 So. 2d 223 (Ala. 2000).
28
Kidd & Krauss, supra note 14, at 2.
29
Flynn, supra note 1, at 41.
30
Id.
31
Id.
32
Id. at 43.
33
John G. Fleming, The Collateral Source Rule and Contract Damages, 71 CAL. L. REV. 56, 57 (January 1983). Examples
of instances in which the collateral source retains a direct claim for reimbursement from the tortfeasor include: indemnity
insurance, workers compensation in which the insurer retains a right to subrogation for benefits paid, certain prepaid
medical plans that include contractual stipulations for repayment, and conditional loans made to the plaintiff requiring
repayment in the case of a successful tort recovery. Id.
34
Subrogation rules are based upon the reasoning that the loss should rest upon the wrongdoer rather than upon the innocent
third party. See Powell v. Blue Corss & Blue Shield, 581 So. 2d 772 (Ala. 1990), overruled by State Farm Fire & Cas. Co.
v. Hannig, 764 So. 2d 543 (Ala. 2000).
35
See Helfend v. S. Ca. Rapid Transit Dist., 465 P.2d 61 (Cal. 1970).
36
See Kidd & Krauss, supra note 14, at 4.
37
Fleming, supra note 33, at 58. See also Kidd & Krauss, supra note 14, at 4.
38
Fleming, supra note 33, at 58.
39
Id.
40
Flynn, supra note 1, at 43-44 (citing Fleming, The Collateral Source Rule and Loss Allocation in Tort Law, 54 CALIF. L.
REV. 1478, 1478-85 (1966); Ghiardi, The Collateral Source Rule: Multiple Recovery in Personal Injury Actions, 535 INS.
L.J. 457, 460-61 (1967); Lambert, The Case for the Collateral Source Rule, 524 INS. L.J. 531, 542-43 (1966); Note,
Unreason in the Law of Damages: The Collateral Source Rule, 77 HARV. L. REV. 741, 748-51 (1964); Schwartz, Tort Law
Reform: Strict Liability and the Collateral Source Rule Do Not Mix, 39 VAND. L. REV. 569, 571-72 (1986); Sedler, The
Collateral Source Rule and Personal Injury Damages: The Irrelevant Principle and the Functional Approach, 58 KY. L.J.
36, 45-48 (1969); Hogan, The Collateral Source Rule: Its Justification and Its Defense, 19 TRIAL 58 (Feb. 1983); Branton,
The Collateral Source Rule, 18 ST. MARYS L.J., 883, 884-85 (1987); Lorentzen & Rankin, The Collateral Source Issue:
Forging A Middle Ground, 35 FEDN INS. COUNS. Q. 3, 4-5 (1984)).
41
Id.
42
Linda J. Grobis, Comment, Lanbert v. Wrensch: Another Step Toward Abrogation of the Collateral Source Rule in
Wisconsin, 1988 WIS. L. REV. 857, 862 (1988).
43
See Jones v. Crawford, 361 So. 2d 518, 522 (Ala. 1978).
44
See Am. Standard Ins. Co. v. Cleveland, 369 N.W.2d 168 (Wis. Ct. App. 1985).
45
See Crawford, 361 So. 2d at 520-21; see also Gribble v. Cox, 349 So. 2d 1141, 1143 (Ala. 1977).
46
Gribble, 349 So. 2d at 1143; Phoenix Ins. Co. of N.Y. v. Leonard, 119 So. 2d 217, 219 (Ala. 1960).
47
See, e.g., Ala. R. Evidence Rule 411: evidence that a defendant is insured is inadmissible when offered to prove that the
defendant was negligent.
48
See, e.g., CHARLES W. GAMBLE, MCELROYS ALABAMA EVIDENCE 189.04(2) (4th ed. 1991).
49
Green v. Denver, 59 F.2d 1029, 1033 (10th Cir. 1995).
50
Marshall & Fitzgerald, supra note 8, at 60. See also Hantler, Schwartz, Silverman & Laird, Moving Toward the Fully
Informed Jury, 3 GEORGETOWN J. L. & PUB. POLICY 21, 24-25 (2005) (asserting that the collateral source rule allows a
victim to be made more than whole).
