Indiana Law Review


A Multi-Perspective Critique of Indiana's Legislative
Abrogation of the Collateral Source Rule

Lawrence P. Wilkins*

I. Introduction

From an early date in Indiana jurisprudence, courts have denied
defendant tortfeasors the abihty to present evidence that the plaintiff

has obtained compensation for the injuries from other sources and avoid

liability by arguing that the plaintiff has no need for compensation

through the torts system. So, for example,^ where the plaintiff's loss

has been covered by a contract of insurance purchased by the plaintiff

or the plaintiff's employer, Indiana courts, in accordance with a rule

adopted in virtually every American jurisdiction, have steadfastly refused

to permit the defendant, '*by way of set-off, recoupment, or in mitigation

of damages,"^ to avoid compensating the plaintiff in an amount equal

to the assessed value of the injuries.

Effective September 1, 1986, the "collateral source rule," as this

judicial position has come to be known, no longer governs the trial of

personal injury actions. By declaring a new collateral source rule which

requires the admission of evidence of certain types of compensation

payments to plaintiff from outside sources, and permits consideration

of those payments in the assessment and review of damages, the Indiana

Professor of Law, Indiana University School of Law - Indianapolis. B.A., The
Ohio State University, 1968; J.D. Capital University Law School, 1973; LL.M., The
University of Texas School of Law, 1974.

'Other sources of benefits may be involved. The rule of exclusion discussed here

applies to direct provision of benefits, such as disability payments from plaintiff's own

carrier or plaintiff's employer's insurance, pension plans, free medical services, welfare

benefits, social security benefits, and gifts. It also applies to benefits that are more indirect,

such as tax savings from the nontaxability of judgments for damages or income and

services of a second spouse. The justifications for excluding evidence of benefits may vary

according to the type of benefit. See generally Averbach, The Collateral Source Rule, 21

Ohio St. L.J. 231 (1960); Esdaile, The Collateral Source Rule: A Proposal to Regulate
Admission of Evidence to Avoid Prejudice, 68 Mass. L. Rev. 102 (1983); Fleming, The

Collateral Source Rule and Loss Allocation in Tort Law, 54 Cal. L. Rev. 1478 (1966);
Hogan, The Collateral Source Rule: Its Justification and Its Defense, Trial, Feb. 1983,

at 58; Lambert, The Case for the Collateral Source Rule, 1966 Ins. L.J. 531; Maxwell,

The Collateral Source Rule in the American Law of Damages, 46 Minn. L. Rev. 669
(1962); Peckinpaugh, An Analysis of the Collateral Source Rule, 1966 Ins. L.J. 545; Note,
Unreason in the Law of Damages: The Collateral Source Rule, 77 Harv. L. Rev. 741
(1966) [hereinafter Unreason]. Where significant, the differences will be treated below,

but in most parts the discussion will proceed without distinguishing the various sources.

^Sherlock v. Ailing, 44 Ind. 184, 199 (1873).

399



400 INDIANA LA W REVIEW [Vol. 20:399

General Assembly has reversed the judicial rule of exclusion.^ In this

enactment, one of a series of important legislative modifications and

abrogations of the common law in this state in recent years, the General
Assembly has terminated an unbroken Hne of precedent extending back

nearly to the middle of the 19th century. Any legislative rewriting of
common law is significant, but when such a solidly established doctrine
as the collateral source rule is overturned, the event is especially note-

worthy. The rule has been under steady attack since it was first pro-
nounced in the courts and has garnered severe criticism from commentators

over the years. This Article will examine the enactment^ in detail and

comment upon its operation and apparent effect in the common law of
torts from several perspectives. It will also briefly review the criticisms

leveled at the rule and evaluate the statutory abrogation in light of those

criticisms.

II. Common Law Background of the Collateral Source Rule

The main justification offered in the early decisions for refusing to

entertain defenses of this nature has been that the defendant has no

interest in the transactions of the injured party. The view of the courts

was clear: the mere fortuity that the defendant had injured someone

who had obtained protection of personal fiscal resources from expenses
occasioned by physical injury bore no relationship to the defendant's

liability. As will be demonstrated below, the courts have been so resolutely
opposed to defendants' arguments based on the premise that no net loss

has occurred because of the collateral payments, that judicial analyses

of this rule of exclusion have been truncated or nonexistent.^ A logical
framework for the judicial collateral source rule can be inferred, however,

and an overall review of the common law history of its application
reveals a shift in emphasis upon justifications for the rule, if not a shift
in the essence of the rule itself. This section of the Article will examine

the case law background of the rule and attempt to develop the inferred

logical framework of the courts in applying the rule. This background

will then serve as a basis for analysis of the effects of the statute.

Early in the rule's development in Indiana, the approach of the

courts applying the rule began with an assumption that the defendant's

^Act of March 11, 1986, Pub. L. No. 201-1986, 1986 Ind. Acts 1959 (codified at
IND. Code §§ 34-4-33-14; 34-4-35-1; 34-4-36-1 to -3 (Supp. 1986)).

"The act is entitled "Reductions of Subrogation or Lien for Collateral Benefits

—

Jury Instructions in Personal Injury Cases—Collateral Source Evidence." Senate Enrolled
Act 394 (1986). It does not have a short title, but needs one badly. Some plaintiffs'
attorneys have suggested "The Liability Insurance Relief Act," others think it might better
be called the "Reduced Compensation Act," while some defense counsel have been calling
it the "One Bite at the Apple Act."

'See infra note 8 and text accompanying notes 20-27.



1987] COLLATERAL SOURCE RULE 401

attempt to mitigate was an attempt to address the issue of the defendant's

culpabihty. Given that approach, the fact that the injured party had

received some financial balm from another was viewed as non sequitur.

The attempt to prove that a plaintiff, once injured, had been requited

from another source would not serve as a premise for the offered

conclusion that the defendant was not at fault in invading the plaintiff's

interest.

The courts were concerned with the effect of recognizing a rule that

would allow an interloper to profit from the contractual security arranged

by others, as evidenced in the statement by the court in Cunningham

V. Evansville and Terre Haute R. Co.:^

The payment of such moneys not being procured by the

defendant, and they not having been either paid or received to

satisfy in whole or in part his liability, he can derive no advantage

therefrom in mitigation of damages for which he is liable. As

has been said by another, to permit a reduction of damages on

such a ground would be to allow the wrong-doer to pay nothing,

and take all the benefit of a policy of insurance without paying

the premium.^

Reduced to essential terms, the truth of this proposition is not self-

evident. Nor does the court offer any further explanation, preferring

instead merely to recite other holdings.^ No reason in logic is suggested
on the face of the statement why C cannot benefit from a transaction
between A and B. Even beyond the explicit recognition of third-party
beneficiary contracts, common experience teaches that members of a
market society benefit daily from others' transactions. If considerations

of fairness are adopted as the perspective, so long as A and B get what
they bargained for, no reason is suggested for disallowing C to enjoy
the fruits of the bargain as well. However, the quotation from the

Cunningham court does demonstrate that the person seeking the miti-

gation was not simply a third-party interloper; he was not the neutral

"C" in the abstract statement. The would-be interloper in the case was
a ^'wrongdoer." So stated, the recitations take on a certain tone of

moral indignation at the suggestion that someone clothed in fault could

avail himself of the preparedness of another.^

The combination of a simply stated rule backed by an attitude of

moral indignation proved to be a formidable obstacle to the rule's

"102 Ind. 478 (1885).

^Id. at 484 (quoting 1 Sutherland, Damages 242 (1916)).
«The court quoted Sherlock v. Ailing, 44 Ind. 184 (1873), and cited The Ohio and

Mississippi R.W. Co. v. Dickerson, 59 Ind. 317 (1877), thereby establishing a pattern of
substituting recitation for analysis by subsequent courts.

'One is reminded of Aesop's fable of the grasshopper and the ant.



402 INDIANA LAW REVIEW [Vol. 20:399

Opponents. The courts remained steadfastly unwilling to permit the tort-

feasor to avoid paying reparation to the plaintiff on the ground that

plaintiff had already recovered for the injuries.

Not long after the rule was first articulated, the courts applied it

to bar evidence of gratuitous services rendered to the plaintiff. '° This

development is noteworthy because in such cases the justification that

plaintiff's foresight and preparedness in dealing with contingencies that

might place a burden on the plaintiff's fiscal fortunes was unavailable.

That the rule was nevertheless applied to such situations demonstrates

just how focused upon assuring that the defendant paid for the wrongful
injury the courts were. Having emphasized the accountability of the

tortfeasor as the justification for the rule, and having refused to inquire

whether a debit upon the financial status of the plaintiff actually existed,
the courts' application of the rule of exclusion to gratuitous benefits

conferred upon the plaintiff was a simple application of the basic logical
construct of the rule, not an extension or modification of it. In the

view adopted by the judiciary, the nature of the source of compensation

that the plaintiff had received was simply inconsequential to the issue

of defendant's accountability for the injury.

This basis for the rule clearly has roots in a philosophy of corrective

justice. An important element of a system pursuing the corrective model
is retribution for wrongs. ^^ If the view is adopted that a primary aim

'"City of Indianapolis v. Gaston, 58 Ind. 224, 227 (1877).

"In an attempt to lay out the "raison d'etre of the law of tort," Professor Glanville

Williams posited "four possible bases of the actions for damages in tort," which are:

1. Appeasement "By this means the victim is induced to 'let off steam' within

the law rather than outside it."

2. Justice "Two variants of this theory may be perceived: (1) The first places
emphasis upon the fact that the payment of compensation is an evil for the

offender, and declares that justice requires that he should suffer this evil. This

is the principle of ethical retribution, ... (2) The second variant looks at the

same situation from the point of view of the victim; it emphasizes the fact that

the payment of compensation is a benefit to the victim of the wrong, and

declares that justice requires that he should receive this compensation. We may
call this ethical compensation."

3. Deterrence "Ranged against the theory of tort as part of the moral order

are those who believe that it is merely a regime of prevention. The action in
tort is a 'judicial parable,' designed to control the future conduct of the

community in general."

4. Compensation "... according to which one who has caused injury to another
must make good the damage whether he was at fault or not. This is the same
as the theory of ethical compensation except that it does not require culpability

on the part of the defendant."

Williams, The Aims of the Law of Tort, 4 Current Legal Probs. 137, 140-53 (1951).
These concepts are elements of a corrective theory of justice and form part of the

backdrop for discussion of the enactment in the context of its satisfaction of the objectives



1987] COLLATERAL SOURCE RULE 403

of the torts system in holding actors Hable for the consequences of their

actions is retribution, to permit a "wrongdoer" to elude accountability

where the injured party turns out to have provided coverage for disability

(or is the recipient of largess) would be dysfunctional. The system would

be deprived of the opportunity to deal with a wrong, to correct the

wrongdoer, and in so correcting deter that wrongdoer from further

injurious conduct. It would also deny the system's objective of presenting

the assessment of accountability as an example to others who would
engage in like behavior, thereby impairing the wider deterrence goal of

the system. For some courts, this view was so fundamental that to them

the conclusion, embodied in the statement of the rule,'^ was obvious

and required reference to no other principle. ^^

The early establishment of such a view did not quell the efforts of

defendants subject to its effect to try to breach the logic of its foundation,

however. Examples of bids to proffer evidence of compensation from

collateral sources to reduce defendants' ultimate judgment debt are prev-

alent in the case law. For example, in a 1915 case, pointing to an

Indiana statute pertaining to railroads, which conferred an insurable

interest in lands along rail routes, one defendant railroad claimed that

when it destroyed the owner's property, insurance proceeds collected by
the owner inured to the defendant's benefit and reduced its liability to

the owner's subrogated insurer by the amount paid.'"^ The Indiana Su-

of a system having components derived from such a theory. This is not to suggest that

Professor Wilhams captures all of corrective theory; indeed, scholars have developed

sophisticated variations and even (mildly?) disagree on some fundamental ideas. See

generally Posner, The Concept of Corrective Justice in Recent Theories of Tort Law, 10

J. Legal Studies 187 (1981), and authorities cited therein. However, complete explication

of those variations and points of departure is beyond the scope of this article.

'^The judicial treatment accordingly given to such cases became tautological in form:

The defendant should not be permitted to reduce liability because it would be improper

for wrongdoers to reduce liability. See, e.g., infra note 13 (quoted language of the court

in Cincinnati R. Co. v. McCullom, 183 Ind. 556 (1915)).

The irreducibility of the principle prevented the courts adhering to it from expressing

it any other way. Professor Williams explains: "Those who adopt the doctrine of ethical
retribution do not, and cannot, refer it to any other principle. It is a postulate—an
ultimate value-judgment which can only be accepted or rejected." Williams, supra note

11, at 141.

