Colorado Collateral Source Rule: Trial Evidence and Post-Verdict Offset

The Colorado collateral source rule keeps evidence of insurance and other third-party payments away from the jury during a personal injury trial, and then, after the verdict, lets the judge reduce the award only by benefits that fall outside a broad statutory exception for anything the plaintiff contracted and paid for. In practice, private health insurance, private disability coverage, and workers’ compensation are protected from that post-verdict reduction, while a narrower set of uncontracted benefits can be offset under C.R.S. § 13-21-111.6.¹

What the Jury Hears at Trial

At trial, the rule works as an evidentiary shield. The judge bars the defense from telling the jury that any third party has already covered some or all of the plaintiff’s losses. If jurors learn that a $50,000 medical bill was already paid by an insurer, they may award nothing for that expense. Colorado courts treat that kind of evidence as irrelevant to the defendant’s liability.¹

The restriction covers oral testimony, documents, and paid invoices showing a zero balance. Defense counsel cannot mention health insurance payments, disability benefits, or government program reimbursements. The jury’s job is to calculate the full, reasonable value of the harm — medical care, lost wages, pain and suffering — based on the evidence of injury, not on who has already written a check.

The underlying logic is simple. A person who causes $100,000 in damages owes $100,000. That number does not shrink because the injured party carried insurance or qualified for a government benefit.

The Post-Verdict Offset Under C.R.S. § 13-21-111.6

Once the jury returns its verdict, the case enters a second phase many plaintiffs do not see coming. C.R.S. § 13-21-111.6 directs the judge to reduce the verdict by the amount of any collateral source payments the plaintiff received, unless those payments fall within a statutory exception. This happens outside the jury’s presence and is essentially a mathematical exercise.¹

The judge reviews financial records and payment histories to identify which third-party payments qualify for offset. If a jury awards $200,000 for medical expenses and a government program covered $30,000 of those bills without any contractual basis tied to the plaintiff, the judge reduces the final judgment to $170,000. The statute then directs entry of judgment on the reduced amount.

The offset applies to payments from any “person, corporation, insurance company, or fund” that compensated the plaintiff for the same loss. In practice, though, the offset hits hardest when benefits come from sources the plaintiff did not personally contract and pay for — certain government programs, charitable payments, or employer-funded benefits where the employee made no premium contributions.

Why Private Insurance Is Protected: The Contract Exception

The most consequential piece of C.R.S. § 13-21-111.6 is its exception for benefits “paid as a result of a contract entered into and paid for by or on behalf of” the injured person. If you carry private health insurance, whether through your employer, through the marketplace, or purchased individually, those payments cannot be deducted from your verdict.¹

The Colorado Supreme Court explained the purpose of this exception in Van Waters & Rogers, Inc. v. Keelan: the legislature did not intend to deny compensation that a claimant was entitled to under a contract the claimant, or someone on the claimant’s behalf, entered into and paid for. The goal is to avoid penalizing prudence and handing a windfall to the party who caused the injury.

The exception reaches a broad range of benefits. Private health insurance, including employer-sponsored plans, individual marketplace policies, and COBRA coverage, qualifies because someone contracted and paid premiums on the plaintiff’s behalf. Private long-term and short-term disability policies purchased by the plaintiff are also protected. And in Adamscheck v. American Family Mutual Insurance Co. (2016), the Tenth Circuit held that workers’ compensation benefits fall within the contract exception because they arise from the employment contract between the worker and the employer.

The dollars matter. If a jury awards $100,000 and your private insurer paid $80,000 of the underlying medical bills, the judge will not subtract that $80,000. You receive the full $100,000 judgment. The contract exception often protects the vast majority of a plaintiff’s collateral source benefits from offset.

Billed Amounts Versus What Insurance Actually Paid

A related issue trips up many plaintiffs: the difference between what a hospital charges and what an insurer actually pays. A hospital might bill $40,000 for a surgery while the insurer’s negotiated rate is $12,000. Which number goes before the jury?

Colorado measures medical expense damages by the reasonable and necessary value of the services rendered, not by the amount the insurer actually paid. The Colorado Supreme Court settled this in Volunteers of America v. Gardenswartz (2010), holding that insurance-negotiated discounts are themselves a collateral source benefit. Because the plaintiff purchased the insurance contract that generated those discounts, the defendant cannot use them to reduce liability.²

A plaintiff with private insurance can generally present the full billed amount to the jury as evidence of the reasonable value of treatment. The defendant cannot introduce the lower paid amount to argue the bills were inflated. Because billed rates often exceed insurer-negotiated rates by a factor of three or more, this piece of the rule can move a verdict significantly.

Subrogation: What the Plaintiff Actually Keeps

Winning a large verdict does not always mean keeping all of it. If your private insurer paid your medical bills and those payments were protected from offset by the contract exception, the insurer usually has a right of subrogation, meaning a right to be repaid from your recovery. Colorado regulates this process tightly under C.R.S. § 10-1-135.³

The statute imposes three protections for injured plaintiffs.

An insurer cannot seek reimbursement or subrogation until the injured party has been fully compensated for all damages arising from the claim. Any contract provision allowing earlier reimbursement is void as against public policy.
If the insurer does recover, the amount must be reduced by the insurer’s proportionate share of the plaintiff’s attorney fees and costs. The insurer cannot get a free ride on the legal work that generated the recovery.
If you recover less than the total available insurance coverage, there is a rebuttable presumption that you have been fully compensated, and the insurer can pursue subrogation. If your recovery equals the full policy limits, the presumption flips: you are presumed not fully compensated, and the insurer’s subrogation claim is blocked unless the insurer proves otherwise.

Those presumptions create real leverage during settlement negotiations. A plaintiff who settles for policy limits can argue that the settlement itself proves they were not made whole, shutting down the insurer’s subrogation claim. Negotiating the lien down, using the attorney-fee reduction and the made-whole rule, is often the final step in determining what a plaintiff actually keeps.³

A Gap in the Rule: Medical Lien Financing

An increasingly common arrangement in Colorado personal injury cases is medical lien financing, where a company pays the plaintiff’s medical providers upfront and takes a lien against the plaintiff’s future recovery. The plaintiff gets treatment without out-of-pocket costs, and the financing company gets paid from the verdict or settlement.

Many Colorado trial courts have concluded that the collateral source rule does not protect these arrangements. The reasoning is that a lien financing company does not compensate or indemnify the plaintiff; it becomes the plaintiff’s creditor. Unlike an insurance contract where the plaintiff pays premiums in exchange for coverage, lien financing is treated as a litigation funding device. Because no indemnification occurs, there is no collateral source to protect from offset, and defendants may argue the amounts paid by the financing company are both discoverable and admissible at trial.

This matters because lien-financed medical bills tend to be higher than insurer-negotiated rates. If a defendant can introduce evidence showing the actual amounts paid and argue they reflect the reasonable value of services, it can significantly reduce the verdict. Plaintiffs who treat entirely on a lien basis rather than running bills through their insurance should understand this risk. Colorado’s trial courts are still split on the details, but the trend favors treating lien financing differently from traditional insurance.