51
See Flynn, supra note 1, at 44-45.
52
Pasman-Green & Richards, supra note 21, at 429-30.
53
Kidd & Krauss, supra note 14, at 24.
54
Flynn, supra note 1, at 46.
55
Id.
56
Id.
57
Id.
58
Id. at 48 (citing Restatement (Second) of Torts 920A (1977), which states:
When the defendants tortious conduct has caused harm to the plaintiff or to his property and is so doing has conferred a
special benefit to the interest of the plaintiff that was harmed, the value of the benefit conferred is considered in mitigation
of damages, to the extent that this is equitable).

Opponents of the collateral source rule argue that the rule is an unwarranted exception to this Restatement section. Id.
59
Marshall & Fitzgerald, supra note 8, at 61. States abolishing and/or minimizing the reach of the collateral source rule
include: Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana,
Iowa, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee,
Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Id. at n.39.
60
Marshall & Fitzgerald, supra note 8, at 61.
61
ALASKA STAT. 9.17.070 (2004); MINN. STAT. 548.36 (2000); N.D. CENT. CODE 32-03.2-06 (2001).
62
COLO. REV. STAT. 13-21-111.6 (2004); CONN. GEN. STAT. ANN. 52-225a (West 2005); FLA. STAT. ANN. 768.76
(West 2005); IDAHO CODE ANN. 6-1606 (2004); IND. CODE 34-44-1-2 (1998); IOWA CODE 668.14 (1998); MICH.
COMP. LAWS 600.6303 (2000); MONT. CODE ANN. 27-1-308 (2000); N.J. STAT. ANN. 2A:15-97 (West 2000); N.Y.
C.P.L.R. 4545(c) (McKinney 2001).
63
Carson v. Maurer, 424 A.2d 825, 836 (N.H. 1980) (holding that a New Hampshire statute abolishing the collateral source
rule was unconstitutional).
64
Denton v. Con-Way S. Express, Inc., 402 S.E.2d 269, 272 (Ga. 1991), overruled on other grounds by Grissom v. Gleason,
418 S.E. 2d 27 (Ga. 1992) (holding that a Georgia statute unconstitutionally eliminated the collateral source rule).
65
OBryan v. Hedgespeth, 892 S.W.2d 571, 578 (Ky. 1995) (state statute abrogating the collateral source rule held
unconstitutional).
66
Kansas courts invalidated statutes attempting to eliminate the collateral sources rule on three separate occasions. See
Christopher J. Eaton, Comment, The Kansas Legislatures Attempt to Abrogate the Collateral Source Rule: Three Strikes
and Theyre Out?, 42 U. KAN. L. REV. 913, 916-20 (1994).
67
ALASKA STAT. 9.55.548 (Michie 2000); ARIZ. REV. STAT. 12-565 (1992); CAL. CIV. CODE 3333.1 (West 1997);
DEL. CODE ANN. tit. 18, 6862 (1999); 735 ILL. COMP. STAT. 5/2-1205 (1992); ME. REV. STAT. ANN. tit. 24, 2906 (West
2000); MD. CODE ANN., CTS. & JUD. PROC. 3-2A-06 (2008); MASS. GEN. LAWS ch. 231 60G (2000); NEB. REV. STAT.
44-2819 (2008); N.Y. C.P.L.R. 4545(a) (McKinney 2001); OHIO REV. CODE ANN. 2305.27 (West 2000); S.D. CODIFIED
LAWS 21-3-12 (Michie 2008); TENN. CODE ANN. 29-26-119 (2000); UTAH CODE ANN. 78-14-4.5 (2001); WASH. REV.
CODE 7.70.080 (2006).
68
N.Y. C.P.L.R. 4545(b) (McKinney 2001).
