To End Insurance’s Collateral Source (Cui Bono): HB1204

NEWS. January 28, 2025, in Little Rock.

The 2025 legislative session is underway.  On the table with this bill is red meat for a conservative legislature, but one should not always eat the beef.

This bill seeks to end payments to persons for the value of an insurance policy.  At issue is the “collateral source rule” and Arkansas’s contract laws.

ANALYSIS.

My very educated guess is that this bill is being pushed by the insurance lobbyists and the chamber of commerce.

In Arkansas, an insurance policy is a matter of contract. If you have car and health insurance, and someone injures you in a car wreck, you are entitled to recover from the person who injured you and from your own insurance provider.  It is of no consequence that this could lead to a double recovery.  Additionally, you cannot tell the jury in a trial about the existence of insurance or that the plaintiff could net a double recovery.

The justification for this rule of law is that a person pays for insurance.  As a matter of contract, the person has paid for the renumeration in the event of an injury.  It does not matter if someone else has also paid for a policy to pay out in the event they injure someone. 

Instead, there are two contracts at play.  The first is a contract between the injured and the insurer in which the insured has paid for coverage in the event of an injury.  The second is a contract between the person causing the injury and an insurance company to pay the person injured so that the person causing the injury does not have to pay personally.

The legislature wants to end that type of recovery. On its face, it is a conservative bill, but it is also nefarious. 

The Latin term is “cui bono” or “who benefits.”  

Who benefits?  The insurance companies.  Who loses? The injured.  Why is this bad?  Well, my client was hit by a drunk driver.  Her car rolled over several times, and she was in a coma for two weeks.  When she woke up, she had to relearn to walk and feed herself.  She needs lifelong care for her injuries. 

She was 19 years of age and a sophomore at ASU in Jonesboro.  The person who hit her had the state minimum coverage of $25,000.00 and that went to the hospital.  Her medical bills were nearly a million dollars. What did she get from insurance?  $50,000.00, which was the policy limits from her own underinsured motorist policy.  And for her to get that, I had to threaten to sue the insurance company who wanted to pay her a fraction of that amount because the adjuster “cared” about my client and skirt a medical lien from a generous hospital who recognized that she would need the future care and $50K wasn’t going to scratch the surface.

What be the effect of this bill?  Yep, you guessed right, client gets nothing and the insurance company made $50K by not having to honor a contract that was already paid for by someone.

‘Merica.

Clinton W. Lancaster

Attorney. America First. Sued Hunter Biden for child support. Represented President Trump in the 2020 Wisconsin election challenge. Former attorney for the Wisconsin Special Counsel. An official “Tough Cookie” per President Trump.