Session April 5, 2017
by Permission from the Court of Appeals Circuit Court for
Crockett County No. 3228 Clayburn Peeples, Judge
granted this appeal to address whether our holding in
West v. Shelby County Healthcare Corp., 459 S.W.3d
33 (Tenn. 2014), applies in personal injury cases. We hold
that it does not. West held that "reasonable
charges" for medical services under Tennessee's
Hospital Lien Act, Tennessee Code Annotated sections
29-22-101 to -107 (2012), are the discounted amounts a
hospital accepts as full payment from patients' private
insurers, not the full, undiscounted amounts billed to
patients. West, 459 S.W.3d at 46. West
defined "reasonable charges" in the context of
interpreting the Hospital Lien Act, and its holding is
limited to that Act. As an alternative argument, we are asked
in this appeal to consider applying the principles in
West to the determination of reasonable medical
expenses in personal injury cases. Doing so involves the
collateral source rule, which excludes evidence of benefits
to the plaintiff from sources collateral to the tortfeasor
and precludes the reduction of the plaintiff's damage
award by such collateral payments. The rule is based on the
principles that tortfeasors should be responsible for all of
the harm they cause and that payments from collateral sources
intended to benefit an injured party should not be used to
reduce the liability of the party who inflicted the injury.
After a thorough review of court decisions in Tennessee and
across the country on the collateral source rule, we decline
to alter existing law in Tennessee. We hold that the
collateral source rule applies in this personal injury case,
in which the collateral benefit at issue is private
insurance. Consequently, the plaintiffs may submit evidence
of the injured party's full, undiscounted medical bills
as proof of reasonable medical expenses. Furthermore, the
defendants are precluded from submitting evidence of
discounted rates accepted by medical providers from the
insurer to rebut the plaintiffs' proof that the full,
undiscounted charges are reasonable. The defendants remain
free to submit any other competent evidence to rebut the
plaintiffs' proof on the reasonableness of the medical
expenses, so long as that evidence does not contravene the
collateral source rule. The decision of the Court of Appeals
is affirmed in part and reversed in part, and the case is
remanded to the trial court for further proceedings.
R. App. P. 11 Appeal by Permission; Judgment of the Court of
Appeals Affirmed in Part and Reversed in Part; Case Remanded
to the Trial Court
Melanie M. Stewart, Memphis, Tennessee, for the appellants,
Debbie Steelman, and Danny T. Cates, Sr., as co-personal
representatives of the Estate of John T. Cook, deceased.
K. Vines, Mark N. Geller, Kevin N. Graham, and Jason J.
Yasinsky, Memphis, Tennessee, for the appellee, Jean Dedmon.
Bradford D. Box and Adam P. Nelson, Jackson, Tennessee, for
the Amicus Curiae, the Tennessee Defense Lawyers Association.
Bryan Smith, Memphis, Tennessee; John Vail, Washington, D.C.;
and Brian G. Brooks, Greenbrier, Arkansas, for the Amicus
Curiae, Tennessee Trial Lawyers Association.
Kirby, J., delivered the opinion of the Court, in which
Jeffrey S. Bivins, C.J., and Cornelia A. Clark, Sharon G.
Lee, and Roger A. Page, JJ., joined.
relevant facts in this appeal are undisputed. In February
2010, Plaintiff/Appellee Jean Dedmon was involved in an
automobile accident with John T. Cook. Mrs. Dedmon was
seriously injured in the accident. Mrs. Dedmon and her
husband, Fred Dedmon (collectively, "Plaintiffs"),
filed this lawsuit against Mr. Cook, alleging that his
negligence caused Mrs. Dedmon to suffer severe and permanent
injuries and to incur past and future medical expenses. The
complaint itemized Mrs. Dedmon's medical bills from
sixteen different medical providers, which totaled $52,
482.87. The bills were attached to the complaint.
the complaint was filed, Mr. Cook died. In September 2013,
the Plaintiffs filed an amended complaint substituting Mr.