69
42 PA. CONS. STAT. ANN. 8553(d) (West 1998); OHIO REV. CODE ANN. 2744.05 (West 1994).
70
DEL. CODE ANN. tit. 21, 2118(g) (1999); MICH. COMP. LAWS ANN. 500.3109 (2002); MINN. STAT. 65B.51 (2005);
N.J. STAT. ANN. 39:6A-6 (West 2001); N.D. CENT. CODE 26.1-41-13 (2001); UTAH CODE ANN. 31A-22-309 (2001).
71
HAW. CODE ANN. 663-10 (2002); IDAHO CODE ANN. 6-1606 (2004); MINN. STAT. ANN. 548.251 (2008); MONT.
CODE ANN. 27-1-308 (2000); OHIO REV. CODE ANN. 2305.27 (West 2000); OKL. STAT. ANN. 63, 1-1708.1D (2003);
S.D. CODIFIED LAWS 21-3-12 (Michie 2008); UTAH CODE ANN. 78-14-4.5 (2001).
72
OR. REV. STAT. 31.580 (2005) (formerly 18.580; renumbered 2003).
73
IDAHO CODE ANN. 6-1606 (2004); IND. CODE 34-44-1-2 (1998); N.J. STAT. ANN. 39:6A-6 (West 2001); OR. REV.
STAT. 31.580 (2005) (formerly 18.580; renumbered 2003).
74
COLO. REV. STAT. 13-21-111.6 (2004); IND. CODE 34-44-1-2 (1998); IOWA CODE 668.14 (1998); N.D. CENT. CODE
32-03.2-06 (2001); S.D. CODIFIED LAWS 21-3-12 (Michie 2008); WASH. REV. CODE 7.70.080 (2006).
75
IND. CODE 34-44-1-2 (1998); IOWA CODE 668.14 (1998); MASS. GEN. LAWS ch. 231 60G (2000); S.D. CODIFIED
LAWS 21-3-12 (Michie 2008).
76
MONT. CODE ANN. 27-1-308 (2000).
77
735 ILL. COMP. STAT. 5/2-1205 (1992).
78
ALASKA STAT. 9.17.070 (Michie 2000); ALASKA STAT. 9.55.548 (Michie 2000); COLO. REV. STAT. 13-21-111.6
(2004); CONN. GEN. STAT. ANN. 52-225a (West 2005); FLA. STAT. ANN. 768.76 (West 2005); IDAHO CODE ANN. 6-
1606 (2004); 735 ILL. COMP. STAT. 5/2-1205 (1992); ME. REV. STAT. ANN. tit. 24, 2906 (West 2000); MASS. GEN. LAWS
ch. 231 60G (2000); MICH. COMP. LAWS 600.6303 (2000); MINN. STAT. 548.251 (2008); MONT. CODE ANN. 27-1-
308 (2000); N.J. STAT. ANN. 39:6A-6 (West 2001); N.Y. C.P.L.R. 4545 (McKinney 2001); N.D. CENT. CODE 32-03.2-06
(2001); UTAH CODE ANN. 78-14-4.5 (2001).
79
ARIZ. REV. STAT. 12-565 (1992); CAL. CIV. CODE 3333.1 (West 1997); DEL. CODE ANN. tit. 18, 6862 (1999); IND.
CODE 34-44-1-2 (1998); IOWA CODE 668.14 (1998); MD. CODE ANN., CTS. & JUD. PROC. 3-2A-06 (2008); NEB. REV.
STAT. 44-2819 (2008); S.D. CODIFIED LAWS 21-3-12 (Michie 2008); WASH. REV. CODE 7.70.080 (2006).
80
ARIZ. REV. STAT. 12-565 (1992); CAL. CIV. CODE 3333.1 (West 1997); DEL. CODE ANN. tit. 18, 6862 (1999); IND.
CODE 34-44-1-2 (1998); IOWA CODE 668.14 (1998); S.D. CODIFIED LAWS 21-3-12 (Michie 2008); WASH. REV. CODE
7.70.080 (2006).
