PERSONAL INJURY PRACTICE
POINTERS FOR DEALING WITH THE
COLLATERAL SOURCE RULE
By: Jesse B. Blocher
Habush Habush & Rottier S.C. ®
WHAT IS THE COLLATERAL SOURCE
RULE?
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“The collateral-source rule provides that the
damages to be awarded to an injured person are
not to be affected by the fact that the claimant
received compensation from other sources, such
as sick leave, compensation, or insurance.”
Payne v. Bilco Co., 54 Wis. 2d 424, 433, 195
N.W.2d 641, 647 (1972).
WHAT IS THE COLLATERAL SOURCE RULE?
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Example, lost wages:
Employee is injured in a car accident due to the fault of
Bad Driver and must miss a month of work.
Employee sustained a loss of earning capacity
Employee is entitled to claim what he was “reasonably
capable of earning at his usual trade or occupation during
such period as he was unable to perform his usual work or
carry on his usual occupation as a natural consequence of
the personal injuries.” Payne v. Bilco Co., 54 Wis. 2d 424,
434, 195 N.W.2d 641, 647 (1972)
The benevolent employer of Employee decides to continue
his wages during the time Employee is off work.
Bad Driver must still compensate Employee for his missed
wages during that month based on the collateral source
rule. Id.
WHAT IS THE PURPOSE OF THE
COLLATERAL SOURCE RULE?
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Defendants often bemoan the collateral source rule as creating a windfall or double
recovery for the plaintiff.
So why does it exist?
“Our tort law applies the collateral source rule as part of a policy seeking to ‘deter negligent
conduct by placing the full cost of the wrongful conduct on the tortfeasor.’ The tortfeasor
who is legally responsible for causing injury is not relieved of his obligation to the victim
simply because the victim had the foresight to arrange, or good fortune to receive, benefits
from a collateral source for injuries and expenses. In an early case applying the collateral
source rule to wages this court stated:
We see no reason why one whose acts have caused injury to another should reap the entire
benefit that comes from the payment of wages made by an employer, either as a gratuity to
a faithful employee or because such payments are required by contract. Such payments do
not change the nature of the injury which the employee sustains through the wrongful acts
of the tortfeasor. If either is to profit by the payments made by the employer, it should be
the person who has been injured, not the one whose wrongful acts caused the injury. The
extent of the liability of the wrongdoer is dependent upon the extent of the injuries inflicted
by his wrongful act, not upon the question whether the employee receives wages during
disability from his employer.” Ellsworth v. Schelbrock, 2000 WI 63, ¶ 7, 235 Wis. 2d 678,
684-85, 611 N.W.2d 764, 767, (internal citations omitted).
Creates a uniform measure of damages in all cases.
If there is to be any double recovery, the rule benefits the plaintiff rather than the
tortfeasor as a matter of equity.
Prevents loss associated with paying insurance premiums by insured plaintiff.
HOW DOES THE COLLATERAL SOURCE RULE
AFFECT MOST PERSONAL INJURY CASES?
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Most common application is determining the
“reasonable value” of medical expenses.
However, it also applies to other benefits such as
disability payments. See Betterman v. Fleming
Companies, Inc., 2004 WI App 44, ¶ 34, 271 Wis. 2d
193, 212, 677 N.W.2d 673, 682.
See also Ellsworth v. Schelbrock, 2000 WI 63, ¶ 8, 235
Wis. 2d 678, 685, 611 N.W.2d 764, 767 (citing
Restatement (Second) of Torts § 920A cmt. c (1979))
(“it is the tortfeasor's responsibility to compensate for
all harm that he [or she] causes, not confined to the
net loss that the injured party receives. . . . [T]he
collateral source rule applies to benefits from
insurance policies, gratuities, and benefits from
employment and social legislation.”)
THE “REASONABLE VALUE” OF MEDICAL
EXPENSES
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“In Wisconsin, a plaintiff who has been injured by
the tortious conduct of another may recover the
reasonable value of medical services rendered.”
Koffman v. Leichtfuss, 2001 WI 111, ¶ 27, 246
Wis. 2d 31, 46, 630 N.W.2d 201, 209.