Cook's personal representatives, Debbie Steelman and
Danny T. Cates (collectively, "Defendants"), for
in March 2013, the Plaintiffs deposed one of Mrs.
Dedmon's treating physicians, neurosurgeon Vaughn Allen,
M.D. Dr. Allen treated Mrs. Dedmon between April 2010 and
September 2012, and in September 2010, he performed neck
surgery on her. In his deposition, Dr. Allen testified
that all of Mrs. Dedmon's medical bills, including those
from his own clinic and those from Mrs. Dedmon's other
medical providers (hospitals, physical therapists,
radiologists, etc.), were reasonable and necessary to a
reasonable degree of medical certainty. Dr. Allen's
deposition was filed in the trial court, and the medical
bills were attached as exhibits.
December 19, 2014, this Court issued its decision in West
v. Shelby County Healthcare Corp., 459 S.W.3d 33 (Tenn.
2014). West interpreted Tennessee's Hospital
Lien Act (HLA), Tennessee Code Annotated sections 29-22-101
to -107 (2012). We will discuss West in more detail
below, but suffice it to say at this juncture that
West held that a hospital's "reasonable
charges" under Section 29-22-101(a) are the amount the
hospital accepts from the patient's private insurer, not
the amount in the medical bills sent to the patient.
West, 459 S.W.3d at 46. In the course of its
analysis, the West Court commented that the amount
of the full, undiscounted charges billed to the patient is
"unreasonable" as compared to the amount of the
discounted bills paid by the insurer. Id. at 44. The
undiscounted bills sent to the patient, the West
opinion stated, do "not 'reflect what is [actually]
being paid in the market place.' Because 'virtually
no public or private insurer actually pays the full charges[,
] . . . [a] more realistic standard is what insurers actually
pay and what hospitals [are] willing to accept.'"
Id. at 45 (quoting What's the Cost?:
Proposals to Provide Consumers with Better Information about
Healthcare Service Costs: Hearing Before the Subcomm. on
Health of the House Comm. on Energy and Commerce, 109th
Cong. 99 (2006) (statement of Dr. Gerard Anderson, Professor,
Bloomberg School of Public Health & School of Medicine at
Johns Hopkins University; Director, Johns Hopkins Center for
Hospital Finance and Management)).
by the holding in West, the Defendants in the
instant case filed a "Motion in Limine to Exclude
Evidence of Unreasonable Medical Charges." Citing
West, they argued that evidence of Mrs. Dedmon's
full, undiscounted medical bills must be excluded because the
amounts of those bills are, as a matter of law, unreasonable.
The Defendants asserted that West's
pronouncements on hospital bills "set[ ] forth a new
standard in Tennessee, as a matter of law." According to
the Defendants' calculations, Mrs. Dedmon's health
insurer paid only $18, 255.42 to satisfy Mrs. Dedmon's
medical bills. As a result, they argued, the full charges
reflected in Mrs. Dedmon's medical bills are irrelevant
and should be excluded on that basis.
Defendants also took the position in their motion that
"[t]he collateral source rule does not apply to [the]
issue" of whether the discounted amounts paid by Mrs.
Dedmon's insurance company are admissible. They insisted
that "evidence of payment of the medical expenses by
medical insurance will not be used to show that the medical
expenses have been paid in an attempt to mitigate the
damages. Rather, the evidence would be used to show whether
the charges are reasonable, as defined by the Supreme
Court." We interpret the Defendants' position in the
motion in limine as arguing that the amount paid by
Mrs. Dedmon's insurance company should be submitted into
evidence instead of the undiscounted medical bills
sent to the patient. Under the Defendants' reasoning,
there is purportedly no need to mention the fact that the
discounted amounts resulted from Mrs. Dedmon's insurance
contract, so the collateral source rule would not be
addition to the motion in limine, the Defendants
filed a "Notice of Intent to Rebut Presumption Pursuant
to T.C.A. § 24-5-113." See Tenn. Code Ann.