81
ALASKA STAT. 9.17.070 (2004); ALASKA STAT. 9.55.548 (Michie 2000); COLO. REV. STAT. 13-21-111.6 (2004);
CONN. GEN. STAT. ANN. 52-225a (West 2005); FLA. STAT. ANN. 768.76 (West 2005); IDAHO CODE ANN. 6-1606
(2004); 735 ILL. COMP. STAT. 5/2-1205 (1992); ME. REV. STAT. ANN. tit. 24, 2906 (West 2000); MD. CODE ANN., CTS. &
JUD. PROC. 3-2A-06 (2008); MASS. GEN. LAWS ch. 231 60G (2000); MICH. COMP. LAWS 600.6303 (2000); MINN.
STAT. ANN. 548.36 (West 2000); MONT. CODE ANN. 27-1-308 (2000); NEB. REV. STAT. 44-2819 (2008); N.J. STAT.
ANN. 2A:15-97 (West 2000); N.Y. C.P.L.R. 4545 (McKinney 2001); N.D. CENT. CODE 32-03.2-06 (2001); UTAH CODE
ANN. 78-14-4.5 (2001).
82
Restatement (Second) of Torts 920A cmt. D (1979).
83
Marshall & Fitzgerald, supra note 8, at 59.
84
The Propeller Monticello v. Mollison, 58 U.S. 152 (1854). The Court refused to allow the fact that a party had collected
from his own insurance to release a wrongdoer from liability, recognizing this as a well established common law doctrine.
Id. at 155.
85
The Propeller Monticello, 58 U.S. at 155.
86
Marshall & Fitzgerald, supra note 8, at 59.
87
C. GAMBLE, MCELROYS ALABAMA EVIDENCE (4th ed. 1991).
88
See Ala. R. Evidence 411: evidence that a defendant is insured is inadmissible when offered to prove that the defendant
was negligent.
89
American Legion Post No. 57 v. Leahey, 681 So. 2d 1337, 1339 (Ala. 1996) (citing C. GAMBLE, MCELROYS ALABAMA
EVIDENCE, 189.04(2) (4th ed. 1991)).
90
54 So. 62, 63-64 (Ala. 1910) (holding that If A. negligently or intentionally burns B.s house, and B. sues him for
damages, surely A. cannot defeat this action by pleading and showing that C. has paid B. the full value of his house under a
contract of insurance between B. and C., as to which A. is a perfect stranger. It is no concern of A.s that C. may be, by
contract or otherwise, subrogated to the rights of B. in the matter. The question, to whom will the damages belong when
recovered, is one in which the defendant has no interest. It does not even affect the measure of his liability; and is not a
proper issue in the suit by B. against A. . . . The mere fact that the insurer has paid the insured cannot affect the action
against the wrongdoer who has destroyed or injured the property, the subject of the insurance).
91
See ALA. CODE 6-5-522, 24.
92
The full statute reads:
6-5-522: Evidence of medical expense reimbursement mitigates damages; cost of obtaining reimbursement recoverable.
In all product liability actions where damages for any medical or hospital expenses are claimed and are legally recoverable
for personal injury or death, evidence that the plaintiff's medical or hospital expenses have been or will be paid or
reimbursed (1) by medical or hospital insurance, or (2) pursuant to the medical and hospital payment provisions of law
governing workmen's compensation, shall be admissible as competent evidence in mitigation of such medical or hospital
expense damages. In such actions upon admission of evidence respecting reimbursement or payment of medical or hospital
expenses, the plaintiff shall be entitled to introduce evidence of the cost of obtaining reimbursement or payment of medical
or hospital expenses. Such portion of the costs of obtaining reimbursement or payment of medical or hospital expenses as
the trier of fact finds is reasonably related to the reimbursement or payment received or to be received by the plaintiff shall
be a recoverable item of such damages for medical or hospital expenses.
93
The full statute reads:
6-5-524: Evidence of reimbursement inadmissible if recipient must repay.
Upon proof by the plaintiff to the court that the plaintiff is obligated to repay the medical or hospital expenses which have
been or will be paid or reimbursed, no evidence relating to such reimbursement or payment not otherwise admissible shall
be admissible as a result of this division.