THE “REASONABLE VALUE” OF MEDICAL
EXPENSES
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“Where the plaintiff's health care providers settle
the plaintiff's medical bills with the plaintiff's
insurers at reduced rates, the collateral source
rule dictates that the defendant-tortfeasor not
receive the benefit of the written-off amounts. the
benefit of the reduced payments inures solely to
the plaintiff.” Koffman v. Leichtfuss, 2001 WI
111, ¶ 30, 246 Wis. 2d 31, 48-49, 630 N.W.2d 201,
210.
THE “REASONABLE VALUE” OF MEDICAL
EXPENSES
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“. . . [W]here the costs of plaintiff's medical treatment
have been paid by a health care insurer, the three
principles co-exist and operate in the following
fashion: (1) the plaintiff is entitled to seek recovery
for the reasonable value of medical services rendered
in treating the claimed injury; (2) the collateral source
rule allows the plaintiff to seek recovery for the
reasonable value of medical services without
consideration of payments made by the plaintiff's
insurer; and (3) the insurer's subrogation rights
entitle it to recoup the amounts it paid on the
plaintiff's behalf.”Koffman v. Leichtfuss, 2001 WI 111,
¶ 46, 246 Wis. 2d 31, 54, 630 N.W.2d 201, 213.
THE “REASONABLE VALUE” OF MEDICAL
EXPENSES
Example:
 Plaintiff is injured in an accident due to Bad
Driver’s negligence and incurs a $10,000 doctor
bill, which is a reasonable amount for
practitioners in the area.
 Plaintiff’s health insurer pays $5,000 and
physician writes off $5,000 pursuant to a
negotiated volume contractual discount.
 Plaintiff is entitled to recover entire $10,000 less
health insurer’s $5,000 subrogated interest.
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INSURERS’ FAILED ATTEMPTS TO AVOID
THE COLLATERAL SOURCE RULE
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In Koffman, the insurer argued that because the plaintiff’’s
insurers were subrogated to his claim, plaintiff had no right to
recover full amount of medical expenses, only subrogated
parties could recover the discounted amount they paid.
What is subrogation?
“The interaction of the collateral source rule with the third
legal principle implicated today, subrogation, has engendered
the confusion that has arisen in the case at hand. By virtue
and to the extent of payments made on behalf of another, a
subrogated party obtains a right of recovery in an action
against a third-party tortfeasor and is a necessary party in an
action against such a tortfeasor. Subrogation exists to ensure
that the loss is ultimately placed upon the wrongdoer and to
prevent the subrogor from being unjustly enriched through a
double recovery, i.e., a recovery from the subrogated party and
the liable third party.” Koffman v. Leichtfuss, 2001 WI 111, ¶
33, 246 Wis. 2d 31, 50, 630 N.W.2d 201, 210-11 (internal
citations omitted).
INSURERS’ FAILED ATTEMPTS TO AVOID
THE COLLATERAL SOURCE RULE
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Koffman court rejected that argument:
“Applying the collateral source rule to payments that have been
reduced by contractual arrangements between insurers and health
care providers assures that the liability of similarly situated
defendants is not dependent on the relative fortuity of the manner in
which each plaintiff's medical expenses are financed. One plaintiff
may be uninsured and receive the benefit of Medical Assistance,
another's insurer may have paid full value for the treatment, and yet
another's insurer may have received the benefit of reduced
contractual rates. Despite the various insurance arrangements that
exist in each case, the factor controlling a defendant's liability for
medical expenses is the reasonable value of the treatment rendered.”
Koffman v. Leichtfuss, 2001 WI 111, ¶ 31, 246 Wis. 2d 31, 49, 630
N.W.2d 201, 210.
“It is undisputed that the plaintiff's insurers have valid subrogation
interests that they have asserted and pursued in this action.
However, the consequence of those subrogation rights is in dispute.
The defendants assert that the insurers' subrogation rights limit the
recoverable medical expense damages to the amounts actually paid.
We do not find the insurers' subrogation interests to have such an
effect.” Id. ¶ 34.
