# Collateral source rule

> The collateral source rule decides whether health insurance and other payments reduce what the at-fault driver owes. States handle it very differently.

Canonical page: https://accidentclaimfacts.com/glossary/collateral-source-rule/  
Last reviewed: October 29, 2026 by the Accident Claim Facts editorial team  
General information, not legal advice. Talk to a licensed attorney in your state.

## Quick answer

The collateral source rule deals with money you received from other sources after a crash, such as health insurance, sick pay or disability benefits. Under the traditional rule, those payments do not reduce what the person at fault owes, and the jury is not told about them. Many states have changed the rule by statute, so the answer depends on where the case is.

## In a car accident claim

Two states show how different the results can be. In Florida, the court reduces an award by amounts already paid from collateral sources such as health or disability insurance, except sources that have a right to be repaid. Texas takes another route for medical bills: recovery is limited to the amount actually paid or incurred by or on behalf of the claimant. In practice, that often means the discounted amount a health plan actually paid matters more than the full bill.

The traditional rule has a logic: the at-fault driver should not benefit from insurance you paid for. And many payers do not simply absorb the cost. A health plan may have a right to be repaid from your settlement through subrogation, so you may not keep both payments. Our guides to [types of damages](https://accidentclaimfacts.com/money/types-of-damages/), [who pays medical bills](https://accidentclaimfacts.com/money/who-pays-medical-bills/) and [medical liens and subrogation](https://accidentclaimfacts.com/money/medical-liens-and-subrogation/) explain how these pieces fit.

## Example

> **Example:** A driver's health plan pays the hospital bills after a crash. At trial, the at-fault driver wants the jury to hear that the bills were already paid. Under the traditional rule, the jury would not hear it. In a state that changed the rule, the court may reduce the award, or limit the bills to what was actually paid.

## Related terms

- [Subrogation](https://accidentclaimfacts.com/glossary/subrogation/)
- [Economic damages](https://accidentclaimfacts.com/glossary/economic-damages/)
- [Made-whole doctrine](https://accidentclaimfacts.com/glossary/made-whole-doctrine/)
- [Lien](https://accidentclaimfacts.com/glossary/lien/)

## FAQ

### Does health insurance reduce a car accident settlement?

It depends on the state's rules and on the health plan. Some states reduce an award for amounts already paid; others do not. Separately, your health plan may ask to be repaid from the settlement.

### Is the collateral source rule the same in every state?

No. Some states keep the traditional rule, others have changed it by statute, and the changes differ in what they cover, such as medical bills only or all benefits.

## Sources

- [Cornell Law School, Legal Information Institute, Wex: collateral source rule](https://www.law.cornell.edu/wex/collateral_source_rule) — the traditional rule
- [Florida Legislature, Florida Statutes § 768.76](https://www.flsenate.gov/Laws/Statutes/2026/768.76) — collateral sources, including what is excluded
- [Texas Legislature, Civil Practice and Remedies Code chapter 41](https://tcss.legis.texas.gov/resources/CP/htm/CP.41.htm) — § 41.0105, medical expenses actually paid or incurred