§ 24-5-113(b)(2). The notice, like the motion in
limine, was based solely on the Defendants'
interpretation of West. The Defendants argued that,
if the full, undiscounted medical bills are admitted into
evidence, then the discounted amounts accepted by the medical
provider should be admissible to rebut the Plaintiffs'
expert testimony that the undiscounted charges are
reasonable. They argued that, in comparing the two bills, the
full, undiscounted medical bills are unreasonable "under
the West standard."
March 2015, the trial court conducted a hearing on the
Defendants' motion in limine. The trial court
agreed with the Defendants that, based on West, Mrs.
Dedmon's full, undiscounted medical bills are irrelevant
to the question of her reasonable medical expenses and that
the discounted amounts paid by Mrs. Dedmon's insurer
constituted her reasonable medical expenses as a matter of
law. Accordingly, it granted the motion in
limine and excluded evidence of Mrs. Dedmon's
full, undiscounted medical bills. The trial court commented
that it interpreted West as having advanced a policy
of not allowing "the subterfuge that the medical
community uses with regard to insurance and expenses to sully
the court system." The trial court added that it could
not "imagine that [this Court] would use any other logic
in this situation than they used in [the hospital lien
Dedmon sought permission for an interlocutory appeal from the
trial court's order. Permission was granted by both the
trial court and the Court of Appeals. See Tenn. R.
App. P. 9.
Court of Appeals reversed. See Dedmon v. Steelman,
No. W2015-01462-COA-R9-CV, 2016 WL 3219070, at *11 (Tenn. Ct.
App. June 2, 2016), perm. app. granted (Tenn. Oct.
21, 2016). Citing limiting language in West, the
appellate court concluded that West did not apply to
personal injury cases. Id. at *9. The language in
West cited by the Court of Appeals included a
comment that West was intended to define
"reasonable charges for the purpose of Tenn. Code Ann.
§ 29-22-101(a), " id. (citing
West, 459 S.W.3d at 44), and a footnote stating that
the West holding was limited to private insurance
cases, id. (citing West, 459 S.W.3d at 39
n.2). The intermediate appellate court reasoned: "If the
[West] [C]ourt did not intend for its opinion to
apply to hospital liens in all circumstances, surely the
court did not intend for its opinion to be binding as to all
determinations of reasonable medical expenses under Tennessee
law." Id. Thus, the Court of Appeals rejected
the Defendants' argument that West required the
exclusion of Mrs. Dedmon's full, undiscounted medical
bills and reversed the trial court's grant of the
Defendants' motion in limine. Id. at
Court of Appeals then went further. It addressed the evidence
that would be permissible on remand to rebut the
Plaintiffs' expert testimony that the undiscounted
medical bills represented Mrs. Dedmon's reasonable
medical expenses. It held that evidence of discounted amounts
accepted by Mrs. Dedmon's medical providers may be
admissible to rebut the Plaintiffs' expert testimony on
the reasonableness of the amount of the full, undiscounted
bills. The appellate court acknowledged the collateral source
rule, which generally provides that collateral-source
benefits such as insurance must not be used to "diminish
the damages otherwise recoverable from the defendant."
Id. at *10 n.8 (quoting Nance ex rel. Nance v.
Westside Hosp., 750 S.W.2d 740, 742 (Tenn. 1988)). It
then commented, however, that "existing law in this
state also makes clear that Defendants are permitted to offer
proof contradicting the reasonableness of the medical
expenses, " id. at 11, citing cases from other
jurisdictions holding that discounted amounts accepted by
medical providers are admissible to rebut the Plaintiffs'
proof of the reasonableness of the full, undiscounted medical
bills, so long as insurance is not mentioned. Id.
