Proposed Legislation is Bad for Wisconsin Families

April 24, 2013 (Press-News.org) Last year, the Wisconsin Supreme Court decided Orlowski v. State Farm Insurance, which unanimously upheld the state's collateral source rule. Under this rule, a person injured as a result of someone else's negligence may recover from the responsible party the reasonable value of his medical expenses, which are presumed to be the amount billed for medical treatment. Evidence that a collateral source - that is, another entity, such as a health insurance company - paid a reduced amount for medical bills is inadmissible in court to establish the reasonable value of a party's medical treatment.

As the Wisconsin Supreme Court explained in Orlowski, the rule has three basic purposes: (1) to place the full burden for wrongful conduct on the negligent party; (2) to fully compensate the injured party; and (3) to allow the injured party to receive the full benefits of the insurance premiums he has paid for years.

Unfortunately, two bills recently introduced in the Wisconsin legislature seek to do away with the state's collateral source rule. Specifically, Senate Bill 22 and Assembly Bill 29 would allow defendants to introduce evidence of collateral source payments to rebut the presumption that invoices for medical treatment show the reasonable value of medical treatment provided to the injured person. The bills apply not only to general personal injury claims, but also to claims under uninsured or underinsured motorist insurance policies.

Supporters of the bills claim that doing away with the collateral source rule will lower car insurance costs. Critics of the bills argue that the change will not only penalize those with health insurance and those on Medicare and Medicaid, but also benefit wrongdoers and the uninsured. It should be noted that auto insurance premiums paid by Wisconsin citizens are among the ten lowest in the country.

Under current law, if a person runs a red light, hits another motorist and causes him to incur $40,000 in medical bills, he is potentially liable to the injured party for $40,000. If the proposed changes become law, the negligent party will be able to introduce evidence of actual health insurance payments to reduce potential amount of his liability. In many cases, insurance companies negotiate discounts with medical providers that allow them to pay less than the actual costs incurred. So, for the above example, an insurer may potentially pay only $20,000 for the $40,000 medical bill, which means that the negligent party's potential liability would be capped at $20,000. This ignores the fact that the insured party has likely paid tens of thousands of dollars in premiums over many years. Under the proposed law, insured parties are, in effect, penalized for being responsible and purchasing insurance. Even more absurd, the proposed law would allow an uninsured injured party to collect the full $40,000 from the wrongdoer.

The rule as it stands is simple: the wrongdoer must pay for 100 percent of the damages caused and the people who secured health insurance should not be penalized for acting responsibly.

Both proposed bills are currently under consideration in the legislature. Only time will tell whether they will pass as written.

Article provided by Domnitz & Skemp, S.C.
Visit us at www.domnitzlaw.com