Cargo ship in the harbor at night

By Tod Everage

The application of the collateral source rule is a common dispute in personal injury litigation because it affects the amount of recoverable damages in the case. When it applies, the defendant is potentially on the hook for a higher amount of past medical expenses, typically, the amount invoiced by the medical providers. When it does not, the plaintiff’s recovery of past medical expenses is reduced, usually to the actual amount paid to the providers. Since its inception, Louisiana courts have regularly been called upon to decide whether certain outside payment sources fall under the the collateral source rule. Recently, Judge Morgan in the Eastern District of Louisiana ruled that employer-based benefits for Longshoreman are not covered by the rule.

The premise of the collateral source rule is that “a tortfeasor may not benefit, and an injured plaintiff’s tort recovery may not be reduced, because of monies received by the plaintiff from sources independent of the tortfeasor’s procuration or contribution.” Bozeman v. State, No. 03-1016 (La. 7/2/04); 879 So.2d 692, 698. The rule was meant to ensure that a tortfeasor was not able to benefit from the victim’s foresight in purchasing insurance and other benefits. It is applied to a variety of factual circumstances, although typically applies to tort cases involving insurance benefits.

There are two primary considerations for determining whether the collateral source rule applies: “(1) whether application of the rule will further the major policy goal of tort deterrence; and (2) whether the victim, by having a collateral source available as a source of recovery, either paid for such benefit or suffered some diminution in his or her patrimony because of the availability of the benefit, such that no actual windfall or double recovery would result from application of the rule.” Lockett v. UV Ins. Risk Retention Grp., Inc., No. 15-166 (La. App. 5 Cir. 11/19/15); 180 So.3d 557, 570 (citing Bellard v. Am. Cent. Ins. Co., 980 So.2d 654, 669 (La. 2008)); see also Hoffman v. 21st Century N. Am. Ins. Co., No. 14-2279, (La. 10/2/15); 2015 WL 5776131, at *3.

In Bozeman, the Louisiana Supreme Court held that Medicaid recipients cannot collect Medicaid “write-off” amounts as damages because no consideration is provided for the Medicaid benefit. In Bellard, the Louisiana Supreme Court also noted: “The purpose of tort damages is to make the victim whole. This goal is thwarted, and the law is violated, when the victim is allowed to recover the same element of damages twice.” In finding that the collateral source rule did not apply to workers’ compensation benefits, the Louisiana Supreme Court stated: “unlike sick leave, annual leave, or employer-provided health insurance, workers’ compensation benefits cannot be considered a fringe benefit in the nature of deferred compensation that would otherwise be available to the plaintiff but for his injury. To the contrary, workers’ compensation benefits are required by law, and that same law prohibits an employer from assessing an employee, either directly or indirectly, with the cost of workers’ compensation insurance.”

More recently, the Louisiana Supreme Court again addressed the collateral source rule, this time with regard to its application to the discounted rate negotiated by the plaintiff’s attorney. See Hoffman v. 21st Century N. Am. Ins. Co., No. 14-2279, (La. 10/2/15); 2015 WL 5776131. In that case, the Court declined to extend the collateral source rule, holding that an attorney-negotiated medical discount, or “write-off,” did not qualify as a diminution of the plaintiff’s patrimony. The court explained that “allowing the plaintiff to recover an amount for which he has not paid, and for which he has no obligation to pay, is at cross purposes with the basic principles of tort recovery in our Civil Code.” The Court then held that because the plaintiff suffered no diminution of his patrimony, “the defendant in this case cannot be held responsible for any medical bills or serves the plaintiff did not actually incur and which the plaintiff need not repay.” Conversely, in Lockett, the collateral source rule applied when the plaintiff personally negotiated a reduction of her medical bills.

The U.S. Fifth Circuit’s jurisprudence is in accord with Louisiana law on this issue. In Miciotto v. U.S., 270 F. App’x 301, 303 (5th Cir. 2008) the Fifth Circuit explained that “for the [collateral source] rule to apply to ‘write-off’ amounts of medical expenses that were billed but not paid because a third-party negotiated a lesser amount, the plaintiff must give some consideration for the benefit obtained or otherwise suffer a diminution of patrimony.”

Judge Morgan reviewed each of these cases in formulating her well-reasoned opinion in Thibodaux v. Wellmate, 2016 WL 2983950 (E.D. La. May 23, 2016). In that case, the Plaintiff had incurred $626,529.68 in past medical expenses, though his Longshore carrier had only paid $244,702.87. The remainder of the bills were not paid because the carrier had negotiated lower amounts, as is typical. The defendant filed a Motion in Limine to address whether the collateral source rule applied to Longshore benefits.

In her ruling, Judge Morgan noted that the Plaintiff “gave no consideration for the compensation” that his employer provided under the LHWCA. “Indeed, compensation benefits, including for medical services and supplies, are required by law.” Thus, because there was no evidence of any diminution of patrimony, the collateral source was inapplicable. Judge Morgan also found that forcing the defendant to pay for the plaintiff’s past medical expenses actually paid still served the policy goal of tort deterrence.