(quoting Martinez v. Milburn Enters., Inc., 233 P.3d
205, 222-23 (Kan. 2010)) (citing Stanley v. Walker,
906 N.E.2d 852, 858 (Ind. 2009) (holding that the collateral
source rule does not bar evidence of discounted amounts so
long as that evidence is "introduced . . . without
referencing insurance"). In a separate concurrence,
Judge Joe G. Riley took the position that the majority's
apparent approval of the "hybrid" method-allowing
evidence of both the full, undiscounted medical bills and
also the discounted amounts accepted by medical
providers-"is dictated by existing case law" in
Tennessee. Id. (Riley, J., concurring).
the Court of Appeals reversed the trial court's grant of
the Defendants' motion in limine and held that
Mrs. Dedmon's full, undiscounted medical bills were
admissible to prove her reasonable medical expenses resulting
from the accident. It also indicated that evidence of the
discounted amounts accepted by Mrs. Dedmon's medical
providers is admissible to rebut the Plaintiffs' proof
that the undiscounted medical bills are reasonable, so long
as insurance is not mentioned. Id. The Court of
Appeals concluded by asking this Court to accept review in
this case to address these important issues. Id. We
granted the Defendants' application for permission to
on Appeal and Standard of Review
appeal to this Court, the Defendants make the same argument
they made in the lower courts, namely, that the holding in
West applies in this case to exclude Mrs.
Dedmon's full, undiscounted medical bills from the
evidence regarding her reasonable medical expenses. If
West does not apply directly, the Defendants argue,
the West principles should nevertheless apply in
personal injury cases to limit a plaintiff's recovery of
"reasonable medical expenses" to the discounted
amounts accepted by medical providers.
the issues raised by the Defendants are questions of law,
which we review de novo, affording no deference to the
decisions of the lower courts. Colonial Pipeline Co. v.
Morgan, 263 S.W.3d 827, 836 (Tenn. 2008).
address the issues raised in this appeal, we first review
Tennessee law on damages in personal injury cases and the
current status of the collateral source rule in Tennessee. We
next review our holding in West and address whether
the definition of "reasonable charges" under the
HLA should be applied to the issue of the "reasonable
medical expenses" recoverable in personal injury cases.
If the rule in West is not directly applicable, we
will consider whether any of the principles in West
should be applied in personal injury cases to exclude
evidence of Mrs. Dedmon's undiscounted medical bills. If
not, we will address the Court of Appeals' language
indicating that defendants may submit evidence of discounted
amounts accepted by medical providers in order to rebut
evidence that the undiscounted medical bills constitute
reasonable medical expenses.
Existing Tennessee Law
person who is injured by another's negligence may recover
damages from the other person for all past, present, and
prospective harm." Rye v. Women's Care Ctr. of
Memphis, MPLLC, 477 S.W.3d 235, 267 (Tenn. 2015)
(quoting Singh v. Larry Fowler Trucking, Inc., 390
S.W.3d 280, 287-88 (Tenn. Ct. App. 2012)). "An award of
damages, which is intended to make a plaintiff whole,
compensates the plaintiff for damage or injury caused by a
defendant's wrongful conduct." Meals ex rel.
Meals v. Ford Motor Co., 417 S.W.3d 414, 419 (Tenn.
2013) (citing Inland Container Corp. v. March, 529
S.W.2d 43, 44 (Tenn. 1975)). "The party seeking damages
has the burden of proving them." Overstreet v.
Shoney's, Inc., 4 S.W.3d 694, 703 (Tenn. Ct. App.
plaintiff who is injured by another's negligence is
entitled to recover two types of damages: economic (or
pecuniary) damages and non-economic (or personal) damages.
Meals, 417 S.W.3d at 419-20. Economic damages
include past medical expenses, future medical expenses, lost
wages, and lost earning potential. Id. at 419. A
plaintiff may seek recovery for all "economic losses
that naturally result from the defendant's wrongful
damages include pain and suffering, permanent impairment
and/or disfigurement, and loss of enjoyment of life."
Id. at 420 (quoting Elliot v. Cobb, 320
S.W.3d 246, 247 (Tenn. 2010)). Non-economic damages are often
highly subjective and are not susceptible to proof by a
specific dollar amount. While there must be some evidence to
justify the amount awarded, plaintiffs are not required to
prove the monetary value of non-economic damages because such
injuries are not easily quantified in economic terms. For
this reason, the trier of fact is given broad latitude in
fixing the monetary amount of non-economic damages.