''E.g., Cincinnati R. Co. v. McCullom, 183 Ind. 556, 571 (1915), where the court

said: "Under such an instruction [where the defendant had requested that the jury determine

damages by crediting defendant with the amounts plaintiff had received from insurance

proceeds] pecuniary benefit received by an injured party to which a defendant had not

contributed could be used as a defense in mitigation of damages resulting from the

wrongful act of such defendant. The impropriety of such an instruction can readily be

seen." The court cited no authority.

'Pittsburgh, C, C. & St. L. Ry. Co. v. Home Ins. Co., 183 Ind. 355, 362, 108
N.E. 525, 528 (1915).



404 INDIANA LAW REVIEW [Vol. 20:399

preme Court, acknowledging the statutory creation of an insurable in-

terest, nevertheless rejected the argument on the ground that the statute

gave no rights to the defendant in the insurance contract procured by

the land owner and did not affect the "ordinary rule" of exclusion of

evidence of collateral sources of compensation.^^ Trying a reverse-twist

variation on the theme of interests, a trucker defendant in a case brought

nearly forty years later argued that because the plaintiff had received

insurance benefits for the injury to his property caused by the defendant,

and because the plaintiff had subrogated its rights to the carrier, the

plaintiff was no longer the sole party in interest in the action.'^ The

strategy was designed to compel the naming of the insurance carrier as

a party, enabling the defendant to compel plaintiff to answer interro-

gatories pertinent to insurance proceeds received. The strategy failed

with the theory, however, when the Indiana Supreme Court, reciting the

''general rule," held that the defendant had no concern with the trans-

action between the plaintiff and the insurer, could not be subrogated

to the rights of the insured, and was concerned only with having to

pay double for the injury. Having obtained an adverse judgment, which

when satisfied would "fully release the appellant from further Uability

to anyone," the defendant's rightful concerns had come to an end, and

he would not be permitted to unseat the plaintiff as a party, interrogate

the plaintiff, or join the carrier. ^^ Eight years earlier, a defendant who
had collided with a fire truck and injured the plaintiff argued that

because the plaintiff was covered by a hospitalization plan of the city,

which was mandated by statute, the city was thereby rendered primarily

liable and defendant could not be liable for plaintiff's medical expenses. ^^

Relying generally on the rule, the Indiana Court of Appeals refused to

adopt the defendant's theory, stating "[w]here the wrongdoer is liable

for damages, he is liable for all damages and it is no concern of such

wrongdoer who ultimately gets the money. '"^

The language of the courts in resisting such persistent and creative

attempts to overcome the rule is consistently couched in fundamental,

unqualified terms, which probably explains in large measure the resiliency

of the rule to attacks. In Sherlock v. Alling,^^ the first Indiana case to

decide that a defendant could not offer evidence of the proceeds of

insurance^* to mitigate damages, the Indiana Supreme Court stated:

''Id. at 362, 108 N.E. at 528.

'^Powers V. Ellis, 231 Ind. 273, 108 N.E.2d 132 (1952).

^Ud. at 281, 108 N.E.2d at 136.

'«Mullins V. Bollinger, 115 Ind. App. 167, 55 N.E.2d 381 (1944).

"M at 171, 55 N.E.2d at 382.
^°44 Ind. 184 (1873).

^'The insurance proceeds were from a life insurance policy on plaintiff's decedent.

Id. at 199.



1987] COLLATERAL SOURCE RULE 405

To allow such a defence would defeat actions under the law,
when the party killed had by his prudence and foresight, made
provision or left means for the support of his wife and children,

and the wrong-doer would thus be enabled to protect himself

against the consequences of his own wrongful act.
. . . No case has been found recognizing the doctrine claimed,
and we are not willing to be the first to sanction it.^^

By 1893, the courts considered the rule to be "well settled" that
the plaintiff could "recover his entire loss from [defendant] without
regard to the amount of insurance he may have been paid thereon. "^^

The rule remained "settled" everywhere but in the minds of defense
counsel until the General Assembly reversed the rule in the 1986 session.

Modern courts have taken to simply quoting the encyclopedic state-
ment of the rule, as was done in Evans v. Breeden:^"^

'Compensation for the loss received by plaintiff from a col-
lateral source, independent of the wrongdoer, as from insurance,

cannot be set up by the wrongdoer in mitigation of damages. '^^

On these terms, to reach the opposite conclusion and permit reduction
of defendant's judgment debt to plaintiff on the premise that plaintiff's
loss has been covered, would require defendants to demonstrate some
reason why they should be permitted to ride the beneficial coat-tails of
the injured party's transactions. Having had no input into the trans-
actions, and being cast as a "wrongdoer," the typical defendant is unable
to make such a showing and is thereby counted out with two strikes.
A case frequently relied upon is Ohio and Mississippi Ry. Co. v.
Dickerson,^^ where the Indiana Supreme Court declared, in response to
defendant's argument that the damages were excessive because of plain-

tiff's receipt of full salary after the injury:

This forms no ground for the reduction of the damages. In
such cases, damages are assessed according to uniform principles,
and are not to be affected by the mere accidental business
relations of the party injured. The liberality of his employer
forms no reason why the appellee should not be compensated
for the injury he sustained. ^^

^^Id. at 200.

"Lake Erie & W.R. Co. v. Griffin, 8 Ind. App. 47, 50 (1893) (citing Cunningham
Evansville & Terre Haute R. Co., 102 Ind. 478 (1885)).

^M64 Ind. App. 558, 330 N.E.2d 116 (1975).

''Id. at 561, 330 N.E.2d at 118 (quoting 9 I.L.E., Damages § 86 at 253).
2^59 Ind. 317 (1877).

'Ud. at 324.



406 INDIANA LAW REVIEW [Vol. 20:399

Try as they might, defendants in this state and most others^^ have simply

been unable to overcome this view of the rule.

Yet attempts to overcome it have recurred, and in some instances

have succeeded in knocking some chinks loose by way of exceptions. ^^

If the proposition is so fundamental, that is, if it is based upon an

irreducible principle viewed as part of the fabric of our system of justice,

one would expect opposition to it to wane, exceptions to be nonexistent,

and efforts to overturn it eventually to stop. The fact that these ex-

pectations have not been fulfilled in the 115 years since the rule was

first judicially pronounced in this country^^ suggests that perhaps the

rule is not so fundamental after all; that even though the rule has been

taken to be fundamental in nature, it may actually be further reducible
to more fundamental parts; and that its resiliency is more attributable

^^See generally C. McCormick, Handbook on the Law of Damages 323 (1935);
Averbach, supra note 1; Annotation, Third Party Tortfeasor's Rights to Have Damages

Recovered by Employee Reduced by Amount of Employee's Workers' Compensation

Benefits, 43 A.L.R.4th 849 (1986); Annotation, Validity and Construction of No-fault

Insurance Plans Providing for Reduction of Benefits Otherwise Payable by Amounts

Receivable From Independent Collateral Source, 10 A.L.R.4th 996 (1981); Annotation,

Collateral Source Rule: Injured Person 's Hospitalization or Medical Insurance as Affecting

Damages Recoverable, 11 A.L.R.3d 415 (1977); Annotation, Admissibility of Evidence

That Injured Plaintiff Received Benefits from Collateral Source, on Issue of Malingering

or Motivation to Extend Period of Disability, 47 A.L.RJd 234 (1973); Annotation, Right

of Tortfeasor or Liability Insurer to Credit for Amounts Already Disbursed to Injured

Party Under Medical Payments or Funeral Expense Clause in Liability Policy, 1 1 A.L.R.3d

1115 (1967); Annotation, Collateral Source Rule: Right of Tortfeasor to Mitigate Opponent's

Damages for Loss of Earning Capacity by Showing That His Compensation, Notwith-

standing Disability, Has Been Paid By His Employer, 1 A.L.R.3d 516 (1966); Annotation,

Collateral Source Rule: Injured Person's Receipt of Statutory Disability Unemployment

Benefits as Affecting Recovery Against Tortfeasor, 4 A.L.R.3d 535 (1965); Annotation,

Application of the Collateral Source Rule in Actions Under the Federal Tort Claims Act,

12 A.L.R.3d 1245 (1962).
^'E.g., Jackson v. Beard, 146 Ind. App. 382, 398, 255 N.E.2d 837, 847 (1970)

(admitted evidence of receipt of social security benefits on the grounds that plaintiff

waived the collateral source rule by opening up testimony with respect to reduced income);

accord Cox v. Winklepleck, 149 Ind. App. 319, 271 N.E.2d 737 (1971) (evidence through

plaintiff's testimony of sick leave and vacation, failure to object to instructions, if given,

relating to such compensation, failure to argue application of the rule in brief on appeal,

constituted waiver). Some states have permitted an exception to the rule for the purpose

of establishing that the plaintiff is a mahngerer. See Hogan, supra note 1, at 58-59.

Contra Eichel v. New York Central R. Co., 375 U.S. 253, 254-55 (1963). No case in
Indiana has directly ruled on the matter, but in dictum the court in Cox, 149 Ind. App.

319, 271 N.E.2d 731, stated that the jury could properly consider whether the period of

time that the plaintiff was off work was the "proximate result" of the defendant's tortious

conduct. Id. at 322, 271 N.E.2d at 739.

3«Harding v. Townshend, 43 Vt. 536, 538 (1871) has been said to be the first case

where the rule was using the term "collateral." Averbach, supra note 1, at 233; see also

Esdaile, supra note 1. The Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152 (1854)

is claimed to be the first case where the doctrine was applied. Maxwell, supra note 1,

at 671.



1987] COLLATERAL SOURCE RULE 407

to the courts' attitudes about it as well as a general resistance of a

system based upon stare decisis to examine its commitment to pronounced

rules. This further suggests that other principles of at least equal value

have continued to underlie attempts to strike the rule from the system,

and that while the assertions of these competing principles have fallen

on judicial ears deafened by stare decisis, the legislature has listened to

proponents of the competing principles.

Correcting the defendant is not the only aim of the common law
torts system, however. The system also purports to correct the wrong

by making the injured plaintiff whole, at least so far as monetary

compensation will allow. This aspect has been, to date, the focus of

defense-oriented attempts to overturn the rule. Reduced to their essence,

the arguments have been that because the plaintiff has already received

some compensation for the injury, the need to make the injury whole
through torts compensation no longer exists, and defendant ought to

be excused from accountability through that system. By placing the

arguments on this foundation, the opponents of the rule have anchored

themselves to an equally fundamental principle from which lo gather

the strength of conviction to reiterate their pleas for reform.

So cast, the competing arguments have placed the corrective system

of justice in a position of internal conflict. To emphasize the retributive
aim of the system and deny the mitigation is to ignore the possibility

that the compensatory function will be duplicated. To recognize the
duplication and allow the "wrongdoer" to escape Hability through mit-

igation is to ignore the retributive and deterrent functions. The tensions

created by this conflict have produced some stultification of policy in

some instances, and judicial ground-shifting in others, as courts attempt

to answer the repeated challenges. The next section of this Article will

examine the criticisms of the rule and responses to those criticisms, with

a view toward identifying the alternative justifications developed in sup-

port of the rule.

III. Criticisms of the Rule

The earliest attempts to allow collateral sources to be considered in

mitigation were grounded in good measure upon considerations of fair-
ness. Defendants argued that to permit the plaintiff to benefit from a

judgment that did not take into account the fact that the injury had

already been compensated would permit a double recovery. Some judicial
responses to that argument were as much bottomed upon the retributive
function of the torts system and the moral position which refused to

aid a tortfeasor as were the seminal statements of the rule itself: If a

windfall is to result, better that the windfall be enjoyed by the innocent

injured party than by a wrongdoer.^^

^'No reported Indiana case has addressed this argument. For an example of a judicial



408 INDIANA LAW REVIEW [Vol. 20:399

Critics of the rule have questioned the core idea of this proposition

by suggesting that it may not be true in all cases that the plaintiff is
the better recipient of the windfall. An inquiry into the bases of liability
is central to this position, because in one form it is a direct attack upon

the assumption that the tortfeasor is a "wrongdoer." Where the tortfeasor
is subject to liability on a theory of strict liability, the status of the

parties relative to the issue of fault is roughly equal. Thus in this

application of the rule, the justification that it advances the retributive

function of tort law is unavailable.^^ Making this observation, the critics

have maintained that there is no indication that refusals to mitigate

have been "sensitive to varying degrees of moral fault."" However, strict

Hability as a regime of accountability has seen the development of

alternative justifications for imposing the burden on the tortfeasor at

the outset that more directly address the question of who should bear
the loss. Risk allocation, cost spreading, accident prevention, cost-benefit

analysis, market forces, and related concepts are elements of the economic

theories dominating discussions of accountability for injuries arising out

of modern trade and transportation.^"^ To the extent that imposition of
the collateral source rule permits the allocation of costs in a manner

consistent with the objectives and criteria of the regime within which

the rule is applied, the rule is justified independent of the traditional

notion that an injured party is to be favored over a "wrongdoer." To
be certain, the courts no longer have the ability to declare the ruUng

upon a stark comparison between a blameworthy defendant and an
innocent injured party, but the foundation for the objection to the moral

justification will have disappeared as well. If the analysis of cheapest

risk-avoider or most efficient cost-bearer has taken place independent

of the question of who is to "blame," and has identified the tortfeasor
as a proper person to subject to hability under the requirements of strict

hability, then to suggest that the plaintiff's insurer ought to bear the

cost because defendant is not a "wrongdoer" begs the question. The
real issue becomes whether allowing the plaintiff to be compensated

statement from another jurisdiction, see Grayson v. Williams, 256 F.2d 61, 65 (10th Cir.