INSURERS’ FAILED ATTEMPTS TO AVOID
THE COLLATERAL SOURCE RULE
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“Contrary to the defendant's assertions, the payments
made on the insured's behalf define only the insurers'
subrogation interest in the medical expense claim.
The claim of medical expense damages as a whole is
defined by the reasonable value of the services
rendered as a result of the tortfeasor's negligent
conduct. The creation of a subrogation interest in an
insurer does not change the nature of the entire claim
for medical expense damages. Thus, recoverable
medical expense damages may exist beyond that of
the amount paid by the insurer, and the insured is
entitled to pursue those amounts.” Koffman v.
Leichtfuss, 2001 WI 111, ¶ 45, 246 Wis. 2d 31, 54, 630
N.W.2d 201, 212-13 (internal citations omitted).
INSURERS’ FAILED ATTEMPTS TO AVOID
THE COLLATERAL SOURCE RULE
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The insurer in Ellsworth argued that Medicaid
benefits should not be subject to the collateral source
rule because the taxpayer, not the plaintiff paid for
the Medicaid coverage.
Court rejected that argument:
“In keeping with precedent and well-established tort
policy, we conclude that the collateral source rule
applies to Medical Assistance benefits. The injured
party may establish and recover the reasonable value
of the medical services received gratuitously via
Medical Assistance. The state's subrogated amount is
deducted from this recovery, and the injured party is
entitled to any remainder.” Ellsworth v. Schelbrock,
2000 WI 63, ¶ 22, 235 Wis. 2d 678, 693, 611 N.W.2d
764, 771.
INSURERS’ FAILED ATTEMPTS TO AVOID
THE COLLATERAL SOURCE RULE
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The Court also rejected the insurer’s argument that even though the plaintiff is
not strictly limited to recovery of the subrogated amount, the subrogated
payment can serve as evidence of the reasonable value of medical expenses:
“. . .[B]oth Koffman and Ellsworth recognize that while a health insurance
provider may negotiate discounted rates with a health care provider, that
negotiated rate is not evidence of the reasonable value of those medical services
for purposes of determining damages in a tort claim. Consequently, a
defendant must produce some competent evidence other than what the
insurance company paid upon which to base its argument that the amount
billed was not the reasonable value of the services. . . . For instance, [the
defendant] could have offered expert testimony as to the reasonable value of
the medical services provided in support of its argument that the amount billed
for the medical services was not the reasonable value of the services. Instead, it
chose to rely solely on its assertion that the actual amount paid by an
insurance company is admissible evidence of reasonable value. For the reasons
already explained, we reject that assertion.
. . . We conclude that the collateral source rule prohibits defendants in a
personal injury case from introducing evidence of the amount of medical
expenses actually paid for the purpose of showing that the billed expenses were
not reasonable.” Leitinger v. Van Buren Mgmt., Inc., 2006 WI App 146, ¶¶ 1819, 295 Wis. 2d 372, 382, 720 N.W.2d 152, 157-58 aff'd sub nom. Leitinger v.
DBart, Inc., 2007 WI 84, 302 Wis. 2d 110, 736 N.W.2d 1.
THE STATUTORY PRESUMPTION
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So we know what is not “reasonable,” what is
“reasonable”?
The “reasonable value” of the medical expenses is
presumptively proved by the amount billed by the
physician. Wisconsin Statutes § 908.03(6m)(bm)
states:
“(bm) Presumption. Billing statements or invoices
that are patient health care records are presumed to
state the reasonable value of the health care services
provided and the health care services provided are
presumed to be reasonable and necessary to the care
of the patient. Any party attempting to rebut the
presumption of the reasonable value of the health
care services provided may not present evidence of
payments made or benefits conferred by collateral
sources.”
PRACTICE POINTERS –INTRODUCING MEDICAL
BILLS AS PROOF OF THE “REASONABLE VALUE”
OF MEDICAL EXPENSES
In litigation, make sure you can lay the
foundation for admission of the records at trial:
 First, with respect to the presumption, the
plaintiff as proponent of the evidence of medical
expenses has the burden of production and
persuasion as to the basic facts. If the proponent
meets these burdens, the defendant then has the
burden of production and persuasion to prove the
nonexistence of the presumed facts. Wis. Stat. §
903.01; See Blinka, Wisconsin Evidence 3rd, §
401.10 (2011 supplement).
