Paralegal Advanced Competency Exam (PACE) Practice Exam

What is the collateral source rule in tort law?

1. A rule allowing deductibles in settlements

2. A rule preventing the victim from receiving compensation

3. A rule that disallows deductions from damages paid to the victim

4. A rule focusing on physical evidence in loss recovery

The correct answer is: A rule that disallows deductions from damages paid to the victim

The collateral source rule in tort law is primarily focused on ensuring that a victim's compensation is not reduced by any benefits they may have received from other sources for the same injury or loss. This means that if an injured party has received compensation from separate sources, such as health insurance or workers' compensation, those amounts cannot be deducted from the damages awarded in a tort claim. The purpose of this rule is to prevent the at-fault party from benefiting from the victim’s prudence in obtaining insurance or other forms of financial assistance. This principle supports the idea that the tortfeasor should bear the full cost of the harm caused, regardless of other payments the victim may have received for their injury. By maintaining the full amount of damages, the rule aims to deter negligent behavior since it upholds the financial responsibility of the party at fault without allowing them to escape liability due to the victim's other compensatory arrangements. The collateral source rule thus plays a key role in maintaining fairness in the legal system, ensuring victims are fully compensated for their losses even if they have received assistance from other sources.