Id.; Coakley v. Daniels, 840 S.W.2d 367,
372 (Tenn. Ct. App. 1992) (emphasizing that damages for
personal injuries are not based on fixed rules of law and are
generally left to the trier of fact). In practice, "the
traditional lawyer's rule-of-thumb" is often to
value the non-economic damages based on a multiple of the
amount of the plaintiff's economic damages. See Meals
ex rel Meals v. Ford Motor Co., No.
W2010-01493-COA-R3-CV, 2012 WL 1264454, at *27 (Tenn. Ct.
App. Apr. 13, 2012) (Kirby, J., dissenting), rev'd on
other grounds, 417 S.W.3d 414 (Tenn. 2013).
case, the economic damages at issue are past medical
expenses. For this type of award, a plaintiff must prove that
the medical bills paid or accrued because of the
defendant's negligence were both "necessary and
reasonable." Borner v. Autry, 284 S.W.3d 216,
218 (Tenn. 2009) (citing 22 Am. Jur. 2d Damages
§ 166 (2003 & Westlaw 2008); 25 C.J.S.
Damages § 259 (2002 & Westlaw 2008));
see West, 459 S.W.3d at 44 ("[R]ecoveries for
medical expenses in personal injury cases are limited to
those expenses that are 'reasonable and
necessary.'"). "In all but the most obvious and
routine cases, plaintiffs must present competent expert
testimony to meet this burden of proof."
Borner, 284 S.W.3d at 218. "A physician who is
familiar with the extent and nature of the medical treatment
a party has received may give an opinion concerning the
necessity of another physician's services and the
reasonableness of the charges." Long v.
Mattingly, 797 S.W.2d 889, 893 (Tenn. Ct. App. 1990)
(citing Emp'rs Ins. of Wausau v. Carter, 522
S.W.2d 175, 176 (Tenn. 1975)). "To be qualified to
render these opinions, the physician must first demonstrate
(1) knowledge of the party's condition, (2) knowledge of
the treatment the party received, (3) knowledge of the
customary treatment options for the condition in the medical
community where the treatment was rendered, and (4) knowledge
of the customary charges for the treatment."
Court of Appeals has explained that, in Tennessee, the focus
is on "the 'reasonable' value of
'necessary' services rendered." Fye v.
Kennedy, 991 S.W.2d 754, 764 (Tenn. Ct. App. 1998)
(emphasis in original). In other words, even if it is
undisputed that the medical services were necessary, the
plaintiff must prove "that the charges in question were
'reasonable.'" Id. To rebut the
plaintiff's proof on medical expenses, the
"defendant is permitted to introduce relevant evidence
regarding necessity, reasonableness, and whether a claimed
service was actually rendered." Id.
small claims, Tennessee Code Annotated section 24-5-113(a)
provides for a rebuttable presumption that medical bills of
$4, 000 or less that are itemized and attached to the
complaint create a prima facie presumption that the
bills are both necessary and reasonable:
(a)(1) Proof in any civil action that medical, hospital[, ]
or doctor bills were paid or incurred because of any illness,
disease, or injury may be itemized in the complaint or civil
warrant with a copy of bills paid or incurred attached as an
exhibit to the complaint or civil warrant. The bills itemized
and attached as an exhibit shall be prima facie evidence that
the bills so paid or incurred were necessary and reasonable.
(2) This section shall apply only in personal injury actions
brought in any court by injured parties against the persons
responsible for causing such injuries.
(3) This prima facie presumption shall apply to the medical,
hospital[, ] and doctor bills itemized with copies of bills
attached to the complaint or civil warrant; provided, that
the total amount of such bills does not exceed the sum of
four thousand dollars ($4, 000).