94
See ALA. CODE 6-5-522, stating, In all product liability actions where damages for any medical or hospital expenses
are claimed and are legally recoverable for personal injury or death, evidence that the plaintiff's medical or hospital
expenses have been or will be paid or reimbursed . . . shall be admissible as competent evidence in mitigation of such
medical or hospital expense damages.
95
ALA. CODE 6-5-524. See also Craig v. F.W. Woolworth Co., 866 F. Supp. 1369, 1371 (N.D. Ala. 1993), affd without
opinion, 38 F.3d 573 (11th Cir. 1994).
96
See 6-5-524.
97
The full statute reads:
6-5-545. Evidence admissible that medical expenses will be reimbursed; information subject to discovery.
(a) In all actions where damages for any medical or hospital expenses are claimed and are legally recoverable for personal
injury or death, evidence that the plaintiff's medical or hospital expenses have been or will be paid or reimbursed shall be
admissible as competent evidence. In such actions upon admission of evidence respecting reimbursement or payment of
medical or hospital expenses, the plaintiff shall be entitled to introduce evidence of the cost of obtaining reimbursement or
payment of medical or hospital expenses.
(b) In such civil actions, information respecting such reimbursement or payment obtained or such reimbursement or
payment which may be obtained by the plaintiff for medical or hospital expenses shall be subject to discovery.
(c) Upon proof by the plaintiff to the court that the plaintiff is obligated to repay the medical or hospital expenses which
have been or will be paid or reimbursed, evidence relating to such reimbursement or payment shall be admissible.
98
The full statute reads:
12-21-45. Evidence that medical or hospital expenses to be paid or reimbursed admissible as competent evidence.
(a) In all civil actions where damages for any medical or hospital expenses are claimed and are legally recoverable for
personal injury or death, evidence that the plaintiff's medical or hospital expenses have been or will be paid or reimbursed
shall be admissible as competent evidence. In such actions upon admission of evidence respecting reimbursement or
payment of medical or hospital expenses, the plaintiff shall be entitled to introduce evidence of the cost of obtaining
reimbursement or payment of medical or hospital expenses.
(b) In such civil actions, information respecting such reimbursement or payment obtained or such reimbursement or
payment which may be obtained by the plaintiff for medical or hospital expenses shall be subject to discovery.
(c) Upon proof by the plaintiff to the court that the plaintiff is obligated to repay the medical or hospital expenses which
have been or will be paid or reimbursed, evidence relating to such reimbursement or payment shall be admissible.
(d) This section shall not apply to any civil action pending on June 11, 1987.
99
12-21-45(a); 6-5-545(a).
100
See Flynn, supra note 1, at 58 (citing Ala. Code 12-21-45(a), (c)).
101
See 6-5-522.
102
See Marsh v. Green, 782 So. 2d 223 (Ala. 2000).
103
Id.
104
See 12-21-45(a); 6-5-545(a).
105
6-5-545 only applies in medical malpractice actions.
106
12-21-45 applies in all civil actions where damages for any medical or hospital expenses are claimed and are legally
recoverable for personal injury or death.
107
See Flynn, supra note 1, at 58.
108
Id.
109
See generally American Legion Post No. 57 v. Leahey, 681 So. 2d 1337 (Ala. 1996).
110
681 So. 2d 1337 (Ala. 1996).
111
12-21-45 abrogates the collateral source rule in personal injury or death cases other than product liability cases.
112
Leahey, 681 So. 2d at 1338.
113
6-5-545 abrogates the collateral source rule in medical malpractice actions.
114
Leahey, 681 So. 2d at 1338.
115
Id. at 1340-43.
116
Id. at 1346. Under Rule 411 of the Alabama Rules of Evidence, evidence that a defendant is insured is inadmissible when
offered to prove that the defendant was negligent.
117
Leahey, 681 So. 2d at 1345.
118
Id.
119
Id.
120
I.e., whether the statute provides for a required or discretionary setoff of an award for damages.
121
Leahey, 681 So. 2d at 1345.