 Plaintiff must prove the basic facts that the
documents are “billing statements” and are
“patient health care records.”
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PRACTICE POINTERS –INTRODUCING MEDICAL
BILLS AS PROOF OF THE “REASONABLE VALUE”
OF MEDICAL EXPENSES
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What are “patient health care records?”
Wisconsin Statutes § 908.03(6m)(a)1 incorporates the definition from §
146.81(4), which states:
“‘Patient health care records’ means all records related to the health of a
patient prepared by or under the supervision of a health care provider;
and all records made by an ambulance service provider, as defined in s.
256.01(3), an emergency medical technician, as defined in s. 256.01(5), or a first
responder, as defined in s. 256.01(9), in administering emergency care
procedures to and handling and transporting sick, disabled, or injured
individuals. ‘Patient health care records’ includes billing statements
and invoices for treatment or services provided by a health care
provider and includes health summary forms prepared under s. 302.388(2).
“Patient health care records” does not include those records subject to s. 51.30,
reports collected under s. 69.186, records of tests administered under s. 252.15
(5g) or (5j), 343.305, 938.296(4) or (5) or 968.38(4) or (5), records related to sales
of pseudoephedrine products, as defined in s. 961.01(20c), that are maintained
by pharmacies under s. 961.235, fetal monitor tracings, as defined under s.
146.817(1), or a pupil's physical health records maintained by a school under s.
118.125.”
The Court in Correa v. Farmers Ins. Exch., 2010 WI App 171, ¶ 7, 330 Wis. 2d
682, 688, 794 N.W.2d 259, 262 found that “patient health care records”
included physician billing statements, ambulance billing statements, but
remanded for a determination as to whether a certin corporations records were
“ prepared by or under the supervision of a health care provider.”
PRACTICE POINTERS –INTRODUCING MEDICAL
BILLS AS PROOF OF THE “REASONABLE VALUE”
OF MEDICAL EXPENSES
What are “billing statements”?
 The Court found that a medical charge summary
prepared by the health care provider was a
“billing statement”, Medicaid claim forms were
not “billing statements.” Correa v. Farmers Ins.
Exch., 2010 WI App 171, ¶ 7, 330 Wis. 2d 682,
688, 794 N.W.2d 259, 262.
 So based on Correa, don’t need the original bill to
the insurer or patient, but you need at least a
billing summary or itemization prepared by the
“health care provider” to meet burden on the
basic facts.
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PRACTICE POINTERS –INTRODUCING MEDICAL
BILLS AS PROOF OF THE “REASONABLE VALUE”
OF MEDICAL EXPENSES
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Second, how to introduce and authenticate the bills at trial
Pursuant to § 908.03(6m)(b) authenticating witness is
unnecessary to introduce the billing statements if the
following is done:
“A custodian or other qualified witness required by sub. (6)
is unnecessary if the party who intends to offer patient
health care records into evidence at a trial or hearing does
one of the following at least 40 days before the trial
or hearing:
1. Serves upon all appearing parties an accurate, legible
and complete duplicate of the patient health care records
for a stated period certified by the record custodian.
2. Notifies all appearing parties that an accurate, legible
and complete duplicate of the patient health care records
for a stated period certified by the record custodian is
available for inspection and copying during reasonable
business hours at a specified location within the county in
which the trial or hearing will be held.”
PRACTICE POINTERS –INTRODUCING MEDICAL
BILLS AS PROOF OF THE “REASONABLE VALUE”
OF MEDICAL EXPENSES
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What must the defense do to overcome the presumption?
Introduce qualified expert testimony – not based on the
amount of the subrogated payment – that the billing
charge is unreasonable. Leitinger v. Van Buren Mgmt., Inc.,
2006 WI App 146, ¶¶ 18-19, 295 Wis. 2d 372, 382, 720
N.W.2d 152, 157-58.
If the defense does that, the plaintiff should consider
whether expert testimony is necessary to maintain the
credibility of the claim for the “reasonable value” of medical
expenses.
