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Insurance write-offs benefit for insured

January 1, 2008
In a case of first impression, the Indiana Court of Appeals ruled write-offs constitute insurance benefits for which an insured has paid directly, and as a result opposing parties in suits can't introduce evidence of write-offs to reduce damage awards.

In Brandon Stanley v. Danny Walker, No. 41A01-0610-CV-462, the appellate court looked to courts in other jurisdictions for the answer to whether write-offs negotiated by an insurer amount to an "insurance benefit" and should therefore be excluded when calculating the actual extent of a plaintiff's pecuniary loss.

Danny Walker and Brandon Stanley were involved in a car accident in which Walker was seriously injured. The gross charges of Walker's medical treatment were later adjusted downward by write-offs negotiated by his insurance company.

Walker later filed a complaint against Stanley, arguing his negligence caused Walker to receive permanent injuries. At trial, Stanley made an offer of proof on the total of Walker's medical bills, wanting to show the amount of write-offs Walker had received. The trial court sustained Walker's objection, citing Indiana's collateral source statute as the reason for excluding evidence of the write-offs.

Looking to solve the issue of whether to exclude the write-offs, the Indiana Court of Appeals looked to courts in other states, including Ohio, Illinois, Kansas, and Louisiana, which have all embraced the view taken by the Indiana Court of Appeals in this case: Walker should reap the benefits of the write-offs because he paid his insurance premiums.

"... (W)e conclude that fundamental notions of tort law, surviving policy justifications of the common law collateral source rule, and concerns of equity warrant the finding that write-offs secured by insurance companies for the benefit of their insureds, constitute insurance benefits for which the plaintiff or the plaintiff's family has paid directly, and therefore, must be excluded from consideration when calculating the extent of the injured party's pecuniary loss," Judge Carr Darden wrote.
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