Kansas, Missouri, and every other state imposes a requirement on drivers that they carry a minimal amount of insurance. This insurance covers the driver in case they are involved in an accident that causes injury or property damage to another driver (or passenger or pedestrian). Even with this mandate, it is virtually unheard of for an injured driver to sue a carless-driver’s insurance company. Even more rare is to hear mention of liability insurance at a trial. Below is a discussion of this oddity involving insurance and personal injury lawsuits.
So where is the insurance company in a lawsuit?As mentioned above, when two drivers are in an accident and cannot reach a settlement regarding that accident, the case will work its way to trial. For example, imagine John runs a red light and hits Jane as she is pulling into an intersection. John has insurance and notifies his insurance company right after the accident. From this point forward, the insurance company, rather than John, is going to be “running” the litigation for John: the insurance company hires the lawyer, the insurance company decides when to settle and for how much within John’s policy limits, decides which witnesses to call at trial, etc. However, if Jane has to file a lawsuit, she won’t sue the insurance company. Instead, she’ll sue John personally.
If this doesn’t seem to make sense, don’t worry: it really doesn’t add up. What is really at play here is contract law, rather than personal injury law. By purchasing insurance, John was paying his insurance company to defend him in the event of John’s negligence. You can think of it as the insurance company being paid to take over John’s potential liability. John is, of course, always needed to litigate the claim though. He is one of the parties involved and it is his carelessness that will ultimately decide if he is liable to Jane. But the case will be Jane v. John, not Jane v. John’s Insurance Company. In fact, the jury will never know that John had insurance at all.
Why can’t the jury know about insurance?Both Kansas law (Section 60-454) and Federal law (Rule of Evidence 411) prohibit a party from presenting evidence that a defendant had insurance at the time of an accident to prove that driver was negligent. Though this rule seems odd at first, it actually makes a fair amount of sense for a few reasons. First, having insurance wouldn’t actually go towards proving negligence—or carelessness—at all. The argument is that an insured individual is more likely to drive carelessly because he or she won’t be the one the ultimately pays for the damage. This argument simply ignores the fact that the driver has been paying for insurance for years, maybe even decades, and will have to pay more after the accident. The second reason this rule was enacted is because of feared misuse by a jury. Congress and the Kansas legislature were unsure that a jury would be able to fairly weigh facts when there was a hurt individual on one side and a big insurance company refusing to pay on the other. This rule paints a much different picture of two individuals that may be equally at fault for the accident. The fact that this picture is intentionally misleading is simply viewed as the price paid to avoid misleading the jury.
There are certainly instances were insurance does come into evidence at trial. First, the rules only apply when the insurance policy is being used to prove negligence by the defendant. Thus, if John denied that he owned the truck that was involved in the accident, Jane could offer a copy of John’s insurance policy covering the truck as circumstantial evidence that John owned the vehicle—why else would he pay to insure it? These cases are quite rare. More common are cases where the insured defendant unintentionally mentions insurance in some way, as the case in Unruh v. Purina Mills, LLC. For example, John may testify that he was sure the accident occurred at 1:15pm because he called his insurance company right after the crash and his phone said that call began at 1:15. John is the intended beneficiary of the no-insurance rule, so he can’t protest that he lost the rule’s protections by mentioning his insurance policy. This is true even if Jane’s attorney asked the question that resulted in John making the statement, so long as it was not the attorney’s intention to have John testify about insurance.
What about health insurance?One other type of insurance is worth mentioning here: health insurance. Say Jane had great health insurance through her job and that insurance paid for all of Jane’s hospital bills. Now Jane is suing John to recover those medical expenses. Can John point to Jane’s health insurance to argue that he shouldn’t have to pay for Jane’s medical bills because Jane herself did not have to pay the full amount?
The same sorts of considerations come into play here, so the answer is largely the same: generally, no evidence can be offered to show that an injured plaintiff’s medical bills were paid by insurance. This is because of the “collateral source” rule. As noted in Farley v. Engelken, the collateral source rule means that an injured plaintiff cannot be punished for having the foresight to carry health insurance. By paying for health insurance, an individual is taking an affirmative step to make sure they will receive necessary medical treatment when disaster strikes. A careless driver does not get to benefit from the victim’s good planning by saying “your insurance took care of it, so you don’t get any redress.” Again, the ideas behind this rule are making sure a jury doesn’t discount medical bills because of insurance and ensuring that evidence of having insurance isn’t used improperly.
There is one important caveat to the collateral source rule, though. In Martinez v. Milburn Enterprises, the Kansas Supreme Court made a big cutback into the rule. Martinez allows a defendant to present evidence that a medical provider “wrote-off” part of a medical bill to subtract from a plaintiff’s damages. So, say Jane has surgery and she is billed $100,000. Jane’s health insurance has Jane pay her co-pay of $1,000 and then negotiates with the hospital on the remaining amount, ultimately paying $85,000 instead of $99,000. John can offer evidence that Jane’s medical bills were really only $86,000 and not $100,000, based upon what Jane’s insurance and Jane actually paid. Needless to say, this really cuts against the grain of the collateral source rule, particularly with how common it is for providers to mark up prices and the write off amounts for insurers.
Insurance is a part of everyday life. However, the law treats insurance in very strange ways. This treatment has resulted from both the experience of courts and legislatures, and the undue influence that large insurance companies can have on drafting laws. Having experience legal counsel is important, because the only way to learn the ins and outs of dealing with insurance companies and making sure the same policy arguments aren’t used as a shield and sword by an insurance company is having trial experience.