The Collateral Source Rule – Who Benefits?

March 2017

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The collateral source rule prevents an injured person’s damages from being reduced by payments made by their own medical insurance or worker’s compensation.

In the decision of DePerrodil v Bozovic Marine, Inc., No. 16-30009, 5th Cir. [Nov. 17, 2016], the U.S. Court of Appeal for the Fifth Circuit provided welcome clarification as to the effect of the collateral source rule on the recovery of medical costs. The question considered was whether a plaintiff is allowed to recover the unpaid, written-off portion of his billed medical expenses, or only those expenses actually paid by his employer under the Longshore and Harbour Workers’ Compensation Act (LHWCA). For the reasons explained below, the conclusion was that a plaintiff is limited to recovery of those medical costs actually paid.

The collateral source rule

The collateral source rule prevents an injured person’s damages from being reduced by payments made by their own medical insurance or worker’s compensation. The basis for this is that this income source, i.e. medical insurance or worker’s compensation, is considered to be independent of (or collateral to) the tortfeasor, and as he has not contributed to that income source he may not reduce its damages by any amount paid. In practice, the rule allows plaintiffs to recover expenses they did not personally have to pay.

The rationale for this is that this income source of the collateral source rule is to ensure that tortfeasors bear the full cost of their own conduct and also to protect plaintiffs who have the “foresight to obtain insurance.” This was clarified in Phillips v. Western Co. [5th Cir. 1992] where it was stated “If tortfeasors could set off compensation available to plaintiffs through collateral sources, then plaintiffs who pay their own insurance premiums would suffer a net loss because they would derive no benefit from any premiums paid.”


Robert dePerrodil, a 70-year-old oilfield consultant who worked for Petroleum Engineers, Inc. (PEI), was transported on a crew boat owned and operated by Bozovic Marine, Inc from Venice, Louisiana, to his work site on an offshore platform. Upon arrival at the platform site, dePerrodil realised that he would not be able to board the platform because no lift boat was present and so he asked to return to port. While returning to port the vessel encountered rough seas, causing dePerrodil to fall to the floor and suffer injuries to his back.

PEI carried workers’ compensation insurance for dePerrodil pursuant to the LHWCA and his medical providers billed the insurer US$186,080 of which US$128,695 was written-off as part of the insurer’s negotiated rates. Ultimately the insurer paid US$57,385 in medical expenses. Subsequently dePerrodil commenced a claim in the U.S. District Court for the Western District of Louisiana against Bozovic Marine, Inc. for compensation in connection with the injuries sustained aboard the defendant’s vessel.

Following a bench trial on the merits, the court concluded that Bozovic Marine had acted negligently and accepted the claim. In awarding dePerrodil US $984,396, the court held the collateral-source rule allowed recovery for the full amount billed for medical expenses and not the lesser amount actually paid. Accordingly, the court awarded the plaintiff the full amount of medical expenses billed for his treatment, that is, US$186,080.

Bozovic Marine subsequently appealed the District Court’s ruling.

Court of Appeal Decision

The court found that Bozovic was a third-party tortfeasor that played no role in securing the insurance coverage and that the collateral-source rule applied.

The next question considered by the court was whether the collateral source rule allowed the plaintiff to recover the amount billed, or only the amount paid.

The court recognised that there was no direct authority regarding the treatment of written-off or discounted LHWCA medical expenses in the maritime-tort context. Therefore, the court looked for persuasive authority elsewhere and was guided by the rules laid down by analogous maritime authority, in the context of the cure obligation, and the case of Manderson v Chet Morrison Contractors, Inc. 666 F.3d 373, 381 [5th Cir. 2012]. In this case, the court held that an injured plaintiff may only recover an amount needed to satisfy payments made for medical treatment rather than the amount billed. Whilst the decision in Manderson was not binding, the court was persuaded that the rule it set down which prohibited write-off recovery was equally applicable to LHWCA maritime-tort cases. This was on the basis that maritime cure and LHWCA insurance create similar obligations for employers. In each case, employers have a duty to respond to work-related injuries through the payment of medical expenses, regardless of being at fault for the cause of the injury.

In line with the maritime cure authority, the court held that LHWCA medical expense payments are collateral to a third-party tortfeasor only to the extent paid and concluded that the lower court had erred in awarding the full amount billed instead of the far lesser amount actually paid by the insurer.


The decision in dePerrodil provides a clarification of the law which is welcomed by maritime defendants. The effect of the collateral-source rule has been limited to the extent that a plaintiff is only allowed to recover the actual amount of medical expenses paid by his employer (or its insurer) in an LHWCA claim and not the higher amount originally billed.


Article by Francisco Carvalho
Syndicate Executive 
Americas Syndicate