The Collateral Source Rule: A Common Law Norm Under Special Interest Attack

David Schap and Andrew Feeley
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Andrew Feeley: Department of Economics, College of the Holy Cross

No 606, Working Papers from College of the Holy Cross, Department of Economics

Abstract: According to Posnerian law and economics, common law (i.e., judge-made law) tends to promote efficiency. Public choice teaches that statutory (legislated) law need have no such efficiency property because, unlike appointed judges, legislators are subject to short election cycles and are beholden to special interests for election and re-election. The collateral source rule is a common law norm that permits an injured party to recover damages from both the tortfeasor (injurer) and from private insurance. Published work in the law and economics literature indicates that despite an appearance that the rule permits unwarranted double recover, the rule is indeed generally efficient. Despite its efficiency properties, the rule has been modified by statute in many jurisdictions in recent decades. Insurers reap transitory gains if exceptions to the collateral source rule are granted by statute whereas medical care providers achieve an ongoing gain if their sector is specifically excluded from the rule's application. The authors report the results of their exhaustive survey of statutory law concerning the collateral source rule in the fifty states, District of Columbia, Puerto Rico and Virgin Islands. The categorized findings reveal significant exceptions to the collateral source rule introduced into statutory law to the benefit of the special interests identified.

Keywords: forensic; economics (search for similar items in EconPapers)
JEL-codes: D72 K13 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-ias and nep-law
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Published in Cato Journal, Vol. 28:1, Winter 2008, pp. 83-99.

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http://www.cato.org/pubs/journal/cj28n1/cj28n1-6.pdf Originally presented at the Public Choice Society Meetings, New Orleans, LA, March 29, 2006 (application/pdf)

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