Be careful about using the treating physician to support
the reasonableness of medical expenses if disputed because
the treating physician will have very little foundation and
knowledge about billing rates in the area and may only be
able to respond with a cursory “of course the amount I bill
is reasonable.”
PRACTICE POINTERS –INTRODUCING MEDICAL
BILLS AS PROOF OF THE “REASONABLE VALUE”
OF MEDICAL EXPENSES
Practically, how can you ensure that there will be
no issues at the time of trial – or at least discover
what the defense is disputing and why?
 Use requests for admissions to “conclusively
establish” the basic facts and authenticate the
document. Wis. Stat. § 804.11.
 In most cases, the defendant insurers will not
want to spend the time an money to battle over
the “reasonable” value of medical expenses.
Requests for admissions “conclusively establish”
that “reasonableness” will not be an issue, and if
it is, request by interrogatory all evidence
supporting the denial.
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
For most PI lawyers, most claims never see a
courtroom, but collateral source rule is one of the
most important rules to be aware of to advise
your clients.
 Why?
 Get the client the best possible result.
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
Example:
 Client has a PI claim worth $30,000.
 Medical Expenses total $15,000; pain and
suffering $15,000.
 Client has three options for immediate payment
of medical expenses: (1) not pay and wait for
liability settlement, (2) use health insurance, (3)
use medical payments coverage from automobile
insurance policy.
 Which should client choose?
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
What is wrong with leaving bill outstanding?
 Client could be sent to collections, unless
agreement is made with provider.
 Eventually client will have to pay the full amount
of the bill to the provider unless a discount can be
directly negotiated.
 If a lawsuit if filed, the outstanding balance may
undermine the physician’s credibility because the
physician will not have a financial interest in the
outcome of the case.
 If client loses, timely filing of health insurance
claim period will have passed and client will be
stuck with the bill.
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
What is wrong with using medical payments
coverage though client’s automobile policy?
 Limited amount of coverage.
 Long wait for coverage determination in disputed
cases could send your client’s bill to collection.
 No discount arrangement with provider.
 Some carriers are not agreeing to pay the full bill
because charge is unreasonable as defined in the
policy and there is no contract with the provider
to force the provider to take less.
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
In most cases it will be best to use the client’s
health insurance.
 Covers everything in the event of a dispute.
 Provider must accept the contractual discount in
most cases.
 Provider must work directly with insurer and
usually cannot bill client for denied or reduced
charges.
 If client has annual deductibles or out-of-pocket
maximums, using health insurance as primary
(and auto med pay as secondary) maximizes the
insurance benefit.
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
It also maximizes client’s benefit from the claim:
 Assuming liability insurer agrees to pay full
value of $30,000 and assuming a 50% contractual
discount from the health insurer, and a 1/3
contingency fee for attorney, client’s settlement
would break down as follows if health insurance
is used:
 $30,000 total settlement
 Less $10,000 for attorneys fees
 Less $7,500 repayment to subrogated health
insurer
 Client nets: $12,500
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PRACTICE POINTERS – USING THE
COLLATERAL SOURCE RULE PRE-SUIT
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On the contrary, if medical payments coverage is used as
primary or if bills are outstanding, the settlement breaks
down as follows:
$30,000 total settlement
Less $10,000 for attorneys fees
Less $15,000 repayment to subrogated health insurer
Client nets: $5,000
So taking advantage of the client’s payment arrangements
from collateral sources helps to maximize the result.
Probably a good idea if you get the case early enough to
help the client understand the benefits of using the health
insurance discount and being proactive with providers to
make sure they are processing the bills correctly and
adhering to their contractual obligations.
There are exceptions in some cases where by law providers
have a lien, or the health insurer is secondary by law or the
terms of its policy – so you have to be careful of that.