1958); Annotation, Admissibility of Evidence That Injured Plaintiff Received Benefits

from Collateral Source, on Issue of Malingering or Motivation to Extend Period of
Disability, 47 A.L.R.3d 234 (1973).

^^See Unreason, supra note 1, at 749.

^''Complete exploration of the economic justifications for and criticisms of the strict

liability system of compensation is beyond the scope of this article. See generally P.

Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and Keeton on Torts §§ 75, 97,
98 (5th ed. 1984); M. Polinsky, An Introduction to Law and Economics ch. 13 (1983);
R. PosNER, Economic Analysis of Law §§ 6.5, 6.6 (3d ed. 1986). For a discussion of
cost allocation in the context of theories of corrective justice and a proposal for a non-

fault based system, see G. Calabresi, The Cost of Accidents (1970).



1987] COLLATERAL SOURCE RULE 409

from two sources is an efficient allocation of resources. Nothing in the

critical literature has explored that issue. ^^ The legislative abrogation
applies to ''personal injury" actions and contains no exclusion for actions

based upon strict liability. By permitting strictly liable defendants to
shift the ultimate allocation of costs to the injured party's insurer, the

Act may well have thrown the strict liability system into imbalance.
Even in the context of a fault-based theory of liability, the rule's

critics have contested the moral basis for applying the rule. Arguments

cast in this mold attack the rule using several premises, ^^ but those

having the greatest bearing upon Indiana's legislative abrogation are the

related notions that no even-handed method of determination of damages

exists in the law of torts, and that the method employed is subject to

evaluations that are primarily affected by factors other than the tort-

feasor's degree of culpability. As expressed in an ambitious student
comment in the Harvard Law Review, the criticism is that no "norm
of damages" for assessing the extent of liability exists, and the variables

upon which the size of the judgment debt depends are "the extent of

injury, the physical idiosyncracies and earning capacity of the injured

person, and . . . the latter's own degree of culpability."^^ So long as
the purpose of dispensing justice on an individualized basis remains a

vital part of the torts compensation system, it is difficult to envision a

mechanism that would not determine compensation according to factors

^^Cf. R. KeETON & J. O'CONNELL, BASIC PROTECTION FOR THE TRAFFIC ViCTIM 278,
400-03 (1965). The authors' proposed no-fault plan provides "reimbursement limited to

net loss" to avoid "wasteful overlapping of basic protection and benefits from other

sources." The authors acknowledge that the plan "is based on a principle contrary to

that underlying the collateral source rule of fort law." Compare the detailed approach
of Professors Keeton and O'Connell in Umiting reimbursement to net loss with the General

Assembly's broad approach.

^^See Unreason, supra note 1, at 749. One premise of such arguments is that
"wrongdoers" are treated uniformly under the rule and are not so treated in the larger

scheme of tort liability, pointing out that "[e]ven the most flagrant wrongdoer ordinarily

is not liable for damages unless harm in fact results from his conduct." Id. Even assuming

the validity of the statement, it is difficult to grasp its logic in the context of the argument

that the rule should not be applied. The assertion seems to be that because the torts

system operates so that those whose conduct has caused no harm, even though the conduct

is "wrongful," are not subject to liability, those who have wrongfully caused harm should
not be subject to hability for compensation to an already compensated plaintiff. So stated,

it is susceptible to the interpretation that it means because some "wrongdoers" escape

liability, others should too (an argument often heard by state troopers who have stopped
speeding motorists). It makes sense only if the elements of "no harm" and "harm already
compensated" are equated. Reduced to these terms, the argument becomes one that asks

the courts to ignore the retribution function and concentrate on the need for applying

the compensation function, something that the courts are bound not to do at common
law. This suggests the prime issue of the legislative abrogation, about which see infra

text accompanying notes 57-61.

^''Unreason, supra note 1, at 749.



410 INDIANA LAW REVIEW [Vol. 20:399

that vary with the peculiar make-up of the injured party. If "norms of
damages" is translatable to a schedule of amounts recoverable arranged
by category of injuries, the criticism seems more a disenchantment with
the torts compensation system in general than a revelation of a fallacy

of the collateral source rule.

Concern for an assurance of appropriate relationship between com-
pensation and levels of culpability is legitimate. That concern has reshaped

the face of the torts compensation system in the more than twenty years
since the quoted criticism was written. Lawyers, judges, and juries work-
ing in tort cases in nearly every state now do so within the controlling
principle of liability apportioned according to fault. With the adoption
bf a comparative fault system, the business of finding fault with the con-

duct that has led to the injury is not aimed exclusively in the direction

of the named tortfeasor. This is not to say that cases will not still occur
where the defendant is the only wrongdoer, but many cases are decided
where fault is assessed to both the plaintiff and the defendant, and among
those are some where the terms "plaintiff" and "defendant" are mean-
ingful only to the extent of designating who was first to bring a lawsuit.
In a system of comparative fault, the concept of culpability has changed

significantly from the traditional notions of moral blameworthiness.

However, the degree of culpability is certainly a focal point of the

inquiry into who should bear responsibility, and juries are instructed to
reach their verdicts by referring directly to the relative culpability of

the parties. That fact alone, of course, does not provide a "norm of
damages, "3^ but sensitivity to degrees of fault has been built into the

system, and the assessor of fault and damages is charged with the
responsibility for apportioning responsibility accordingly. This funda-

mental change in the system means that at least in some cases, the
courts are no longer dealing with a blameless plaintiff, and the under-
pinnings for the moral assertion that windfalls should not be enjoyed

by the wrongdoer have eroded away.

IV. A Critique of the Legislative Abrogation

Against this background, an assessment of the legislative abrogation

should take into account the effect that proof of collateral benefits

would have on the ultimate assignment of responsibility. To the extent

^^It is not precisely clear just what is meant by "norm of damages" in this context,
but if it means something Hke a schedule of damages such as applied in the workers'

compensation field, the reference for the norm would at any rate be the type of injury

and not degrees of culpability. If it means a schedule of damages related to the type of

conduct, it would resemble the system of fines and penalties employed in the criminal

law. With the difficulty of categorizing the myriad of ways that negligent conduct manifests

itself, such a schedule would seem to be infeasible beyond a general sweeping "fine" for

conduct failing to satisfy the standard of the ordinary and prudent person.



1987] COLLATERAL SOURCE RULE 411

that proof of collateral benefits will allow an admittedly culpable tort-

feasor to escape liability altogether, it would appear to suffer from the

same criticism leveled at the rule: it is susceptible to the charge that it

remains insensitive to degrees of fault (it would actually run counter to

the cardinal principle of the system). To the extent that it becomes
operable only with respect to plaintiffs who had received outside payments
and permits defendants to offset liability in direct one-to-one proportions,

it remains vulnerable to the argument that such proof allows gross, one-

sided results which would vary solely upon the idiosyncratic circumstances
of the person injured.

However, the enactment does not permit the inclusion of evidence

of collateral benefits on a wholesale basis. The legislature has been
careful to limit its rule of inclusion by setting out an express list of

exceptions. The court must permit offers of:

(1) proof of collateral source payments, other than:

(A) payments of life insurance or other death benefits;

(B) insurance benefits for which the plaintiff or members of
the plaintiff's family have paid for directly; or

(C) payments made by the state of Indiana or the United States,
or any agency, instrumentality, or subdivision thereof, that have

been made before trial to a plaintiff as compensation for the
loss or injury for which the action is brought[.]^^

To these exceptions must be added the separate section of the Act
which requires the court, if requested, to "instruct the jury that the

jury may not consider the tax consequences, if any, of its verdict.'"*^
The exceptions draw a rather tight boundary around the new rule's
appHcation, and the required jury instruction"*' even allows some assurance
that the jury will not, through surmise, debit the verdict amount by
assumed tax savings.

With respect to these exceptions, the common law rule remains in
effect, presumably accompanied by all of the problems assigned to it

by the critics. Reflective examination of the statute reveals that the new
rule is not conceptually revolutionary, and may not even fully discharge
the ambitious assertion of purpose that the General Assembly included

in the Act."*^ The enactment by its own terms purports to open the door

3'lND. Code § 34-4-36-2(1) (Supp. 1986) (emphasis added).
'"Id. § 34-4-35-1 (emphasis added).

"The provision appears to be merely directory, but it states that "the court shall,
if requested" give the instruction and the content is set out specifically. The instruction
will be requested in every case, and the court does not have the usual discretion to refuse

it. For further discussion, see infra notes 91-93 and accompanying text.

"The Act declares in the first section of the new chapter that:

The purpose of this chapter is:



412 INDIANA LAW REVIEW [Vol. 20:399

to evidence of collateral source benefits, then promptly closes it to all

but third-party purchased accident and hospitalization insurance proceeds,

wage maintenance plans (excluding workers' compensation and govern-

mental entitlements), gratuitous services, and gratuitous benefit payments.

It seems not to have taken full leave of the important notion in Sherlock

V. Alling^^ that the defendants ought not to avail themselves of plaintiffs'

"prudence and foresight" in providing for future contingencies through

insurance. Minimal departure in concept does not mean minimal dif-
ference in effect, however. Certainly, given the heavy incidence of third-

party purchased accident and hospitalization insurance coverage and sick

pay, most cases will be affected by the rule.

Given this adherence to the idea which supplied part of the foundation

for the exclusionary common law rule, the statutory rule contains some
flaws in language and logic which may present difficulties in application
that will require judicial interpretation. The facial resemblance to the

underlying concept of the common law rule of exclusion may lead to
problems in application in doubtful cases. For example, the Act excepts

from its coverage "insurance benefits for which the plaintiff or members

of the plaintiff's family have paid for directly,"^"* while it excepts "pay-

ments of life insurance or other death benefits'"^^ without reference to

whether the Hfe insurance benefits were paid for "directly" by the

plaintiff or were received gratuitously. Opposition in the critical literature

to excluding evidence of Hfe insurance proceeds has been mild at best,'*^

on the basis that in forms other than term-type policies, it is not a

contract of indemnity transacted for the purpose of covering expenses

in connection with a loss; rather, it represents an effort to save and

invest part of the family finances; and that the wrongful conduct of

the defendant only hastened the day on which the contract obligations

of the carrier became due.^^ Without an official legislative history, it

(1) to enable the trier of fact in a personal injury or wrongful death action to

determine the actual amount of the prevaihng party's pecuniary loss; and

(2) to provide that a prevailing party not recover more than once from all

applicable sources for each item of loss sustained.

Act of March 11, 1986, Pub. L. No. 201-1986, 1986 Ind. Acts 1959.

Considered against the exceptions clauses quoted above, it seems doubtful that the

General Assembly has enabled the trier of fact to do much at all in some cases "to
determine the actual amount of the prevailing party's pecuniary loss" or to prevent a

plaintiff from recovering "more than once from all applicable sources for each item of

loss sustained."

"^4 Ind. 184 (1873). See supra text and quotation accompanying note 22.

^IND. Code § 34-4-36-2(1 )(B) (Supp. 1986).
''Id. § 34-4-36-2(1 )(A).

'^^See Fleming, supra note 1, at 1500; Unreason, supra note 1, at 750-51.

"^See Fleming, supra note 1, at 1500; Unreason, supra note 1, at 750-51. See generally

1 Rhodes, Couch on Insurance 2d §§ 1:18, 1:30, 1:51, 1:60, 1:62, 1:72, 1:73, 1:74,
1:75 (1984).



1987] COLLATERAL SOURCE RULE 413

cannot be known what persuaded the General Assembly to maintain the

exclusionary rule with respect to such policies, but clearly the type of

insurance is important in the legislative scheme. However, given the

thrust of the Act, it seems incongruous generally to exclude life insurance

of all types, stemming from all sources. Because the legislature has

chosen to categorize insurance benefits by type and then, with respect

to the general category of "insurance," further categorize on the basis

of who paid for it, the sweeping treatment of life insurance is inconsistent

and puzzling. Avoidance of complexity seems a weak explanation in

light of the General Assembly's willingness to create the complexity of

categories in the first instance.

