Injury Law: Why Can't Juries Know If A Defendant Has Liability Insurance?

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Aaron House

Why Do We Keep Juries From Knowing That A Defendant In A Personal Injury Lawsuit Has Liability Insurance?

People who have been injured by another person’s negligence (or by a company’s negligence), who must sue to receive fair compensation for their injuries, are barred from informing juries that a defendant has liability insurance to cover the damages being sought in the lawsuit.

The reason for this prohibition is that juries are likely to award higher amounts when they know an insurance company will be responsible for paying them rather than the individual defendant. And people are hesitant to award damages against another person because they worry about saddling that person with debt. Juries typically have less empathy towards insurance companies who they perceive as having the financial ability to pay a judgment. The law is thus designed to protect insurance companies by preventing jurors from knowing that insurance coverage exists.

Collateral Source Doctrine

This doctrine, known as the “collateral source doctrine,” protects insurance companies and further harms people who have been hurt. We should trust our juries with the facts in each case, and one of those facts is the existence of liability insurance. We should not create a legal “fiction” because we know that juries will often make assumptions regarding the existence or non-existence of liability insurance coverage.

Its Purpose: Protect Insurance Companies

When a defendant has liability coverage, the lawyer is actually hired and paid by the insurance company, and in general, the lawyer and the insurance company, and not the defendant, make decisions about the settlement. Insurance companies remain protected by keeping juries from knowing that they are the ones who will ultimately be paying any judgment. Insurance companies are also protected because lawsuits are brought against the at-fault party, and in third-party cases, that means the insurance company is not named as a defendant.

The bar on discussing the presence of a liability insurance policy in court may lead jurors to assume that no policy exists and therefore lead them to award smaller amounts. By trying to avoid one bias, another is inadvertently created. A jury may be particularly reluctant to award a victim his total actual damages in the event of a catastrophic injury or wrongful death where the damages will be particularly high while they maintain the belief that the defendant will have to pay out of pocket. The bottom line is that juries don’t want to bankrupt other people when that simply isn’t the typical outcome. And in the major majority of cases, if an injured person is willing to go through trial, the existence of liability coverage is very high.

In a recent trial that occurred in Missouri, a person suffered a brain injury in a car accident. The jury was instructed not to consider the existence of insurance during trial, but it came out after trial that the jury assumed that the at-fault driver had no auto insurance because he was a teenager, and they assumed that the injured party (an older woman) had health insurance. Because they didn’t want to saddle a teenager with debt for a woman whose bills would likely be covered by health insurance, they only awarded a small amount. One of the jurors cried when she later found out there was auto insurance. The result here, as in many cases, is that the jury made false assumptions and protected the at-fault driver rather than the woman who suffered brain damage.

Contact House Law

Personal injury matters and the interplay between these claims and relevant insurance policies are complex and fraught with misunderstandings. If you have been injured because of someone else’s negligence, contact Aaron House at 816-875-4260 for a free consultation to discuss your personal injury case.

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