EXCEPTIONS – THE LAMBERT/OTTO RULE
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“[S]ince the doctrine of subrogation was designed in part to prevent double recovery by the
Plaintiff, the Plaintiff should not be allowed to recover the full amount free of the
subrogation claim of the insurer which was extinguished by the running of the statute of
limitations against the subrogated insurer.” Lambert v. Wrensch, 135 Wis. 2d 105, 119,
399 N.W.2d 369, 375 (1987) (internal citations omitted).
“Ordinarily, subrogation and the collateral source rule work together. Subrogation prevents
double recovery by a plaintiff while the collateral source rule prevents payments made by
an insurer from benefiting the defendant. However, ‘where the insurer is barred from
pursuing a claim [of subrogation], the tortfeasor is entitled to a reduction in judgment for
the amount of that claim.’ In such a situation, the risk of double recovery by the plaintiff,
from both the insurer and the tortfeasor for the same injury, defeats the collateral source
rule. Indeed, Wisconsin courts recognize a plaintiff should be made whole, but no more
than whole.
Otto contends, however, that unlike those prior cases, particularly Lambert, Blue Cross lost
its subrogation right through a default judgment, not the running of the statute of
limitations. Therefore, it asserts the rule from Lambert, as discussed in Koffman, should
not apply. We decline to address this argument. Rather, we note that at the time judgment
was entered against PIC, the statute of limitations had run on Blue Cross's subrogation
claim. We therefore hold that when judgment is entered against a tortfeasor, if a
concomitant subrogation claim is time-barred because the statute of limitations has run,
theLambert-Koffman rule applies to invalidate the collateral source rule. Thus, PIC is
entitled to an offset for the subrogated amount.” Estate of Otto v. Physicians Ins. Co. of
Wisconsin, Inc., 2007 WI App 192, ¶¶ 31, 32, 305 Wis. 2d 198, 214-16, 738 N.W.2d 599,
607-08 aff'd, 2008 WI 78, 311 Wis. 2d 84, 751 N.W.2d 805.
EXCEPTIONS – THE LAMBERT/OTTO RULE
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The Lambert rule is narrowly limited to situations where the subrogated entity is time-barred by the statute
of limitations from pursuing its claim:
“The Lambert decision also contains language that might suggest that the collateral source rule is wholly
inapplicable where an insurer has a subrogated interest. Id. at 121, 399 N.W.2d 369. Indeed, such a
characterization of the Lambert decision was repeated in Ellsworth, 2000 WI 63 at ¶ 18, 235 Wis.2d 678, 611
N.W.2d 764. Focusing upon this language in Lambert, the defendant argues that the circuit court correctly
determined that the insurers' subrogation rights rendered the collateral source rule inapplicable in the case
at hand.
Lambert should not be read so broadly. The language of Lambert suggests that the holding is limited to its
facts. Lambert, 135 Wis.2d at 121, 399 N.W.2d 369 (“[W]here subrogation is present, as here, the collateral
source rule is inapplicable.” (emphasis added)). In Voge v. Anderson, we properly characterized
Lambert as holding that “where the insurer is barred from pursuing a claim [of subrogation],
the tortfeasor is entitled to a reduction in judgment for the amount of that claim.” 181 Wis.2d 726,
732, 512 N.W.2d 749 (1994); see also Jindra v. Diederich Flooring, 181 Wis.2d 579, 596, 511 N.W.2d 855
(1994) (describing “narrow situation” of Heifetz and Lambert); Petry v. St. Paul Fire & Marine Ins., 151
Wis.2d 343, 346, 444 N.W.2d 428 (Ct.App.1989).
Consistent with this narrow reading of Lambert, we now clarify that where, as here, the risk for double
recovery on the part of the plaintiff-insured does not exist because the insurer is not barred from pursuing
its subrogation rights, there is no justification for nullifying the collateral source rule. In the ordinary case,
the collateral source rule and the principles of subrogation work in tandem to further the goals of both rules.
The collateral source rule prevents payments made by the insured from inuring to the benefit of the
defendant, and the insurer's subrogation rights prevent a double recovery on the part of the plaintiff
Moreover, we note that even if this case did present us with a Lambert situation (where the
insurer is barred from pursuing its subrogation rights), reliance on Lambert to limit the
defendants' liability to the amount paid would be misplaced. If the rule of Lambert were
applicable in this case, the effect would not be to limit the medical expense damages to the
amounts paid. Rather, if the insurer is barred from exercising its subrogation rights, the
plaintiff's recovery of the reasonable value of medical expenses would simply be reduced by the
amounts paid on his behalf in order to prevent a double recovery.” Koffman v. Leichtfuss, 2001 WI
111, ¶¶ 37-41, 246 Wis. 2d 31, 52-53, 630 N.W.2d 201, 212 (emphasis added).
