Legislature Introduces Legislation Limiting Phantom Damages

Two Wisconsin legislators (Rep. André Jacque (R-DePere) and Sen. Paul Farrow (R-Pewaukee)) have introduced Senate Bill 22, which abrogates the collateral source rule in personal injury cases, thereby allowing defendants to introduce evidence of the amounts actually paid to cover the plaintiff’s medical expenses.

Under current law, defendants are not allowed to introduce evidence of payments made to the plaintiff by collateral sources when determining the “reasonable value” of medical expenses. A number of Wisconsin Supreme Court decisions have ruled that the collateral source rule prohibits defendants from introducing evidence of the amounts paid, allowing plaintiffs to be awarded significantly more than they ever had to pay their medical provider. Some courts have referred to this overcompensation as “phantom damages.”

While the legislation applies to personal injury cases, the bill also addresses the recent Orlowski v. State Farm Mutual Auto Insurance Company decision by the Wisconsin Supreme Court which extended the collateral source rule to underinsured motorist (UIM) cases.

A companion bill in the Assembly will be officially introduced later this week. The Hamilton Consulting Group will provide continuous updates as the bill progresses through the legislative session.