Code Ann. § 24-5-113(a). The subsection (a) small-claims
presumption "assists claimants for whom the expense of
deposing an expert may exceed the value of the medical
services for which recovery is sought." Borner,
284 S.W.3d at 218. This presumption may be rebutted "by
proof contradicting either the necessity or reasonableness of
the medical expenses." Id.
(b) of the same statute sets forth another procedure to
create a rebuttable presumption of the reasonableness (but
not the necessity) of the plaintiff's medical bills:
(b)(1) In addition to the procedure described in subsection
(a), in any civil action for personal injury brought by an
injured party against the person or persons alleged to be
responsible for causing the injury, if an itemization of or
copies of the medical, hospital[, ] or doctor bills which
were paid or incurred because of such personal injury are
served upon the other parties at least ninety (90) days prior
to the date set for trial, there shall be a rebuttable
presumption that such medical, hospital[, ] or doctor bills
(2) Any party desiring to offer evidence at trial to rebut
the presumption shall serve upon the other parties, at least
forty-five (45) days prior to the date set for trial, a
statement of that party's intention to rebut the
presumption. Such statement shall specify which bill or bills
the party believes to be unreasonable.
Code Ann. § 24-5-113(b). The presumption of
reasonableness in subsection (b) can apply to medical expense
claims of any size. See Boettcher v. Shelter Mut. Ins.
Co., No. 2:14-cv-02796-JPM-dkv, 2016 WL 3212184, at *2
(W.D. Tenn. 2016) (citing Hogan v. Reese, No.
01-A-01-9801-CV-00023, 1998 WL 430627, at *7 (Tenn. Ct. App.
July 21, 1998) (noting that subsection (b), added in 1989,
"is not limited as to the amount of such medical
apparent from the statutory language, the presumption statute
establishes two different presumptions. Compliance with
subsection (a) of Section 24-5-113 creates a presumption of
both necessity and reasonableness. In contrast, compliance
with subsection (b) of Section 24-5-113 creates a presumption
only that the medical bills are reasonable.
Id. at *2 n.2 (citing Laird v. Doyle, No.
02A01-9707-CV-00153, 1998 WL 74258, at *2-3 (Tenn. Ct. App.
Feb. 24, 1998)). At trial, defendants may present evidence to
rebut the presumption of reasonableness in subsection (b)(1)
by following the procedures set out in subsection (b)(2).
Id. (citing Tenn. Code Ann. § 24-5-113(b)(2)).
of any presumption of necessity and/or reasonableness of
medical expenses under subsections (a) or (b) of Section
24-5-113, plaintiffs must always establish causation, i.e.,
"that the injuries or condition for which the medical
treatment was sought was caused by the conduct of the
defendant." Iloube v. Cain, 397 S.W.3d 597, 603
(Tenn. Ct. App. 2012).
Collateral Source Rule
collateral source rule originated from the common law in
England as early as 1823. See Dag E. Ytreberg,
Annotation, Collateral Source Rule: Injured Person's
Hospitalization or Medical Insurance as Affecting Damages
Recoverable, 77 A.L.R.3d 415, § 2[a] (1977). It was
adopted in the United States in 1854 by the United States
Supreme Court in The Propeller Monticello v.
Mollison, 58 U.S. (17 How.) 152 (1854). Id.;
see also Mitchell v. Haldar, 883 A.2d 32, 37 &
n.4; Baptist Healthcare Sys., Inc. v.
Miller, 177 S.W.3d 676, 687 (Ky. 2005); Bozeman
v. State, 879 So.2d 692, 700 (La. 2004); Perreira v.
Rediger, 778 A.2d 429, 433 (N.J. 2001); Kenney v.
Liston, 760 S.E.2d 434, 440 & n.9 ( W.Va. 2014).
