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Overcoming the Collateral Source Rule in Maryland

In Maryland, the Collateral Source Rule exits.  The rule, as set forth in the Maryland Pattern Jury Instructions is as follows:

In arriving at the amount of damages to be awarded for past and future medical expenses and past loss of earnings, you may not reduce the amount of your award because you believe or infer that the plaintiff has received or will receive reimbursement for or payment of proven medical expenses or lost earnings from persons or entities other than the defendant, such as, for example, sick leave paid by the plaintiff’s employer or medical expenses paid by plaintiff’s health insurer.

            In the lawsuit defended by Landsman & Ronald in the United States District Court in Maryland, Plaintiff was seriously injured when a large truck struck, and ran over him.  His medical expenses exceeded one million dollars ($1,000,000.00).  Defendant requested during discovery, the source of payments of the medical expenses.  Plaintiff refused to provide the information claiming that the information was irrelevant based on the Collateral Source Rule.  Defendant asserted that the information was relevant as it appeared that Medicaid paid a huge portion of the medical expenses.  If the Collateral Source Rule applied, Plaintiff would get the benefit of the windfall of collecting the medical expenses, although they had already been paid by Medicaid and did not need to be paid back.

            The Collateral Source Rule doctrine “rests on public policy considerations, particularly that the wrongdoer should not receive a windfall because the Plaintiff received a benefit from an independent source, but also that, to the extent the collateral benefit arises from insurance maintained by the plaintiff, the rule encourages the maintenance of insurance.”  Haischer v. CSX Transp., Inc., 381 Md. 119, 132, 848 A.2d 620, 627 (2004).

            In the case defended by Landsman & Ronald, the Plaintiff had initially advanced a claim for lost wages as a result of his injuries.  During discovery, Defendant asked Plaintiff to provide his income tax returns for the ten (10) years prior to the occurrence.  While Plaintiff did provide his tax returns for the two (2) prior years, the full complement of returns was not provided.  Counsel for Defendant then requested, by subpoena, that Plaintiff appear to answer questions including those involving his tax returns.  At the deposition, Plaintiff informed counsel for Defendant that he was withdrawing his lost wage claim.  Further, during the deposition, Plaintiff’s attorney objected to questions regarding his tax returns and instructed the Plaintiff not to answer, citing his Fifth Amendment right against self-incrimination.   No additional tax returns were provided.

            Landsman and Ronald, as counsel for Defendant, filed a Motion to Compel the tax returns and to have Plaintiff respond to questions regarding his taxes.  The argument advanced by counsel for Defendant was two fold.  First, Defendant argued that since the Plaintiff submitted Answer to Interrogatories, under oath, regarding his income tax returns, that he supplied copies of two (2) years of tax returns, as well as named an expert economist to testify as to his lost income, that Plaintiff had waived his right to assert his Fifth Amendment privilege against self-incrimination.  The second portion of the argument was, that since Plaintiff had waived his right to assert his Fifth Amendment privilege against self-incrimination, the income tax information requested was discoverable as it was relevant to the defense of the case due to suspected fraud and misrepresentations believed to be contained in the tax returns and in his discovery responses – thus bearing on Plaintiff’s credibility.

            Upon hearing arguments on both sides, the United States District Court for the District of Maryland Magistrate sided with the Defendant and ruled that the Plaintiff would have to produce his tax returns as part of discovery and be subject to inquiry regarding the contents of his tax returns and his income or otherwise, be forced to plead his Fifth Amendment rights in open court before the jury on the witness stand.

            Counsel for Defendant particularly wanted the tax information to advance the argument that, if Plaintiff did not pay his share of taxes, which he was required to do as an income earner in the State of Maryland, he should not be entitled to the benefit of the Collateral Source Rule since the medical bills were paid by a tax funded source.  Further, since Medicaid is not an insurance that is purchased and maintained by the Defendant, it would not be against public policy to deny Plaintiff the benefit of the Collateral Source Rule because the Court would not be discouraging a person from purchasing and maintaining their own insurance, rather it would be encouraging a person to pay their full taxes in order to get the full benefit of Collateral Source Rule.

            While the case settled prior to the Federal Court issuing its ruling on whether the a person who does not pay taxes, whose bills are paid by a source funded solely by those same taxes, is entitled to claim the benefit of the Collateral Source Rule, Landsman and Ronald feel strongly that the defense asserted helped to settle the case.

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