Reinsurance Focus

In a recent decision, the Fifth Circuit touched on the collateral source rule, which generally prohibits parties from introducing evidence of reinsurance. The plaintiff medical center and its insurer (Western Professional Insurance) alleged that the defendant medical center and other defendants supplied misleading letters recommending a physician the defendants had fired just two months earlier for on-duty use of narcotics. While in the plaintiff medical center’s employ and under the influence of narcotics, the physician sent a patient into a permanent vegetative state. A judgment was rendered against the medical center and in favor of the patient. The plaintiffs sued for misrepresentation and negligence and, in turn, a judgment was rendered against the defendants.

On appeal, the court reversed the judgment against the defendant medical center for insufficiency of evidence, but remanded the case for further proceedings. The court rejected the defendants’ argument that the district court erred in excluding evidence of Western’s reinsurance. The Fifth Circuit noted that, under governing Louisiana law, the collateral source rule provides that payments made to, or benefits conferred on, an injured party from sources other than the tortfeasor, notwithstanding that such payments or benefits cover all or part of the harm for which the tortfeasor is liable, are not credited against the tortfeasor’s liability. The defendants’ attempt to introduce evidence of reinsurance at trial was “nothing more than a classic argument against the collateral source rule.” Kadlec Medical Center v. Lakeview Anesthesia Associates, No. 06-30745 (5th Cir. May 8, 2008).

This post written by Brian Perryman.