Mollison involved a collision between a steamship
(The Propeller Monticello) and a schooner (the
Northwestern) carrying a cargo of salt. The
collision caused the schooner to sink. Mollison, 58
U.S. at 153. The schooner's owner, Mollison, recovered
for the loss under his insurance policy. When Mollison sued
the owner of the steamship for damages, the steamship owner
denied liability based on Mollison's recovery under his
insurance policy. Id. at 155. The United States
Supreme Court rejected that argument, holding that the
steamship owner could not benefit from Mollison's receipt
of proceeds from his insurance policy. It explained that
Mollison's insurance contract was "in the nature of
a wager between third parties, with which the [steamship
owner] has no concern. The insurer does not stand in the
relation of a joint [tortfeasor], so that satisfaction
accepted from [it] shall be a release of others."
Id. The Court noted that its holding relied upon a
doctrine that was "well established at common law and
received in courts of admiralty." Id. The Court
emphasized that the tortfeasor "is bound to make
satisfaction for the injury he has done." Id.
1876, it was "well settled that the reception of the
amount of the loss from the insurers is no bar to an action
subsequently commenced against the wrong-doer to recover
compensation for [an] injury occasioned by [a]
collision." The Atlas, 93 U.S. 302, 310 (1876).
Atlas recognized that "[n]one can recover twice
for the same injury." Id. Nevertheless, the
United States Supreme Court reasoned: "Compensation by
the wrong-doer after payment by the insurers is not double
compensation, for the plain reason that insurance is an
indemnity; and it is clear that the wrong-doers are first
liable, and that the insurers, if they pay first, are
entitled to be subrogated to the rights of the insured
against the insurers." Id. at 310-11; see
id. at 310 (indicating the rule is based on the
principle "that a wrong-doer in such a case cannot claim
the benefit of the contract of insurance if effected by the
person whose property he has injured").
term "collateral source" derived from language used
in a Vermont decision, Harding v. Town of Townshend,
43 Vt. 536 (1871). See Charles R. Mendez, The
Impact of the Affordable Care Act on the Colorado Collateral
Source Rule, 94 Denv. L. Rev. Online 1, 2 n.7 (2017);
see also Miller, 177 S.W.3d at 687; Kenney,
760 S.E.2d at 440 n.9. The Vermont Supreme Court in
Harding described the rule in terms similar to those
used by the United States Supreme Court in Mollison,
but the Vermont Court characterized insurance proceeds
received by the plaintiff as "collateral" to any
recovery from the wrongdoer:
The policy of insurance is collateral to the remedy against
the defendant and was procured solely by the plaintiff and
at his expense, and to the procurement of which the defendant
was in no way contributory. It is in the nature of a wager
between the plaintiff and the third person, the insurer, to
which the defendant was in no measure privy, either by
relation to the parties, or by contract, or otherwise. It
cannot be said that the plaintiff took out the policy in the
interest or behalf of the defendant, nor is there any legal
principle which seems to require that it be ultimately
appropriated to the defendant's use and benefit.
Harding, 43 Vt. at 538. After Harding, the
principle eventually came to be known as the "collateral
to the United States Supreme Court's rationale in
Mollison, the Vermont Supreme Court in
Harding rejected the defendant's argument that
the collateral source rule would permit double recovery for
plaintiffs, reasoning that the insurer would likely have
subrogation rights. It explained that any recovery against
the tortfeasor for amounts paid by insurance would
"create an equity between the plaintiff and the
insurer, to be ultimately adjusted between them, in which the
defendant has no interest, and with which he has no
concern." Id. at 539. Thus, the rationale for
the rule was that insurance proceeds emanate from an
agreement between the plaintiff and the insurer, wholly
"collateral" to the defendant, so the defendant
should not benefit from the plaintiff's receipt of
proceeds "with which he has no concern."
time, all fifty states, except perhaps Alabama, adopted some
form of the collateral source rule. James L. Branton, The
Collateral Source Rule, 18 St. Mary's L.J. 883,
883-84 (1987) (noting that, until legislative
"abolitions of the [collateral source] rule, it was a
part of the jurisprudence in every state"); Kevin S.
Marshall, The Collateral Source Rule and its Abolition:
An Economic Perspective, 15-FALL Kan. J.L. & Pub.