122
See 12-21-45, 6-5-545, stating that [upon admission of evidence respecting reimbursement or payment of medical or
hospital expenses, the plaintiff shall be entitled to introduce evidence of the cost of obtaining reimbursement or payment of
medical or hospital expenses, and [u]pon proof by the plaintiff to the court that the plaintiff is obligated to repay the
medical or hospital expenses which have been or will be paid or reimbursed, evidence relating to such reimbursement or
payment shall be admissible.
123
Leahey, 681 So. 2d at 1345.
124
Id. at 1345-46.
125
See Ala. R. Evidence Rule 411: evidence that a defendant is insured is inadmissible when offered to prove that the
defendant was negligent.
126
Leahey, 681 So. 2d at 1346.
127
Baader v. State, 77 So. 370 (Ala. 1917).
128
Leahey, 681 So. 2d at 1345 (citing Baader, 77 So. at 371-72).
129
Id.
130
Leahey, 681 So. 2d at 1346.
131
Id.
132
Id. at 1346-47 (quoting Ross Neely Express, Inc. v. Alabama Dept of Environmental Mgmt., 437 So. 2d 82, 84 (Ala.
1983); Friday v. Ethanol Corp., 539 So. 2d 208, 215 (Ala. 1988)).
133
782 So. 2d 223 (Ala. 2000).
134
Marsh v. Green, 782 So. 2d 223 (Ala. 2000).
135
Marsh, 782 So. 2d at 225, 230-33.
136
Id. at 230 (citing 22 Am.Jur.2d Damages 566 (1988)).
137
Id.
138
Id. at 231 (citing State ex rel. Wilkinson v. Murphy, 186 So. 487 (Ala. 1939)).
139
Marsh, 782 So. 2d at 231 (quoting Alabama State Federation of Labor v. McAdory, 18 So. 2d at 815)).
140
Marsh, 782 So. 2d at 232.
141
Id. (quoting Seminole Tribe of Florida v. Florida, 517 U.S. 44, 63 (1996)).
142
This hypo was set forth, in substantial part, by Judge Graffeo in a recent order in Escott v. Alsayyad (Cv 07-0582)
(Circuit Court of Jefferson County, Alabama).
143
See 12-21-45, 6-5-545
144
See Marsh, 782 So. 2d at 233 n.2.
145
Marsh, 782 So. 2d at 233 n.2.
146
Id.
147
792 F.Supp. 1217 (N.D. Ala. 1992).
148
Killian v. Melser, 792 F. Supp. 1217 (citing 6-5-522).
149
See Killian, 792 F.Supp. 1217, 1219 (N.D. Ala. 1992). See also Craig v. F.W. Woolworth Co., 866 F.Supp. 1369, 1372
(N.D. Ala. 1993) (agreeing that the statute is purely evidentiary).
150
See ALA. CODE 12-21-45 (1995); ALA. CODE 6-5-545 (1993).
151
See Killian, 92 F.Supp. at 1220.
152
See generally Marsh v. Green, 782 So. 2d 223 (Ala. 2000).
153
See 1 Alabama Pattern Jury Instructions Civ. 11.09 (2nd ed.), which states: The measure of damages for medical
expenses is all reasonable expenses necessarily incurred for doctors' and medical bills which the plaintiff has paid or
become obligated to pay [and the amount of the reasonable expenses of medical care, treatment and services reasonably
certain to be required in the future]. The reasonableness of, and the necessity for, such expenses are matters for your
determination from the evidence.
154
See generally Killian, 792 F. Supp. 1217 (N.D. Ala. 1992); see also Craig v. F. W. Woolworth Co., 866 F. Supp. 1369,
stating that 12-21-45 opens the door to chaos.
155
See generally 794 So. 2d 349 (Ala. 2001).
156
See generally Hull v. Jackson, 794 So. 2d 349 (Ala. 2001).
157
Whether the plaintiff should recover all the medical expenses paid by her insurer (effectively reinstating the collateral
source rule in individual cases), whether the plaintiff should recover only those sums for which she is personally liable
(abrogating the collateral source rule in individual cases), or whether some amount in between the two extremes should be
awarded to the plaintiff (leaving doubt as to whether the collateral source rule is in effect in individual cases). See Marsh v.
