Earlier this month, a state appellate court issued an opinion explaining how the collateral source doctrine is applied under Virginia personal injury law. The case actually involved a breach-of-contract claim, however, in answering whether the collateral source doctrine applied to breach-of-contract claims, the court thoroughly explained the collateral source doctrine, its origins, and how it applies in Virginia personal injury accidents.
In this case, the claim was between a power plant and contractor what was paid to perform certain work at the power plant. According to the court’s opinion, there was a boiler accident at the power plant that resulted in the deaths of three workers. The families of the deceased workers filed claims against the power plant, the contractor, and several other parties.
Evidently, there was a contract between the power plant and the contractor that required the contractor to obtain certain insurance coverage. However, the contractor did not purchase the specified insurance coverage. Nonetheless, after the power plant paid out nearly $5 million to settle the cases, and incurred nearly $10 million in legal fees, the power plant was fully reimbursed by all available insurance policies. However, the power plant pursued a breach-of-contract claim against the contractor, arguing that it failed to obtain the specified insurance. The court had to determine if the power plant could pursue such a claim, given the fact that it had undisputedly already recovered for the total costs of defending and settling the lawsuit.
Virginia’s Collateral Source Doctrine
In answering the question posed by the case, the court explained the collateral source doctrine in detail. The collateral source doctrine holds that compensation a victim receives from a collateral source (such as an insurance policy) cannot be applied as a credit against the damages owed by an at-fault party. Thus, evidence that an accident victim was compensated for their loss through an insurance policy is inadmissible at trial. This rule was based on the fear that knowledge of compensation from a collateral source could “unjustly influence the measure of compensation” awarded by a jury.
The court explained that initially, the collateral source doctrine only applied to insurance payments. However, over time, the doctrine was expanded to include payments from any collateral source, such as workers’ compensation payments, social security payments, or pension payments. However, when there are claims made against several at-fault parties and one or more of the claims settle before trial, the collateral source doctrine does not apply, and the total owed by the non-settling parties is reduced by the amount of the settlements. The court went on the explain that although the rule seems to allow for a plaintiff to recover twice for his injuries, that is not often the case in reality because injured parties typically assign their claim (as well as any potential proceeds) to the party that compensated them.
Ultimately, the court, in this case, determined that the collateral source doctrine does apply to Virginia breach-of-contract claims, depending on the specific facts presented.
Have You Been Injured in a Virginia Car Accident?
If you or someone you love has recently been injured in a Virginia car accident, you may be entitled to monetary compensation for the injuries you have sustained. At the Maryland car accident law firm of Lebowitz & Mzhen, LLC, we handle car accident claims across Maryland, Virginia, and Washington, D.C. With decades of experience representing injury victims in all types of Virginia personal injury cases, we know what it takes to help our clients obtain the compensation they deserve. To learn more, call 410-654-3600 to schedule a free consultation today.