Complexity cannot be avoided in any case where the gratuitously

conferred poHcy has come from a family member. Section 2(3) of the

Act permits ''proof of the cost to the plaintiff or to members of the

plaintiff's family of collateral benefits received by the plaintiff or the

plaintiff's family. "^^ The Act does not say that hfe insurance benefits

are not collateral benefits. It acknowledges that they are collateral benefits

but renders them exceptional by the use of the words "other than" in

the operative clause."^^ Exclusion of the benefits with inclusion of the

costs where a family member has purchased the policy is bound to lead

to confusion.

The unfortunate choice of language in the two subsections has

provided fertile ground for contention in the context of gratuitously

conferred policies. A party might argue that even though Hfe insurance
is involved, the evidence of benefits received from the policy should

nevertheless be admitted on the grounds that plaintiff has not paid for

the benefits "directly" and subsection 1(B) thereby controls. Giving

credence to the purpose clause, which emphasizes the actual pecuniary

losses of the plaintiff and states the objective of a single recovery, no

apparent reason exists for excluding evidence of life insurance benefits

generally. Plaintiffs who have "indirectly" purchased Hfe insurance ben-

efits through employment plans or other means that satisfy the unstated

"indirect" concept will have recovered for the pecuniary losses that

concerned the legislature. Likewise, it is not clear, upon analysis, why

those who have purchased term Hfe policies should not be required to
try to convince the trier of fact that the proceeds were not purchased

as a hedge against accidental losses rather than as an investment strategy

utilizing family finances. Perhaps the exclusion represents a sympathetic

recognition that since Hfe insurance proceeds are the bone of contention,

loss of life win have occurred, and the survivors should be spared the

humility of arguing over who should be credited with the assigned monetary
value of the Hfe of the decreased. Only the legislators know.

^«lND. Code § 34-4-36-2(3) (Supp. 1986).

'^Id. § 34-4-36-2(1).



414 INDIANA LAW REVIEW [Vol. 20:399

The argument might be resolved by observing that the first subsection,
1(A), does not contain the word "or" following the semicolon ending

the clause. If the legislature intended the omission, it might mean that
the two clauses are not alternatives but are disjunctive and the first

clause stands alone without modification or supersession by the other.

However, drafting conventions indicate that when the disjunctive is
intended, use of the word "or" is recommended.^° Grammatical and

typographical omissions and errors are not so rare in legislative codes,

however, that a court can be sanguine about an interpretation that

assumes an intentional omission, especially one that runs counter to

drafting conventions. Interpretation of the effect of a statute on the

basis of what is not present in the legislative language is tricky business,

and opens the door to some rather sweeping arguments.
A court would have similar difficulty trying to interpret the statute

adhering to the principle that a more specific statutory statement governs

a general statement. If the type of insurance mentioned in the two clauses

is the basis for comparison, the first clause is more specific by virtue
of the inclusion of the modifier "Hfe" to operate on "insurance." On
the other hand, if the manner of purchase is the comparison, the phrase

"for which the plaintiff or members of the plaintiff's family have paid
for directly," makes the second clause more specific. Additionally, the
third subsection, 1(C), seems even more specific than the previous two,

because it appears that if the state or federal government is the source

of the funds, it does not matter whether the funds could be characterized

as from Hfe insurance or otherwise, or whether the plaintiff purchased

the benefits directly or otherwise. It might be argued on the strength

of this observation that the three clauses are set out in ascending order

of specificity. Again, without an official history, the courts are left to

conjecture and surmise. The legislature could have been more cognizant
of drafting conventions and stated clearly and affirmatively what evidence

should be included. Interpreters should not be left to an analysis of a

^°See R. DiCKERSON, The Fundamentals of Legal Drafting 76-78 (1965). E.g.,
Council of the District of Columbia, Legislative Drafting Manual 63 (Rev. ed.
1982).

''E.g., Commonwealth v. Kelly, 177 Mass. 221, 58 N.E. 691 (19(X)). The court held
that innkeepers could not sell intoxicating liquor to guests after 11 P.M. on the strength

of a comma, which was included in the first publication of the statute in question, but
was dropped in favor of a semicolon in later printings, and potential fortunes were lost.

See also Ex parte John Hill, 172 Eng Rep. 397 (1827). The absence of the word "bull"
in an enumeration which made it a crime to mistreat "any horse, mare, gelding, mule,
ass, ox, cow, heifer, steer, sheep, or other cattle" rendered the enactment inapplicable to

bull-baiting against the interpretive device employed by the judges, which excludes from

the general words items of higher rank than the words enumerated. Thus the "sport" of

bull-baiting was legally the attribution of many made and lost fortunes in merrye olde
England.



1987] COLLATERAL SOURCE RULE 415

series of exceptions to determine what limited types of benefits remain

affected by the rule of inclusion. Legal lore and folklore contains stories

about how fortunes were made and lost on the basis of the presence
or absence of a word or a punctuation mark.^' The point of the stories

is always that precision of language is important in the law, but they

also provoke negative reactions from those who think that the substance
of the law, not its form, should control decisions. Indiana courts should

not have been placed in the difficult position of determining accountability

upon such a technical point by such an easily curable grammatical

structure.

More generally, the exception for "directly" purchased benefits is
curious and fraught with problems. In a hospitalization plan to which

employer and employee both contribute, an issue is bound to arise in

litigation whether evidence of benefits is to be included or excluded.

Counsel handling such cases should be prepared to present arguments

pro and con on the question of whether the trier of fact should divide

the proceeds in proportion to the relative amounts paid by the parties

to the employment contract and credit the defendant with only the

amount "paid for" by employer contributions.
If the legislature intended to inject such complications into the trial

of damages, it is a fair question whether it carefully considered the

added administrative costs. The potential for confusion will be so great
in some cases that the inquiry to determine the "actual amount of the
party's pecuniary losses" ^^ will come at greater administrative costs than
the legislature may have contemplated. In light of the inconsistency with
which the legislature has treated the criterion of actual pecuniary loss

as a truly primary consideration in the two subsections, it is doubtful

that it intended trials to delve so deeply into such a determination. Evidence

that the legislature was motivated to avoid complications in the evaluation

of damages is contained in another part of the enactment itself. In section

2 of the Act, the General Assembly declared: "In a tort action for

personal injuries tried by a jury, the court shall, if requested, instruct

the jury that the jury may not consider the tax consequences, if any,
of its verdict. "^^

The Internal Revenue Code of 1954, section 104(a)(2) excludes from
gross income "the amount of any damages received ... on account of
personal injuries or sickness."^"* In effect, the section produces the

possibility that a person recovering for lost or impaired earnings will

"receive a net amount greater than if no injury had occurred, because
plaintiff is entitled to receive the full amount of the damages without

"IND. Code § 34-4-36-1(1) (Supp. 1986).
"/d. § 34-4-35-1.

^*26 U.S.C.A. 104 (a)(2) (1984).



416 INDIANA LAW REVIEW [Vol. 20:399

the tax reduction that would occur if the same amount had been received

as ordinary taxable income. If a jury were to take section 104(a)(2) into

account and try to adjust the verdict to reflect the tax savings, it would

be required to perform computations using estimates or evidence of the

plaintiff's tax rate, which could get quite complicated. Furthermore,

even though the amount of the verdict is not taxable, the interest
generated by investments of the monies generated by the damages award

is taxable, adding another layer of compHcation. Courts have, in general,

refused to permit the jury to consider such evidence, some on the basis

of the collateral source rule, and others simply because they were skeptical

about juries' ability to make the adjustments.^^ If the jury instruction
section of the Act is viewed as contrary to the general thrust of the

Act's rule of inclusion, it represents strong evidence that the General

Assembly preferred that the common law rule of exclusion remain intact
where the inclusion of collateral benefit evidence would compel a com-

plicated set of computations in order to adjust the verdict to reflect

those benefits.

Furthermore, the significance of "direct" in the analysis of the

transaction giving rise to the entitlement to benefits presents a potentially

troublesome issue. An employee who has settled for a lower wage or
salary in return for employer-paid accident and hospitalization insurance

or wage maintenance is likely to assert with legitimate conviction that

contributions have been directly made to the provision of the protection
plans. The statute has made such arguments by plaintiff's counsel possible
by virtue of the subsection permitting evidence of "proof of the cost

to the plaintiff or to members of the plaintiff's family of collateral

benefits received by the plaintiff or the plaintiff's family. "^^

No limitation on "direct" versus "indirect" cost is mentioned in
the subsection. It is apparent from the inclusion of evidence of cost

that the jury is to consider that evidence in some way in rendering its
verdict for damages. Nothing in the statute explicitly says what effect

that evidence is to have. It makes sense to assume that the section authorizes

the jury to deduct the plaintiff's costs from the collateral benefits before

deducting those benefits from the defendant's Hability. That is not the

only plausible interpretation of the clause, however. It may also be
interpreted to mean that the jury should consider the existence of costs
("direct" or "indirect") to the plaintiff as determinative of whether the

benefits should be deducted from the damages award at all. By pointing

out the exclusion of evidence accomplished by the statute's first two

exceptions, a bona fide argument could be offered that the legislature's

''See Unreason, supra note 1, at 747 (citing Highshew v. Kushto, 235 Ind. 505,
134 N.E.2d 555 (1956), and other cases). Contra Norfolk & Western Ry. Co. v. Liepelt,
444 U.S. 490 (1980).

'^IND. Code § 34-4-36-2(3) (Supp. 1986).



1987] COLLATERAL SOURCE RULE 417

choice of peculiar language has left it open to jury discretion whether

to permit defendants to enjoy the beneficial effect of plaintiff's financial

arrangements. The rule, after all, is only a rule of evidentiary inclusion.

It does not dictate what conclusions the trier of fact must draw from

that evidence. In a proper case, the jury, having found that the plaintiff

has incurred costs for the benefits, might well decide to refuse to offset

the damages by the amount of the benefits.

It might be counter-argued with some force that such an interpretation

would place subsection 2(3) in conflict with subsection 2(1)(B), on the

grounds that 2(1 )(B) would be nullified if 2(3) were given such effect.

However, the arguments cannot be settled on the face of the statute,

and courts presented with such issues will have to decipher the language.

Without a single definitive interpretation, the potential for inconsistency

among courts is real, and a controlling pronouncement from the supreme
court could be several years in coming.

Courts charged with the task of making some sense of the language

might well be disposed to avoiding an interpretation that draws two

parts into conflict, but if the legislature's basic design is the source of

the conflict, the courts are limited in what they can do. The courts

might be able to save a statute from minor errors of construction, but

they should not be expected to repair major design flaws. When it is
recalled that in addition to the difficulty between these two clauses,

subsections 2(1)(A) and 2(1 )(B) also contain conflicting terms and that

interpretation is needed to apply them consistently, the statute's design

becomes suspect.

Determining the principles of design that govern the statute is difficult

because, as demonstrated, so much of the enactment is internally in-
consistent. One thing is certain: in permitting a defendant to escape
accountability completely, solely on the basis that the plaintiff's collateral

benefits are large enough to have covered the "pecuniary losses," the

legislature has eradicated the retributive and deterrent functions of the

torts system, important justifications for the common law rule. Degrees
of culpability are of no consequence; the effect can be the same whether

the defendant is a mere humbler or an intentional wrongdoer. Emphasis

has now been shifted to the compensatory function, but only in a limited
sense. The legislature has concentrated on the need for compensation,
and has attempted to swing the balance of concern in the torts system

in that direction. New emphasis does not necessarily mean expansive
refinement, however. In concentrating the pursuits of the system upon
recovery of "pecuniary losses," the General Assembly has allowed a

much narrower concept of compensation to become operable than has
previously characterized the common law. It goes beyond the mere
mechanical difference between the common law rule of exclusion and
the legislative rule of inclusion. The triers of fact and law are now to
evaluate cases by concentrating upon and giving primacy to the "actual



418 INDIANA LAW REVIEW [Vol. 20:399

amount of . . . pecuniary losses"^'' proven by the complaining party,
and to assure that no more than one compensation is made, "from all
appHcable sources. "^^ In so doing, if it turns out that a proven wrongdoer

escapes an obligation to pay for the wrong, then so be it; that effect

is among the costs of seeing to it that the injured party gets no more
than is due. This shift in emphasis clearly reflects the legislative preference

for a torts system in which distributive theories of justice dominate

corrective theories. This is not to say that corrective justice has been

discarded, since "correction" includes compensation for the injury as

well as retribution, and the enactment certainly allows for both in a

proper case.^^ The compensatory correction is based upon an assessment
of the injured party's need, and establishing need becomes a threshold

for determining whether the system will seek payment of retribution as

a source of the compensation. In a general sense, this has always been

true in the common law.^° But now, the determination of need is confined
by a pecuniary concept of loss or detriment, in contrast to the more
abstract notion of loss or detriment in the common law, which would
include not only those injuries evidenced by pecuniary harm, but also

harms not directly translatable into pecuniary terms.^^

This distinction between a requirement of concrete, limited-means

establishment of need on the one hand, and a broader, more abstract

and flexible means of assessing the appropriateness of compensation is

important in understanding the thrust of the statute and evaluating its

possible repercussions in the torts system. By focusing upon the com-

pensatory side of the corrective justice equation using a pecuniary loss

concept as the lens by which to ascertain "need," the legislature may
have given short shrift to both distributive and corrective functions even

though it has expressed objectives grounded in distributive theory.

