The Inherent Unfairness of Rule 414

Justice is supposed to be blind. That is why the woman holding the scales of justice has a blindfold over her eyes. The implication is that everyone should be treated the same under the law. It’s one of the reasons you are entitled to a trial by a jury of your peers.

However, this fairly new law enacted in the fall of 2011 in North Carolina does just the opposite. It discriminates against Plaintiffs depending on their health insurance.

Rule 414 (or Billed vs. Paid as it may be referred) was codified in an attempt at tort reform to limit a windfall to Plaintiffs allegedly. However, in what can only be described as an extreme overcorrection, this rule of evidence has done nothing except hurt Plaintiffs, even those with significant, serious, and permanent injuries. It punishes them for having health insurance and rewarding the tortfeasor (and thereby the insurance company) by making them have to pay less for the injuries they caused.

The Rule reads as follows:

The evidence offered to prove past medical expenses shall be limited to evidence of the amounts actually paid to satisfy the bills that have been met, regardless of the source of payment, and evidence of the amounts actually necessary to satisfy the bills that have been incurred but not yet satisfied. This rule does not impose upon any party an affirmative duty to seek a reduction in billed charges to which the party is not contractually entitled.

Before this new rule of evidence, the insurance company owed the amount of the bill, regardless of any source of payment. For example, if an ambulance bill was $1,000, the insurance company owed $1,000 (The only caveat was there was a presumptive reasonableness component to the amount of the bill, but the insurance company could challenge it). It did not matter if the claimant did not have health insurance, Medicare, Medicaid, BlueCross/BlueShield, etc.

This is called the Collateral Source Rule, which prohibits a jury from knowing who paid what on a particular bill. This rule helps level the playing field so that everyone who incurs this type of bill is treated the same.

While the Collateral Source Rule still exists, Rule 414 nullifies what I would argue was the intent of the Collateral Source Rule because it allows insurance companies to find out who paid what (irrelevant and immaterial under the Collateral Source Rule) and actually get a credit for any adjustments. So now, for that same $1,000 ambulance ride, one person may only be entitled to $250, another $500, and so on, depending on the type of insurance a person has if any.

In fact, under Rule 414 a claimant is almost better off not having insurance because it is less likely there will be any write-offs or adjustments to their bills, thereby increasing the overall value of their claim. Surely in this current climate of the debate over affordable health care, its rising costs, and affordable health care coverage, the legislature did not intend to actually reward people for not having insurance and punish those who do!

That is why it is essential to have an experienced attorney on your side to help combat and address the issue of Rule 414 in North Carolina personal injury cases. At the Law Offices of Jason E. Taylor, PC, we are here to help.



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