EXCEPTIONS – THE LAMBERT/OTTO RULE
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Although there is some ambiguity, the caselaw
supports the argument that where the subrogated
entity waives its interest, the plaintiff can still apply
the collateral source rule and claim that amount.
“We conclude that medical expenses paid by an
insurer are properly awarded where the insurer
either waives or properly exercises its subrogation
rights. We remand on this issue, with directions that
the trial court reinstate the original jury award of
$10,000 for medical expenses.” Anderson v. Garber,
160 Wis. 2d 389, 402, 466 N.W.2d 221, 226 (Ct. App.
1991).
“Insurers may waive their subrogation rights, and
when they do so, the collateral source rule applies.”
Blumenfeld v. Jeans, 2011 WI App 107, ¶ 6, 336 Wis.
2d 430, 435, 804 N.W.2d 692, 695.
UM/UIM
Special Rule for UM/UIM cases?
 For a long time we lived with the Graser rule:
 “[T]he collateral source rule, which finds its
genesis in tort law, is inapplicable to claims made
by an insured under his or her UIM policy.”
Heritage Mut. Ins. Co. v. Graser, 2002 WI App
125, ¶ 1, 254 Wis. 2d 851, 854, 647 N.W.2d 385,
386.

UM/UIM
In 2012, the Wisconsin Supreme Court
overturned Graser:
 “We reaffirm what our prior precedent has
clearly established: an injured party is entitled to
recover the reasonable value of medical services,
which, under the operation of the collateral
source rule, includes written-off medical
expenses. We overrule Graser to the extent that
it holds that the collateral source rule has no
application in cases involving UIM coverage.”
Orlowski v. State Farm Mut. Auto. Ins. Co., 2012
WI 21, ¶ 4, 339 Wis. 2d 1, 6, 810 N.W.2d 775,
777.

UM/UIM
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Is there an exception to Orlowski for waiver?
“Graser's fact-specific holding, that a health insurer's
waived subrogation claim does not revert to the insured for
the purpose of a UIM recovery, is not implicated here.
Arnold P. Anderson's treatise on insurance contains a
concise summary of his narrow reading of Graser that is
not affected by our decision in this case: “[W]hen
subrogation does not exist, the risk of double recovery may
defeat application of the collateral source rule.” Arnold P.
Anderson, Wisconsin Insurance Law § 4.61, at 64 (6th
ed.2010). Only Graser's broad language—that the collateral
source rule is not applicable to a UIM recovery—must be
overruled in this case. Therefore, we do not address the
validity of Graser's fact-specific holding.” Orlowski v. State
Farm Mut. Auto. Ins. Co., 2012 WI 21, n.11, 339 Wis. 2d 1,
6, 810 N.W.2d 775, 777.
EXCEPTION – MEDICAL MALPRACTICE
CASES

“Evidence of any compensation for bodily injury
received from sources other than the defendant to
compensate the claimant for the injury is
admissible in an action to recover damages for
medical malpractice. This section does not limit
the substantive or procedural rights of persons
who have claims based upon subrogation.” Wis.