"M § 34-4-36-1(1).
'Ud. § 34-4-36-1(2).

''A "proper case" in this sense would be one where no collateral source benefits

were received by the plaintiff or one in which collateral sources that were received fell

within one of the statutorily excepted categories.

^It has been true at least in negligence law, which requires the plaintiff to establish

a prima facie case by proving actual damages.

^'This idea can be illustrated by the concept of "general" versus "special" damages

in tort law. "General" damages are those damages recoverable for injuries expected or

assumed to have resulted from the invasion of the defendant, and which are viewed as

so usually accompanying the invasion that some courts do not require that they be

specifically pleaded and proved. Pain and suffering, humiliation, fear, fright, and anxiety

are usually counted among the harms for which "general" damages are recoverable.
"Special" damages, on the other hand, are assessed for "natural" consequences of the

conduct, but are not expected or assumed in the same sense of inevitability as those in

the category of "general" damages, and hence must be specially pleaded and proved. See

generally C. McCormick, supra note 28, at 32-39, 315-19.



1 987] COLLA TERAL SOURCE RULE 4 1

9

A full description of the distributive theories of justice is beyond
the scope of this Article. For this analysis it should be sufficient only

to point out some elements in simplified form and their bearing upon

this enactment. First, concerns of justice from a perspective of distributive

principles are usually addressed on the "higher" order of things and

people. The orientation is to matters social in scale: the rights, entitle-

ments, powers, duties, and obligations of groups of society qua segments

of that society in interaction. First principles, designed to order the

interaction between groups and ensure that each operates at a level of

benefits and burdens that is fair to all, guide the choice among alternative
courses of action and establishment of relationships.^^ Those principles

also establish the basic framework of institutions designed to maintain

and adjust the apportionment and dispersal of social resources and

provide the criteria for evaluating their work." The "share" appropriate

to each group is determined by reference to the particular content of

the first principles, and so it follows that the "justness" of allocation

can be ascertained by how closely it adheres to the principle of enti-
tlement, not necessarily to the relative sizes of the shares. Because the

content of the first principles varies across models, the "justness" of

entitlement may be determined by whether (to present some examples):
it tends to maximize the net of gains over losses in a utilitarian system;

it is equal to the entitlements of others in an egalitarian system; it

represents what society has chosen through some rational process of

collective decisionmaking in, for example, a majoritarian democratic

system; or it represents an accumulation brought about by conscientious

effort in a system based upon moral desert.^^ Beyond this, distributive

principles and the various theories for distributive justice are not generally

concerned, so that what is actually produced as a result in a particular

case is not generally addressed. ^^ Further refinement of assessment within

the respective systems is possible by examining what "losses" are to be

measured against what "gains;" what counts as "equal" and how is it
measured; who is entitled to vote or otherwise participate in the mech-
anism for collective choice; and what intermixture of effort and accu-

mulated resources is "natural" or "moral. "^^ But confined to the level

^^See generally J. Rawls, A Theory of Justice 4, 7, 84-85 (1971); Hoffman &
Spitzer, Entitlements, Rights and Fairness: An Experimental Examination of Subjects'
Concepts of Distributive Justice, 14 J. Legal Stud, 259, 262-67 (1985); Sadurski, Social

Justice and Legal Justice, 3 Law & Phil. 329, 330-31, 334 (1984).
*U. Rawls, supra note 62, at 274-80.

^Id. at 22-33, 221-34, 312-15; Hoffman & Spitzer, supra note 62, at 262-66.
^^See Franaszek, Justice and the Reduction of Litigation Cost: A Different Perspective,

37 Rutgers L. Rev. 337, 350-60 (1985).

^J. Rawls, supra note 62, at 22-33, 221-34, 312-15; Hoffman & Spitzer, supra note
62, at 262-66.



420 INDIANA LA W REVIEW [Vol. 20:399

of distributive principles, any debate between competing theories can

proceed no further than these issues and cannot address the matter of

what is a just resolution of a controversy between individuals.^^ Thus,

in a distributive system governed solely by the principle of "first-come-

first-served," for example, the competing theories for distributive justice

could come to different conclusions on the question of whether the

system was "good" or "just," as measured by the doctrine of each

theory, and so judge the result at that level. ^^ But within a system that

ratifies the "first-come-first-served" principle, the controversy between

the late-comer who was shut out by the first-comer who takes all of
the offered resources cannot be resolved in the context of the dominant

distributive theory. That debate must take place in the context of cor-

rective principles, which provide the justification for nonconsensual trans-

fers to adjust maldistribution. The corrective principles may limit the
distributive principle within certain circumstances that prevail between

individuals. So, for example, the "first-come-first-served" principle could

still operate in a system that included a corrective principle of allowing

a late-comer to compel the transfer of the proceeds of the race upon

a showing that the putative first-comer was not "really" first, or was

"first" only because of some culpable behavior during the race. Pressed

against this elementary, and perhaps oversimplified, framework of anal-

ysis, the Indiana statute contains features that are difficult to integrate

into the common law of torts.

^Trofessor Glanville Williams illustrated the problem in the context of his discussion

of the deterrence function:

Lundstedt denies that there is necessarily a moral basis for the law of tort,

even where liability is confined to cases of culpa. He seeks to prove this denial
by an example. 'Through the negligence of a poor man a millionaire has suffered
damage estimated at £500. Surely it would not be in accordance with the

sentiment of justice that the poor man should eventually be forced to beg for
his living in order that the millionaire might obtain his "satisfaction"?' In

Lundstedt's opinion, not only is such a transfer unjust; it is, if regarded in

isolation, socially undesirable. Only by taking a broad view can we discover it

to be for the public good to maintain, without exception, a rule whereby damage

ought regularly to be so transferred.

Williams, supra note 11, at 145.

^^That is, a utilitarian would say that the principle and hence the system is just to

the extent that it maximizes social utility, and the resulting distribution to a single individual

would be irrelevant. An egahtarian would maintain that the principle (thereby the system)
is unjust because it permits an unequal distribution, and the resulting distribution to a

single individual demonstrates the injustice. A social choice theorist would say that so
long as society rationally has chosen the principle to govern (perhaps on the basis that

it "knew" such results were possible), the result is what society wanted and is therefore

just, and so on.



1987] COLLATERAL SOURCE RULE 421

The Statute purports to establish the distributive principle of enti-

tlement to compensation upon demonstration of need to repair a pe-

cuniary loss. It purports to correct maldistribution (the burdens of

personal injury) by requiring compensation, but from only one source

among all "applicable sources." The definite shift in emphasis from

corrective retributive and deterrent functions to distributive and corrective

compensation functions will be difficult to harmonize with the established

common law of torts. ^^ For example, as demonstrated above, ^° the
statement of the distributive principle does not help the triers of law

and fact to ascertain ''appHcable sources" in doubtful cases, because

the corpus of the Act in large part contradicts the principle.

From the perspective of distributive theories of justice on the
*

'higher"

order of coordination of lives and fortunes, the Act is not likely to

bring about drastic change, because decisions about whether to insure

oneself from accident or liability or both are affected more directly by

other social and psychological forces. Likewise, persons will be no more

able to predict whether they will hurt or be hurt by someone with

insurance after the Act than they were before its enactment. But once

the law of ''personal injury actions" contained in the statute is invoked

by those who appeal to the justice system to reorder their lives, the
culmination of the corrective process as modified by the Act is bound

to affect the view of those subject to it. As cognizance of the statute's

inconsistent treatment of "direct" and "indirect" benefits grows, for

^^For the remainder of the article, the discussion will evaluate the statute using John

Rawls' "fundamental social problems" of "coordination, efficiency, and stability" as the

criteria. Rawls expressed his ideas in this way:

Some measure of agreement in conceptions of justice is, however, not the only
prerequisite for a viable human community. There are other fundamental social
problems, in particular those of coordination, efficiency, and stability. Thus the

plans of individuals need to be fitted together so that their activities are compatible

with one another and they can all be carried through without anyone's legitimate

expectations being severely disappointed. Moreover, the execution of these plans

should lead to the achievement of social ends in ways that are efficient and

consistent with justice. And finally, the scheme of social cooperation must be
stable; it must be more or less regularly complied with and its basic rules willingly

acted upon; and when infractions occur, stabilizing forces should exist that prevent

further violations and tend to restore the arrangement.

J. Raw^ls, supra note 62, at 6.

In some respects the critique will directly apply Rawls' criteria and in the same

context as he expressed them. In others, the critique will be more general; for example,

with respect to coordination, Rawls speaks of the problem of individual plans fitting

together. Here the problem of coordination will also be addressed as one of fitting the

legislative declaration of "personal injury law" into the established common law of torts,
which also involves the matter of coordinating the sometimes conflicting institutional

powers of the legislature and the courts.

™5ee supra notes 44-61 and accompanying text.



422 INDIANA LAW REVIEW [Vol. 20:399

example, and members of society assess the justice they and others have
received against the distributive principle declared in the Act, some
disappointment and disenchantment with the system will likely result.

To the extent that the retributive and deterrent functions of the common
law corrective theory of justice are ingrained in social attitudes about

the litigation system for redressing tortious conduct, the statute will

significantly change that system. Persons who seek corrective justice
through the torts system must establish their claims by reference to

concepts of fault. Many who successfully meet the requirements of a
prima facie case will nevertheless see tortfeasors at every level of blame-

worthiness escape liability. When it is explained that the law dictated
such a result because of the insurance planning of the injured party,

some are apt to wonder if the principle of liability apportioned by
"fault" is meaningful at all.^'

The distributive principle declared by the Act is that one should be
compensated based on need, which is determined by whether the person

seeking compensation has received payment from one of the sources not

excepted by the Act. The necessary corollary to that principle is a mirror
image of another distributive principle, which maintains that one is

entitled to benefits on the justification of conscientious effort and ex-
penditure of one's resources. That is, under the Act, the defendant

becomes entitled to benefit from someone else's planning and expenditure

when he produces injury through conduct that society has otherwise
deemed culpable. The potential for a system employing such a principle
to satisfy those who believe the torts system is also for the purpose of
correcting faulty conduct is minimal. It is hkely to produce pressures

for redistribution to permit injured parties to participate in the insurance

planning of defendants on the grounds of an amalgam of principles of
equalization and moral desert. The argument is likely to take this form:
If defendant is able to participate in plaintiff's transactions on the basis

of an assessment of need for corrective compensation, so too should

the plaintiff be entitled to participate in defendant's insurance planning

on the basis of an assessment of a need for corrective retribution and

deterrence, and the balance should be struck by equalizing the competing
claims. That could be done by allowing partial participation by both.

Plaintiff would not receive full compensation because he would not

deserve double recovery. Defendant would not be able fully to escape

"To the extent that the enactment succeeds in transferring the burden of the cost
of accidents to accident and health insurers, the effect will have been to move the torts
compensatory system into a "no-fault" regime without modifying the substantive law

requiring a showing of fault or other refinements. See generally G. Calabresi, supra note

34; R. Keeton & J. O'Connell, supra note 35.



1987] COLLATERAL SOURCE RULE A17>

liability because he would deserve to pay some retribution and feel some
effects of a deterrent sanction. ^^

Objection to the views just articulated is bound to arise on grounds

of efficiency—yet another criterion for evaluating the system of justice.
That objection, stemming from the distributive principle of the Act,

would maintain that if a plaintiff were able to obtain more than the

pecuniary value of the injury, the system would be requiring a corrective

transfer of wealth from the defendant to the plaintiff where no correction

was necessary. To the extent that the plaintiff would be getting more
than the cost of the transaction contemplated, the argument proceeds,

the system would be inefficient.

