South-Western Legal Studies in Business

Collateral-Source Rule Regarding Damages Does Not Apply to Recovery from Sources Beyond Wrongdoer
Description Appeals court held that a trial court properly reduced a damage award by the amount received by the plaintiff from the defendant’s insurance company for damages suffered due to the defendant’s negligence. Since the insurer acted on behalf of the defendant, the insurance payment reduces the damages due from the defendant.
Topic Court Procedure
Key Words Damages; Collateral-Source Rule
C A S E   S U M M A R Y
Facts Walsh, a welder, negligently started a fire in a commercial building. He was held responsible for $68,000 in damages to the VanLandschoots, the owners of the building. Walsh’s insurance company paid $46,439 to the VanLandschoots’ insurer that reimbursed payment their insurer paid them. The trial court reduced the judgment against Walsh by the amount paid by his insurance company. The VanLandschoots appealed.
Decision

Affirmed. “The VanLandschoots argue that the collateral-source rule should apply and the judgment should not be reduced by the amount that Walsh’s insurer paid to their insurer. Under the collateral-source rule, in general, compensation received from a third party will not diminish recovery against a wrongdoer. … The collateral-source rule … applies only to a payment that comes from a source other than the tortfeasor or someone acting for a tortfeasor. If the payment comes from the tortfeasor, or someone acting for the tortfeasor, the rule does not apply, and such payment will reduce the tortfeasor’s liability.” In a property-damage case, where the tortfeasor’s insurer makes a payment directly or indirectly to the injured party, such payment helps to offset the tortfeasor’s liability to the injured party.

Citation VanLandschoot v. Walsh, 660 N.W.2d 152 (Ct. App., Minn., 2003)

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