Stat. 895.55(7)
EXCEPTION – MEDICAL MALPRACTICE
CASES


The Wisconsin Supreme Court confirmed that evidence of collateral source
payments may be used to dispute the reasonableness of medical expenses in
medical malpractice cases:
“We conclude that the text of § 893.55(7) explicitly allows evidence of collateral
source payments to be introduced in medical malpractice actions. We further
conclude that if evidence of collateral source payments from sources including
Medicare, other state or federal government programs, medical insurance or
write-offs, and discounted or free medical services is presented to the factfinder, then the parties must be allowed to furnish the jury with evidence of
any potential obligations of subrogation or reimbursement. Because the text
does not inform a fact-finder what to do with the evidence, in interpreting the
statute and determining what a fact-finder must do with the evidence we
consider the text of the statute, the legislative history, the legislative goal, and
three common-law concepts encompassed in medical malpractice actions and
Wis. Stat. § 893.55(7), namely reasonable value of medical services, the
collateral source rule, and subrogation. We conclude that the circuit court must
instruct the fact-finder that it must not reduce the reasonable value of medical
services on the basis of the collateral source payments. Although the jury is
instructed not to use the evidence of collateral source payments to reduce the
award for medical services, evidence of collateral source payments may
be used by the jury to determine the reasonable value of medical
services.” Lagerstrom v. Myrtle Werth Hos.-Mayo Health Sys., 2005 WI 124, ¶
74, 285 Wis. 2d 1, 38-39, 700 N.W.2d 201, 219-20.
EXCEPTION – MEDICAL MALPRACTICE
CASES


However, not all payments from collateral sources
may be introduced into evidence in medical
malpractice cases without a showing of relevancy:
“First, we hold that evidence of collateral source
payments is admissible under Wis. Stat. § 893.55(7)
only if the evidence is relevant. In a medical
malpractice action, evidence of collateral source
payments is relevant if it is probative of any fact that
is of consequence to the determination of damages. . .
. By failing to make a threshold determination of
admissibility of life insurance proceeds and social
security benefits, the trial court committed reversible
error. ”Weborg v. Jenny, 2012 WI 67, ¶ 7, 341 Wis. 2d
668, 677, 816 N.W.2d 191, 196.
EXCEPTION – NURSING HOME CASES

“Evidence of any compensation for bodily injury
received from sources other than the defendant to
compensate the claimant for the injury is
admissible in an action to recover damages for
negligence by a long-term care provider. This
section does not limit the substantive or
procedural rights of persons who have claims
based upon subrogation.” Wis. Stat. § 893.555(8).
LEGISLATION TO ELIMINATE COLLATERAL
SOURCE RULE?





The following changes have been recently introduced in the state legislature:
901.057 Collateral source payments and rights of subrogation. In actions for
damages caused by personal injury or wrongful death that are not subject to s. 893.55 (7) or
893.555 (8), or seeking payment based on uninsured or underinsured motorists coverage,
evidence of any compensation for bodily injury received from a source other than the
defendant to compensate the claimant for the injury or to pay for medical expenses
incurred by the claimant is admissible for the purpose of determining the reasonable value
of the claim, including the reasonable value of the injured person’s medical expenses.
Evidence of the claimant’s obligations of subrogation or reimbursement resulting from
payments made by a source other than the defendant to compensate the claimant for injury
is admissible. Evidence of amounts paid or incurred by the claimant in recovering a
payment from a source other than the defendant is not admissible. Admission of evidence
under this section does not limit the substantive or procedural rights of persons who have
claims based upon subrogation or lien.
SECTION 2. 908.03 (6m) (bm) of the statutes is amended to read: 908.03 (6m) (bm)
Presumption. Billing statements or invoices that are patient health care records are
presumed to state the reasonable value of the health care services provided and the health
care services provided are presumed to be reasonable and necessary to the care of the
patient. Any party attempting to rebut the presumption of the reasonable value of the
health care services provided may not present evidence of payments made or benefits
conferred by collateral sources.
SECTION 3.0Initial applicability.
(1) This act first applies to actions filed on the effective date of this subsection.
13-LRB−0986/1
LEGISLATION TO ELIMINATE COLLATERAL
SOURCE RULE? PRACTICAL IMPLICATIONS




If you represent plaintiffs in personal injury cases,
you need to monitor the progress of this bill.
If passed in current form, strong consideration should
be given to filing lawsuit in every or most affected
cases, i.e., cases where plaintiff’s damages have been
paid in part by collateral sources – especially those
where an insurance discount was applied.
There may be legal challenges to the bill if passed,
especially concerning retroactivity. If you have an
affected case, you will want to explore those.
May want to modify advisory practices regarding
choices for medical expense payment on case by case
basis to avoid impact of the new rule if passed.
QUESTIONS? IDEAS? COMMENTS?