These efficiency arguments would bear a close relationship to the

objections raised in the critical literature against the common law rule
of exclusion and the responses to those objections. In that debate, the

assertion has been that double recovery amounts to a windfall, and that

plaintiffs are no more entitled to windfalls than defendants. The criticism

was offered in the form of an argument grounded in concepts of moral

desert, not so much as a challenge to the common law's moral assertion
that blameworthy defendants deserve to pay, but that plaintiffs may not
always deserve to get a windfall.^^ In a clash of moral claims, some

tension is created that produces an impetus to identify a neutral principle

with which to resolve the conflict. Here the assertion would be that

who deserves the windfall can be decided by reference to the distributive
principle that reflects society's desire to be efficient in allocations and

transfers of pecuniary resources. The argument would continue that if
the aim of the compensation function is to redress injury by putting

the injured party back in the position enjoyed prior to the injury, and

the best way to do that is to compel a transfer of defendant's assets
to cover the plaintiff's pecuniary loss, a transfer greater in amount than

the loss would be dysfunctional and inefficient.

The responses to the critics' challenge to the moral justification for

applying the rule may be apt, even in the absence of a moral contrast
between "wrongdoer" and injured party. In response to the assertion

that the plaintiff may not be more entitled to a windfall than the

^^The justification for this result is grounded on both the distributive principle that

one should receive no more than a fair share, and the corrective principle that involuntary

transfers of wealth are necessary when one has injured another through culpable conduct.

Neither principle is fully satisfied, but to the extent that full satisfaction of one means

no satisfaction of the other, the two are in conflict and cannot coexist. The three possible

alternatives in such situations are: (1) one principle is discarded in favor of the other;

(2) the two alternate in applicability; or (3) a new principle synthesizing the two originals
is developed. The result of this solution is an example of the exercise of the third option
and maintains essential relationship to both competing principles.

"5ee Peckinpaugh, supra note 1, at 550-51; Unreason, supra note 1, at 748-49.



424 INDIANA LAW REVIEW [Vol. 20:399

defendant, the proponents of the basic rule have challenged the assumed

truth of the assertion that plaintiff would receive a double recovery.

Such responses take two forms: (a) a general recognition that contracts

of insurance sometimes permit the insurer to be subrogated to the rights

of the insured and entitle the insurer to reimbursement from the proceeds

of the judgment; (b) a counter-assertion that the compensation received

is frequently not "full."'^'* This latter approach, in turn, branches to

mean: (1) that accident insurance is not perfect, and some items of

injury are usually not covered by the insurance policy, such as expenses

governed by deductibles clauses, or pain and suffering; and (2) that

other detriments to the plaintiff arose by virtue of having to resort to

litigation to obtain recompense from the tortfeasor, such as time, trouble

and aggravation, or attorney's fees, which traditionally are not compen-
sable items in tort damages. ^^

With respect to the justification for the common law rule that
plaintiffs are often required to repay insurance carriers from the proceeds

of judgments, the General Assembly has responded to concern about

the effect of the new rule of inclusion. The Act specifically makes
admissible "proof of the amount of money that the plaintiff is required
to repay, including workmen's compensation benefits, as a result of the

collateral benefits received; . . ."^^

Because the Act's purpose clauses establish pecuniary loss and a

single recovery as the primary considerations for evaluating personal

injury claims, admission of evidence of subrogation rights is clearly

consistent with the distributive and corrective principles of the legislative

declaration.^^ The jury may thereby take into account the fact that the

^'^See Unreason, supra note 1, at 750, where the author discusses the argument posed

here. The argument is treated as a general justification for the rule rather than as a

counter-assertion to opponents of the rule. See also McWeeney v. New York, N.H, &
H.R.R., 282 F.2d 34, 37-39 (2d Cir. 1960), cert, denied, 364 U.S. 870 (1960); Hudson v.

Lazarus, 217 F.2d 344, 346 (D.C. Cir. 1954), cert, denied, 350 U.S. 856 (1954); 2 V.

Harper & F. James, The Law of Torts § 25.22 (1956).
"See Fleming, supra note 1, at 1499; Lambert, supra note 1, at 542.

'^IND. Code § 34-4-36-2(2) (Supp. 1986).
"The Act also appears to adjust subrogation rights to more nearly reflect the jury's

assessment of the pecuniary losses in the case. The first section of the Act provides:

In any action tried under this chapter, any subrogation or Hen for collateral

benefits received by the prevailing party shall be reduced by the ratio of the

lower of the prevailing party's judgment or collected judgment to the amount

of damages the trier of fact found the prevailing party to have sustained.

Act of March 11, 1986, Pub. L. No. 201-1986, 1986 Ind. Acts 1959 (codified at Ind.

Code § 34-4-33-14 (Supp. 1986)).
It might appear that the General Assembly has enacted a duphcation of an existing

section which already affects subrogation claims, in light of the section of the Comparative

Fault Act, Ind. Code § 34-4-33-12 (Supp. 1986), that reduces subrogation claims and liens

in the same proportion as the claimant's recovery is diminished, and in some instances the

two sections do operate identically.



1987] COLLATERAL SOURCE RULE 425

subrogation rights of the insurer will offset any potential for double

recovery by the plaintiff. This places a responsibility upon plaintiff's

counsel to present clearly the obligation to repay and request instructions

designed to assure that the jury understands the effect of that obligation

in producing the net amount of pecuniary loss. Other problems with

Important differences exist, however, as demonstrated beiow. The differences seem

to indicate an intention to assure that injured parties not at "fault" will not be under-

compensated as a result of the operation of the rule of inclusion in conjunction with

subrogation rights.

The section is inartfully drafted, but seems to mean that when a plaintiff recovers
less than the damages assessed in an action covered by the Comparative Fault Act, the

subrogee or lien holder can recover only that amount that is in the same proportion to
the original claim as the plaintiff's recovery bears to the assessed damages. That amount
is determined mathematically by first finding the quotient of the recovery divided by the

damages amount and then multiplying the amount of the original subrogation or lien by that
quotient.

To demonstrate the effect of the provision, several illustrations are necessary, each
with an increasing amount of complexity. The simplest will deal with the case where
injuries are fully covered by insurance: Assume that Plaintiff incurred medical expenses
in the amount of $10,000, which were paid by Insurer. Insurer now has a potential
subrogation claim in the amount of $10,000. If Plaintiff's damages are assessed at $10,000
and the jury also finds Plaintiff to be at fault by SO'^o, the verdict will be for $5,000.
If Plaintiff recovers the full $5,000, Insurer's claim will be reduced by 50% ($5,000 -

$10,000 = .50) to $5,000. In this way, the enactment assures Plaintiff (and the triers of
law and fact) that Insurer will not be able to recover more on the subrogation claim
than Plaintiff has recovered. This arrangement prevents the possibility that Plaintiff will

bear more responsibility for the injury than the jury's apportionment of "fault" would
allow.

The more complicated version operates the same way: Again, assume that Plaintiff
proved medical expenses of $10,000, which were covered by Insurer's policy, but this time

only to the extent of 80%. At that point, Insurer's subrogation rights would total $8,000.
Suppose further that the jury, after finding Plaintiff's damages to be $10,000, also found

Plaintiff to be 50% at fault, and rendered a verdict for $5,000. If Plaintiff recovers the
full $5,000, Insurer's claim is reduced by 50% ($5,000 ^ $10,000 = .50) to $4,000. In
this illustration Plaintiff must bear responsibility for $1,000 of the $2,000 that the injury

has cost.

The two previous illustrations have ignored the effect of the legislative rule of inclusion.
Here is what happens when Defendant attempts to introduce evidence of Plaintiff's receipt
of insurance benefits in the second illustration: Assume that the insurance cost Plaintiff
$1,000. If Plaintiff has "directly purchased" the insurance, the receipt of collateral benefits

is inadmissible and the jury may not consider them. (Also, Defendant's counsel, being
fair, did not first ask Plaintiff if any benefits were received from insurance and then ask
how those benefits were purchased.)

If the transaction somehow falls outside the Act's exceptions and amounts to an
"indirect" purchase, the importance of the effect of the new rule of inclusion becomes
apparent: "damages" are no longer measured by simply using the concepts of "special" and

"general" damages, but are a function of the determination of the "pecuniary losses" Plaintiff

has suffered. The jury determines damages by offsetting the amount of the expenses by the
amount of the benefits, less the cost to Plaintiff for those benefits. In determining Plaintiff's

"pecuniary loss," the jury, doing the computation correctly, would start with the $10,000
medical expenses. From that amount it would deduct the $8,000 in collateral benefits. To



426 INDIANA LAW REVIEW [Vol. 20:399

respect to this aspect of the statute will be discussed below,^^ but so

long as the focus is upon avoiding the potential for recovering more

than the economic cost of the injury, the Act squarely meets the common
law rule's defenders' arguments for retaining the exclusionary effect;

any allowance of damages greater than the actual pecuniary loss would

represent an economically dysfunctional transfer of resources. Proponents

of the equalized partial compensation/retribution approach would be

required to justify the transfer on other grounds^^ which overcome this

the $2,000 remainder it would then add back the $1,000 it cost Plaintiff to get those

benefits. Plaintiff's "pecuniary losses" would then total $3,000. The jury would then

determine "damages" to be $3,000. If it finds Plaintiff's "fault" to be 50%, the verdict

would be in the amount of $1,500. Insurer's lien would then be reduced by 50% ($1,500
^ $3,000 = .50) to $4,000. Plaintiff would be required to repay the subrogation claim,

if at all, only to the extent of the judgment. A strong argument could be maintained
that the subrogee cannot recover anything on the grounds that Plaintiff's recovery has

not exceeded his actual losses, and he would therefore not be "unjustly enriched" by

retaining the full amount of the proceeds of judgment. On the adjustment of subrogation
rights which exceed the amount of judgment, see generally Wilkins, The Indiana Com-
parative Fault Act at First (Lingering) Glance, 17 Ind. L. Rev. 687, 740-46 (1984).

When Plaintiff is found to be free of "fault," the "ratio of the lower of the prevailing
party's judgment or collected judgment to the amount of damages the trier of fact found

the prevailing party to have sustained" is, of course, 1:1, or 100%. The operation of

the enactment means that the subrogation rights or hen are reduced by 100%, and the

faultless Plaintiff is not required to bear any of the cost of the injury. Thus, in this

situation, the difference between the new subrogation reduction section and the original

one can be seen: Under the original section, because "diminution" of Plaintiff's recovery

is the triggering device, no reduction occurs unless such diminution occurs. Under the

new section, reduction occurs "by the ratio" of (collected) judgment to damages, and if

Plaintiff recovers full damages, that ratio is 100%.

^^See infra notes 86-89 and accompanying text.

^''Such an approach would have to maintain that what might appear to be a breach

of the compensatory function is actually a cost imposed against the defendant and in

favor of the plaintiff to reflect the corrective aims of the system. See supra note 34 and

accompanying text for discussion of other aspects of this approach.

Professors Keeton and O'Connell have articulated the idea this way:

It is often stated that the principal objective of tort law, and of any automobile

claims system, is to compensate for loss. More precisely, however, the objective

is to determine whether to compensate, and if so, how. Tort law prescribes the

negative of compensation—the circumstances under which compensation will
not be awarded—as well as the affirmative. Underlying the whole body of tort
law is an awareness that the need for compensation, alone, is not a sufficient

basis for an award. When a plaintiff receives a defendant's payment in satisfaction
of a judgment obtained in court, loss is not compensated in the sense that it

is somehow made to disappear. It is only shifted: To the extent that the plaintiff
gains, the defendant loses. Moreover, the machinery for adjudicating whether

and how loss is to be shifted is provided at considerable economic cost to the
community and to the parties. To the costs of courts to society and the costs
of lawyers to the parties must be added other less tangible and direct costs;

for example, the costs of missing work to testify in court, the discomfiture and

even agony of recreating the accident at the trial, and the anger and frustration



1987] COLLATERAL SOURCE RULE All

economic efficiency argument or expand the scope of the economic

efficiency inquiry to include consideration of other costs and benefits

and directly refute the claim of efficiency. ^°

Considerations of efficiency in the system of justice include not only

the efficiency of allocations and transfers of monetary resources, but

also the efficiency of the legal processes by which those allocations and

transfers are accomplished. On this plane of analysis, the enactment has
reversed the emphasis of the common law rule of exclusion. Under the
common law, the potential for loss of efficiency in the occasional case
involving a plaintiff who was not obligated to repay was offset by the
gain of efficiency in not requiring presentation to the jury of evidence

and instructions concerning the existence of such an obligation. In order

to assure that the occasional case will be captured by the distributive

and corrective principles operative in the Act, the General Assembly has

required that every other case include the evidence of repayment obli-

gation. The marginal gains made possible under the new rule therefore
are achieved at significant administrative costs, ^' and those costs are

of a courtroom fight. When loss is shifted by way of an award, these costs ^
'

adjudication, tangible and intangible, produce a net loss from an over-all point

of view unless advantages outweighing them are realized.