Policy 57, 59 & n.28 (Fall 2005) (citing David Fellman,
Unreason in the Law of Damages: The Collateral Source
Rule, 77 Harv. L. Rev. 741, 742 (1964), and Alabama
cases to demonstrate the exception in Alabama).
Tennessee Supreme Court applied the rule espoused in both
Mollison and Harding as early as 1896,
though at that time it was not yet called the
"collateral source rule." Anderson v.
Miller, 33 S.W. 615, 617 (Tenn. 1896), cited in
Benson v. Tenn. Valley Elec. Coop., 868 S.W.2d 630, 640
(Tenn. Ct. App. 1993) (recognizing Anderson's
application of the collateral source rule); see also Ill.
Cent. R.R. Co. v. Porter, 94 S.W. 666, 669-70 (Tenn.
1906), cited in Hearn v. Boswell, 1987 WL 5751, at
*5 (Tenn. Ct. App. Jan. 27, 1987) (recognizing
Porter's application of the collateral source).
In Anderson, the plaintiffs sued the defendant in
negligence for property damage from a fire; the plaintiffs
had fully recovered for their property damage under their
insurance policy. Anderson, 33 S.W. at 616. The
defendant argued that the insurance company that covered the
loss was actually the aggrieved party. The Anderson
Court rejected this argument and held that the plaintiffs
were the proper parties to bring the lawsuit. The Court
described the plaintiffs' contract with their insurance
company as unrelated to the defendant's obligation to the
plaintiffs: "[The defendant] has no concern with any
contract the plaintiff may have with any other party in
regard to the goods, and his rights or liabilities can
neither be increased nor be diminished by the fact that such
a contract exists. He has no equities, as against the
plaintiff, which can entitle him, under any circumstances, to
an assignment of the plaintiff's policies of
insurance." Id. (emphasis added) (quoting
Perrott v. Shearer, 17 Mich. 48, 56 (1868)).
years later, the Tennessee Supreme Court in Porter
excluded evidence of gratuitous salary payments received by
the plaintiff mail carrier when he missed work because of the
defendant's negligence. Porter, 94 S.W. at
667-68. The defendant in Porter argued that evidence
of the gratuitous payments was relevant to show that, in
effect, the mail carrier did not "miss" work
because he received his salary during his disability. The
defendant contended: "[T]he object of the law is to make
the plaintiff whole, and if he has lost nothing in a
pecuniary sense, from his disability, he is not entitled to
damages for loss of time [from work]." Id. at
668. The Court in Porter rejected this contention;
it held that evidence of the gratuitous payments to the mail
carrier was not admissible and should not reduce the
railroad's liability. Id. at 669-70. The Court
cited "the well-settled rule that money received on
accident insurance policies by the injured persons does not
diminish the amount of recovery against the wrongdoer."
Id. at 670.
Anderson and Porter, the collateral source
rule has become a familiar part of Tennessee jurisprudence.
See, e.g., Nance, 750 S.W.2d at 742;
Donnell v. Donnell, 415 S.W.2d 127, 134 (Tenn.
1967), abrogated on other grounds by Dupuis v. Hand,
814 S.W.2d 340 (Tenn. 1991); J&M, Inc. v.
Cupples, No. E2004-01328-COA-R3-CV, 2005 WL 1190704, at
*3 (Tenn. Ct. App. May 20, 2005) (observing that the
collateral source rule "has long been adopted in
Tennessee"); Fye, 991 S.W.2d at 763 (noting
that "[a]n injured party's right to recover his or
her 'reasonable and necessary expenses' must be
viewed in connection with the collateral source rule");
Steele v. Ft. Sanders Anesthesia Grp., P.C., 897
S.W.2d 270, 282 (Tenn. Ct. App. 1994) ("The collateral
source rule permits plaintiffs to prove and recover medical
expenses, whether paid by insurance or not.");
Cherry v. McCullough, No. 02A01-9201-CV-00005, 1992
WL 379074, at *6 (Tenn. Ct. ...