Green, 782 So. 2d 223, 235 (Ala. 2000).
158
See Marsh v. Green, 782 So. 2d 223, 235 (Ala. 2000) (Cook, J., dissenting). Such due process concerns are speculative,
as the Alabama Supreme Court in Marsh definitively ruled that the statutes did not violate the constitution. However, as
Justice Cook noted in his dissent, such a concern may be well founded notwithstanding the courts holding.
159
See Leahey, 681 So. 2d at 1347 (citing Ross Neely Express, Inc. v. Alabama Dept of Environm. Mgmt., 437 So. 2d 82,
84 (Ala. 1983)).
160
See UT ST 78B-3-405 (1953). The full statute reads:
78B-3-405. Amount of award reduced by amounts of collateral sources available to plaintiff--No reduction where
subrogation right exists--Collateral sources defined--Procedure to preserve subrogation rights--Evidence admissible
Exceptions
(1) In all malpractice actions against health care providers as defined in Section 78B-3-403 in which damages are awarded
to compensate the plaintiff for losses sustained, the court shall reduce the amount of the award by the total of all amounts
paid to the plaintiff from all collateral sources which are available to him. No reduction may be made for collateral sources
for which a subrogation right exists as provided in this section nor shall there be a reduction for any collateral payment not
included in the award of damages.
(2) Upon a finding of liability and an awarding of damages by the trier of fact, the court shall receive evidence concerning
the total amounts of collateral sources which have been paid to or for the benefit of the plaintiff or are otherwise available to
him. The court shall also take testimony of any amount which has been paid, contributed, or forfeited by, or on behalf of the
plaintiff or members of his immediate family to secure his right to any collateral source benefit which he is receiving as a
result of his injury, and shall offset any reduction in the award by those amounts. Evidence may not be received and a
reduction may not be made with respect to future collateral source benefits except as specified in Subsection (5).
(3) For purposes of this section collateral source means payments made to or for the benefit of the plaintiff for:
(a) medical expenses and disability payments payable under the United States Social Security Act, any federal, state, or
local income disability act, or any other public program, except the federal programs which are required by law to seek
subrogation;
(b) any health, sickness, or income replacement insurance, automobile accident insurance that provides health benefits or
income replacement coverage, and any other similar insurance benefits, except life insurance benefits available to the
plaintiff, whether purchased by the plaintiff or provided by others;
(c) any contract or agreement of any person, group, organization, partnership, or corporation to provide, pay for, or
reimburse the costs of hospital, medical, dental, or other health care services, except benefits received as gifts, contributions,
or assistance made gratuitously; and
(d) any contractual or voluntary wage continuation plan provided by employers or any other system intended to provide
wages during a period of disability.
(4) To preserve subrogation rights for amounts paid or received prior to settlement or judgment, a provider of collateral
sources shall, at least 30 days before settlement or trial of the action, serve a written notice upon each health care provider
against whom the malpractice action has been asserted. The written notice shall state:
(a) the name and address of the provider of collateral sources;
(b) the amount of collateral sources paid;
(c) the names and addresses of all persons who received payment; and
(d) the items and purposes for which payment has been made.
(5) Evidence is admissible of government programs that provide payments or benefits available in the future to or for the
benefit of the plaintiff to the extent available irrespective of the recipient's ability to pay. Evidence of the likelihood or
unlikelihood that the programs, payments, or benefits will be available in the future is also admissible. The trier of fact may
consider the evidence in determining the amount of damages awarded to a plaintiff for future expenses.
(6) A provider of collateral sources is not entitled to recover any amount of benefits from a health care provider, the
plaintiff, or any other person or entity as reimbursement for collateral source payments made prior to settlement or
judgment, including any payments made under Title 26, Chapter 19, Medical Benefits Recovery Act, except to the extent
that subrogation rights to amounts paid prior to settlement or judgment are preserved as provided in this section.
(7) All policies of insurance providing benefits affected by this section are construed in accordance with this section.
161
UT ST 78B-3-405 (1953).