From a recognition of this truth emerges a basic principle underlying both
tort law generally and that segment of tort law concerned with automobile cases:

An award is not made unless there exists some reason other than the mere need
of the victim for compensation. Otherwise, the award will be an arbitrary shifting

of loss from one person to another at a net loss to society due to the economic

and sociological costs of adjudications.

R. Keeton & J. O'CoNNELL, supra note 35, at 242.
^°Judge Richard Posner provides an analysis that would challenge the fundamental

validity of the argument on the larger scale of economics, and one that is clearly grounded

in corrective theory. In his text, he sets out the following analysis of the collateral source

rule:

If an accident insurance policy entitles me to receive $10,000 for a certain kind
of accidental injury and I sustain that injury in an accident in which the injurer

is negligent, I can both claim the $10,000 from the insurance company and

obtain full damages (w' ich let us assume, are $10,000) from the injurer, provided

I did not agree to assign my tort rights to the insurer (subrogation). To permit
the defendant to set up my insurance policy as a bar to the action would result
in underdeterrence. The economic cost of the accident, however defrayed, is

$10,000, and if the judgment against him is zero, his incentive to spend up to

$10,000 (discounted by the probabihty of occurrence) to prevent a similar accident

in the future will be reduced. Less obviously, the double recovery is not a

windfall to me. I bought the insurance policy at a price presumably equal to

the expected cost of my injury plus the cost of writing the policy. The company
could if it wished have excepted from the coverage of the policy accidents in

which the injurer was liable to me for the cost of the injury, or it could have
required me to assign to it any legal rights that I might have arising from an
accident. In either case my premium would have been less.

Some courts have had trouble when the collateral source benefit was not



428 INDIANA LAW REVIEW [Vol. 20:399

imposed against the cases that would have come out the same under
the common law rule as they will under the new rule anyway.

On this scale of efficiency, the new statute presents some serious
problems that the General Assembly should address at its earliest op-
portunity. In addition to the problems discussed above, the statute

contains other flaws which not only bring it into conflict with existing

sections of the Comparative Fault Act, but which also turn the enactment

on itself and present opportunities for results not in keeping with its
objective.

First, with respect to the existing subrogation claims and liens re-

duction section of the Comparative Fault Act, the new enactment does
not contain exceptions that are prominent in the former provision. Section

12 of the Comparative Fault Act reduces all such claims and Hens ''other
than a Hen under IC 22-3-2-13 [workers' compensation] or IC 22-3-7-

36 [occupational disease]. "^^ The new enactment applies to ''any sub-
rogation or lien for collateral benefits. "^^ Whether this difference rep-
resents a shift in policy by the legislature to permit the imposition of

some responsibility upon some employers who were at fault in producing
a worker's injury, or is simply an oversight is not clear. ^"^ It is clear

that courts will be faced with a dilemma concerning which section to
apply. ^^

When juries begin to apply the new enactment against the background
of the evidence that can now be admitted, some problems of coherency
will result from its poor construction by the legislature. The source of
this difficulty is subsection 2(3), which permits the fact-finder to hear

rendered pursuant to a contract but was "gratuitous." However, most gratuitous

benefits turn out to be ones for which the beneficiary has paid indirectly. If

an employer gives his injured employees medical treatment free of charge, this

means only that the employer pays for their labor partly in money and partly
in kind, so that the money wage would be higher if the "gratuitous" benefits
were lower. (What about social security benefits?)

R. PosNER, supra note 34, at 186.

*"Those costs may be reflected in the complexity of the activity needed to evaluate
the point in contention, and in the consequent potential for confusion and error, as well

as in the more direct costs of time and expense. The Act may well involve such costs,
as illustrated supra note 77 in the discussion of how the subrogation reduction section
of the Act works.

^^ND. Code § 34-4-33-12 (Supp. 1986) (emphasis added).
^Ud. § 34-4-33-14 (emphasis added).

**''See generally Wilkins, supra note 77, at 751-56 for discussion of the workers'

compensation lien exception in section 34-4-33-12.

•^^Conventional techniques of statutory interpretation would suggest an "implied
repeal" of the earlier statute, if it is unavoidably in conflict with the later one. See Payne

V. Buchanan, 238 Ind. 231, 238, 148 N.E.2d 537, 540 (1957); see also Schrenker v.

Chfford, 270 Ind. 525, 387 N.E.2d 59 (1979); Lloyd v. State, 270 Ind. 227, 383 N.E.2d
1048 (1979).



1987] COLLATERAL SOURCE RULE 429

evidence of "proof of the amount of money that the plaintiff is required
to repay, including workmen's compensation benefits, as a result of the

collateral benefits received; . . ."^^

Because the statute provides no statement other than the general

statements of purpose about how the newly admitted evidence is to
affect the findings of fact, the jury might rationally conclude that an

obligation to repay offsets the effect of reduction for receipt of the

benefits. That is, a jury trying to compute its verdict might well decide

that because the plaintiff is obligated to repay the benefits received, the

amount of those benefits should be reflected in the recovery so that the

plaintiff will not be required to incur further out of pocket expenses. ^^

The problem is that the plaintiff's obligation to repay cannot be definitely

ascertained until after the verdict has been rendered, and if a jury

misapprehends the purpose of the evidence of the plaintiff's obligation

to repay, in the manner suggested above, it may well inadvertently
change the plaintiff's obligation. ^^ Considering the statute as a whole,

such a result would run directly counter to the apparent intent. The
language of the enactment permits such a result, however, and unless

the jury is carefully and completely instructed on the effect it is to give

to such evidence, the statute will be permitted to cannibalize itself.^^

Even if no error occurs, the adjustment will have come at the expense
of greater administrative costs.

Another form of the arguments critical of the common law rule in
this context posits that the courts have been so concerned that juries

would be "prejudiced" by the inclusion of evidence of collateral com-

«^lND. Code § 34-4-36-2(3) (Supp. 1986).
^^To illustrate:

The jury considers Plaintiff's $10,000 expenses as the starting point. Hearing evidence that
the Plaintiff received $8,000 in benefits and charged that it is to determine Plaintiff's "actual

pecuniary loss," it would then deduct that $8,000 from the expense, leaving $2,000. Having
hard that Plaintiff is obligated to repay that $8,000, however, the jury might well decide to

adjust its findings to assure that Plaintiff does not have to repay those benefits out of pocket.

If it adds back the $8,000 and the verdict is $10,000, the intended effect of having it consider
evidence of collateral source benefits is frustrated.

**That would happen in this way:

In the example given supra note 87, the verdict was for full damages. When damages
and the verdict are equal, the "ratio" is 1:1 or 100*^0, and the subrogation rights are

extinguished. In its effort to give Plaintiff a source of funds out of which to satisfy the

subrogation claim, the jury will have actually erased the obligation and would permit a

double recovery, even though it believed, correctly at the time it began its adjustment,

that Plaintiff was required to pay the benefits back.

^'Given the indirectness of such evidence, the complexity of comparative fault in

general, the complexity of subrogation claims and liens and the reduction factor, and the

number of mathematical computations that the jury has to perform, it is doubtful that
even the most careful instruction will be able to prevent errors.



430 INDIANA LAW REVIEW [Vol. 20:399

pensation sources that the exclusionary effect of the rule must reflect

a belief that juries applying common morality would find it unconscion-
able for the plaintiff to obtain double recovery. ^° This argument finds

support in empirical studies conducted thirty years ago at the University

of Chicago.^' Proponents of the rule have not come forward with

countering empirical evidence and (consequently?) have not directly re-

sponded to the argument. Of course the common law rule was well in
place long before any empirical data on jury behavior were available.

The judicial attitude may well reflect a concern for prejudice to defend-
ants' interests as well as plaintiffs'. The justification that the rule was

prejudicial to the plaintiff was a relatively recent development in Indiana,

and supports the view that courts are concerned about the jury deciding

issues of liability and damages in favor of defendant when it is presented
evidence of collateral source benefits.^ It is interesting to note, however,

that the court in Brindle v. Harter,^^ which articulated this view, relied

upon decisions that the admissibility of evidence of insurance was prej-

udicial to defendants, and applied this reasoning to collateral source

evidence "by analogy."^"* The Brindle court's reasoning thereby reflects

a judicial approach that is rooted as much in a concern about the
prejudicial effect of evidence of insurance toward the defendant as the

plaintiff. The legislative attitude reflected in the Act rejects that approach.

It may be true that in this modern day of personal injury litigation, with
financial responsibility laws inducing the purchase of automobile insur-

ance and the widespread utilization of health and accident coverage

plans, juries will assume that insurance protection is available. ^^ If that

is true, then the concern should be with what effect that assumption

has on the dispensation of justice at the hand of the jury. No clear
answer is available; the same empirical study that supports the rule of

inclusion also suggests that where uncertainty about coverage exists,

jurors operate somewhat erratically in the atmosphere of doubt about

the appropriateness of taking it into account. Some people might see
the "absence" of insurance as defendant's fault, while others might

'"Esdaile, supra note 1, at 105; Peckinpaugh, supra note 1, at 550-51; Unreason,

supra note 1, at 749.

^'5ee Esdaile, supra note 1, and authorities cited therein. In his article, Mr. Esdaile

cites an empirical study by Professor Harry Kalven, in which Professor Kalven provides

a brief overview of the study conducted by The Jury Project of the University of Chicago

Law School. In his article, Professor Kalven observes that the persons who participated
in the study expressed a sensitivity to situations where the plaintiff has obtained com-

pensation from other sources and tended to reduce damages in such cases. Kalven, The

Jury, The Law and the Personal Injury Award, 19 Ohio St. L. J. 158, 169 (1958).
'^Brindle v. Harter, 138 Ind. App. 692, 311 N.E.2d 513 (1965).
'Ud.

''Id. at 699-700, 211 N.E.2d at 517-18.

^^See Kalven, supra note 91, at 171.



1 987] COLLA TERAL SOURCE RULE 43

1

favor the plaintiff and attempt some rough "equity" at the risk of

putting the burden on the carrier.^*' The modern torts system wrought

by the "reform" of common law by the General Assembly places
importance upon the efficiency of allocation and transfer of resources,

while it also confers an increased responsibility upon the jury to evaluate

the cases brought before it, on issues of liability as well as damages.

In such a system, opening up matters of insurance coverage purchased

by the plaintiff to jury consideration while keeping the matter of insurance

coverage purchased by the defendant for protection in the event of

Hability seems to be giving the jury only half the facts it needs to decide

the ultimate issue. That issue includes matters of correction in the

retributive and deterrence sense as well as in the sense of needed com-

pensation. The jury's input into the evaluation of the case ought to

include its decision about which side of the controversy should bear the

costs of the accident, and whose insurance fund should reflect them.

An objection that such a system would be allowing the jury to get
involved with "questions of law," when its proper function is to deal
with "questions of fact," begs the question. The present system already

lets jurors do that, and sends them off to deliberate in secret with only

part of the facts and law involved in the case and the hope that they

will properly do justice equipped with that partial knowledge. If the

response is that this type of system is an adjustment too far the other

way, then perhaps a middle-ground approach could be identified. A
system that permitted instructions of law based upon the partial equalized

compensation/retribution approach might help keep the jury in line and

address both sides of the debate. ^^

''Id.

'Professors Keeton and O'Connell recognized the advisability that the system address

both sides of the controversy:

This principle is not a denial of the central importance in tort law of the need

to compensate for loss. Rather it is a recognition that good rules of law for

determining when and how losses are to be compensated must reflect concern
for the interests of those who pay awards as well as those who receive them.
Also, recognition of this basic principle of preserving the status quo when lacking

good reason for change does not imply that the principle is ordinarily decisive.

Doing justice, after all, is the main objective. Surely the costs of adjudication,

calculated in even the most inclusive terms, are a modest price to pay if the

system achieves this end. It has long been assumed that doing justice ordinarily

requires a wrongdoer to compensate his innocent victim; and since it is so often

concluded that there is good reason for regarding one party as a wrongdoer

and the other as his innocent victim, the principle of preserving the status quo

in order to save the costs of adjudication will rarely be controlhng. The principle

remains valid, however, for occasionally it will be decisive, and it serves also

as a reminder that the search for defensible bases for shifting loss must be

pressed beyond the simple need for compensation.

R. Keeton & J. O'Connell, supra note 35, at 243.



432 INDIANA LAW REVIEW [Vol. 20:399

The third criterion for evaluating a system of justice, the social need

for stability in that system, is also impHcated in the interjection of the

new rule of inclusion into the common law of torts. In shifting the
business of courts and juries away from the traditional corrective ap-

proaches to resolving personal injury disputes and more narrowly focusing

that business upon a distributive principle, the Act is likely to generate

repercussions in the process of accommodating the system to the change.

Much of what has already been discussed is relevant in this con-
sideration of stability. For example, to the extent that the new rule's

potential for defeating the expectations of those who seek judicial dispute
resolution is realized, satisfaction with the manner in which the system

adjusts competing claims will wane. A realization of the possibility that
the complexities in applying the new rule will produce higher economic

and administrative costs or greater potential for error will also lower

estimations of the quality of justice the system has to offer. Impetus

for change or a search for alternatives might result from the decline in

gratification or unwillingness to incur greater costs. Loss of the op-

portunity to obtain retribution against the background of requirements

focused upon proof of "fault" might induce some pressure to modify

those requirements. It is certainly too early to leap to any conclusions

on these issues, but just as when a stone is thrown into a pond, the

level of the pond is raised, and the ripples Unger long after the stone

has come to rest, the new rule will have a similar effect on the common
law. The pond and the common law are flexible enough to find new
points of equilibrium, thereby adjusting to accommodate the new part

into the entire system. But the nature of the pond and the common
law are nevertheless forever changed.

Recognition that the legislative rule emphasizes the compensatory

function and that it does so by exclusive reference to pecuniary losses

will possibly refuel efforts to induce the common law to recognize costs
of personal injury litigation as compensable pecuniary losses. Arguments

for the recovery of attorney's fees are to be expected on the grounds

that such fees represent a pecuniary loss to the plaintiff, occasioned by

the defendant's culpable conduct, effectively reducing the recovery amount,

which the Act blithely treats as a refined method of identifying what

the plaintiff has been required to give up as a result of the injury caused

by the defendant. ^^

^^The General Assembly has already declared a policy in favor of recovery of attorney's

fees, and has thereby established a position directly opposed to the common law rule. An
enactment passed in the same session as the one here discussed provides:

In any civil action, the court may award attorney's fees as part of the cost to

the prevailing party if it finds that either party:

(1) brought the action or defense on a claim or defense that is frivolous,

unreasonable, or groundless;



1987] COLLATERAL SOURCE RULE 433

Less likely, perhaps, but still plausible, are arguments that the com-

mon law should recognize what the legislature has not, concerning other
costs of litigation not reimbursed by collateral benefactors. Such ar-

guments will ask the courts to permit awards reflecting the inconvenience,

aggravation, or humiliation experienced by those forced to resort to

litigation in order to obtain redress. To be certain, these items of damage
were not arguable in the common law prior to the Act, but they were
barred by other rules of exclusion which may come under new scrutiny
in the atmosphere of change brought about by the adoption of the new

rule of inclusion. The common law rules of exclusion were not pro-
nounced and intended to be applied in a vacuum; they were developed

within a coherent system. In such a system, modification of one rule

is likely to produce secondary effects, placing pressure on other rules.

The legislature's piecemeal change in the rules of the process will produce

efforts to reassess the continued vitahty of the other rules of exclusion.

The new roles and responsibilities imposed on juries by this enactment
and the Comparative Fault Act perhaps signal a public view that juries

ought to have more to hear and say in the adjustment of disputes

between their peers. The legislature's readiness to open juries' eyes and

minds to complex issues of percentages of ''fault" and pecuniary losses

reflects a greater faith in jurors' abilities than the common law's rules
of exclusion have shown. The light of comparison casts an unflattering

shadow of paternalism across the face of the common law. If the General
Assembly's faith is fulfilled, perhaps it should not lie in the mouths of

common law judges to refuse to consider whether they ought to give
the jury all of the information it needs to decide how the disputants'
resources and losses should be distributed.

Finally, inasmuch as the Act is another in a series of legislative

incursions into the common law of torts, ^^ stability is implicated on the
scale of institutional coordination. On this scale, the perspective is that
of concern with the relationship between the courts and the legislature

as institutions of government in fashioning the law to be applied and

(2) continued to litigate the action or defense after the party's claim or

defense clearly became frivolous, unreasonable or groundless; or

(3) litigated the action in bad faith.

Act of March 11, 1986, Pub. L. 193-1986, 1986 Ind. Acts 1944 (codified at Ind. Code

§ 34- 1-32- 1(b) (Supp. 1986)).

"Groundless" may be a relatively concrete standard by which to judge the appro-
priateness of actions and defenses. "Frivolousness" and "unreasonableness" are far more

abstract and flexible standards, providing considerable leeway for assertion of the right

to recover.

'^The Comparative Fault Act, Ind. Code §§ 34-4-33-1 to -14 (Supp. 1986); the

Medical Malpractice Act, Ind. Code §§ 16-9.5-1-1 to -10-5 (1984 & Supp. 1986); the
Products Liability Act, Ind. Code §§ 33-1-1.5-1 to -8 (1984 & Supp. 1986); and the
seatbelt statute, Ind. Code §§ 9-8-14-1 to -6 (Supp. 1986).



434 INDIANA LA W REVIEW [Vol. 20:399

the manner of application in the trial of disputes involving personal
injuries. The issue becomes whether a conflict exists between the leg-
islature's exercise of power and that of the courts. To be certain, the
legislature does have some power to affect the judiciary by adopting
rules of procedure, jurisdictional requirements, limits on and bases of

recovery, and the like. Mixed judicial and legislative functions are nec-

essary complexities in ordering the system of justice in a complex society.

But a dual role is not inescapable, and the courts have maintained an

area of exclusivity with respect to procedural rules. As students of the
law soon discover and are frequently reminded thereafter, deciding which

rules are substantive and which are procedural is not always clear cut,

however. The Indiana Supreme Court has attempted to state some

guidelines in establishing the dividing line:

In general terms substantive law can be defined as including

that body of rules which regulates the conduct and relationship

of members of society and the state itself as among themselves
apart from the field of litigation and jurisdiction. In general

form procedural law can be defined as that body of law regulating

the conduct and relationship of individuals, courts, and officers

in the course of judicial litigation. ^^^

Challenges to the constitutionality of this Act may not be inevitable,
but to the extent that it is perceived to be a legislative declaration that

goes beyond the bounds of that necessary area of mixed functions, it

may induce a reaction on constitutional grounds. In the new chapter
created by the Act entitled "Jury Instructions in Personal Injury Actions" '^^

and in the first purpose clause, ^°^ the General Assembly has created the

issue of whether the statute amounts to an impermissible legislative rule

of procedure or merely a new statement of substantive law.^°^

"^State V. Gibson Circuit Court, 239 Ind. 394, 399, 157 N.E.2d 475, 478 (1959)

(quoting 1 Gavit, Ind. Pleading and Practice § 5 at 11 (1950)). The court expanded
upon the treatise definitions by stating:

As a general rule laws which fix duties, establish rights and responsibilities

among and for persons, natural or otherwise, are substantive in character, while
those which merely prescribe the manner in which such rights and responsibilities

may be exercised and enforced in a court are procedural.
The time, place and method of doing an act in court properly fall within

the category of procedural rules and are appropriate subjects for such regulation.

Id. (citation omitted). The court held that the rule of court pertaining to change of

venue superseded a statute on the same subject, upon finding that the statute was a rule

of procedure.

""Ind. Code § 34-4-35-1 (Supp. 1986).
'°Vg?. § 34-4-36-1.

'°^According to case law, if the supreme court has not issued a rule on the matter,

the legislature is within the proper exercise of its power to declare procedural rules, and



1987] COLLATERAL SOURCE RULE 435

V. Conclusion

The common law collateral source rule, being a rule of exclusion,
has created tension in the trial of torts cases since its inception. Its

definite, one-sided effect on the outcome of cases has provoked strong
and polarized positions on both sides of the bar.*^"^ The approach of
the courts to the rule was couched in fundamental terms giving the
appearance that the rule itself was considered fundamental. So viewed,
the need for further analysis seemed unnecessary to the courts, and the
force of stare decisis perpetuated the rule's application for over a century

may even declare such rules in an area where the supreme court has spoken, so long as
the two rules are not in conflict. State v. Bridenhager, 257 Ind. 699, 279 N.E.2d 794

(1972). The supreme court has promulgated rule 51 of the Indiana Rules of Trial Procedure
pertaining to jury instructions. That rule does not contain any language relating to the

effect of tax consequences, of course, and the rule is stated generally in any event, so

direct conflict between the Act's instruction and the trial rule does not exist. The striking
feature of the trial rule is the discretion that it confers upon the judge in deciding whether
and what to instruct the jury. The rule's mandatory effects are directed toward "the

parties," and no part of the rule permits the parties to compel the reading of any

instruction. Cf. Hobby Shops, Inc. v. Drudy, 161 Ind. App. 699, 317 N.E.2d 473 (1974).
The new chapter of the Code created by the Act requires that the court ''shall if requested,
instruct the jury that the jury may not consider the tax consequences, if any, of its
verdict." Ind. Code § 34-4-35-1 (Supp. 1986) (emphasis added). In contrast to trial rule
51, the statute removes the trial court's discretion, and the legislature has spelled out

the content of the instruction. Clearly the General Assembly has taken a different approach

and has gone further than the supreme court itself has to direct the conduct of

the participants in litigation. Whether this direction will amount to an impermissible
incursion into the exclusive realm of the courts will have to await review by the courts.

The first purpose clause of the Act purports: "to enable the trier of fact in a personal
injury or wrongful death action to determine the actual amount of the prevailing party's
pecuniary loss." Ind. Code § 34-4-36-1 (Supp. 1986). The provision is not clearly purely
substantive or procedural, which gives rise to the issue. One might argue that "to enable"
has a procedural connotation, but the remainder of the clause surely deals with the

substantive content of the legislature's notion of the proper measure of damages {quaere,

indeed, whether the measure of damages is substantive or procedural). How the jury
determines "pecuniary losses," however, is surely a matter of procedure, and it is arguable

that the limited rule of inclusion determines how the jury goes about determining what
is counted as "pecuniary loss." The General Assembly has been careful in its language

selection, however, steering clear of imposing mechanical requirements upon the jury.
Furthermore, the rule is one of inclusion of evidence that the courts have not previously

recognized. In Johnson v. St. Vincent Hosp. Inc., 273 Ind. 374, 404 N.E.2d 585 (1980),

the supreme court observed that the challenged statute (the Medical Malpractice Act) made
evidence admissible rather than inadmissible, and that the evidence that had been made
admissible had been "expressly sanctioned by rules of evidence as declared by the courts."

Id. at 393, 404 N.E.2d at 598. From those observations, the court concluded that the
statute did not "take away from the courts their judicial authority." Id. The factual
distinctions in the case of the enactment under discussion may prove to be crucial.

^^E.g., the juxtaposed articles, Lambert, The Case for the Collateral Source Rule,

1966 Ins. L.J. 531, and Peckinpaugh, An Analysis of the Collateral Source Rule, 1966
Ins. L.J. 545.



436 INDIANA LAW REVIEW [Vol. 20:399

in this state. Upon close examination, the rule can be seen to have been
a means of addressing several, even competing, principles; and the

common law position had given primacy to the retributive and deterrent
functions of the torts system, giving double effect to the compensatory

function in some cases. The legislature, in declaring a new rule of

inclusion, has answered the pleas of those who opposed the rule on the
strength of arguments stemming from principles driving the compensatory

function, and in doing so has shifted the balance to the other side.

Such a dramatic shift would, in any case, be difficult to accommodate

in our system of litigation, because of ingrained habits of conduct, and

familiar patterns of thought and speech, to say nothing of the existence

of 113 years of unbroken precedent. But the legislative rule as declared

contains conceptual and mechanical difficulties which will magnify the

expected problems. Some were perhaps avoidable. Given the legislative
preference for distributive and corrective principles apparent on the face

of the statute, some of these difficulties were unavoidable. So the old

tension has not been relieved; rather, the beneficiaries of institutional

resolution of the controversies producing it have merely been reversed.

Moreover, the enactment is merely the latest in a series of efforts by

the General Assembly to transport tort law out of the common law and
into a legislative conceptualization, thereby raising issues of institutional

coordination within the system. Mobilization of opposition to the rule

is to be expected, not only in the form of direct challenges to the rule

itself, but also in the form of increasing demands for further modification

of the common law to accommodate the interests given primacy by the
abrogated rule. The resulting debates should prove to be interesting.