Cargo ship in the harbor at night

By Tod J. Everage

The U.S. 5th Circuit has finally weighed in on the application of the collateral source rule to Longshore benefits. Back in June, we discussed the latest case out of the EDLA discussing this issue. On November 17, 2016, the U.S. Fifth Circuit came to the same conclusion: a plaintiff may only recover the amount actually paid by the LHWCA insurer, not the amount billed. This decision finally settles the dispute that arises in nearly every Longshore case where a Plaintiff demands reimbursement for all medical expenses billed by the provider, including all amounts written off. In more serious cases, the difference can be substantial.

In this case, the plaintiff was injured on the M/V THUNDERSTAR, a 65-foot crewboat owned and operated by Bozovic Marine. Plaintiff was a 70-year-old contract consultant. When Plaintiff realized he couldn’t board the platform from the THUNDERSTAR without a liftboat present, he instructed the captain to bring him back to Venice. During the voyage in rough seas, Plaintiff fell to the floor in the wheelhouse. He suffered back injuries. The medical bills for Plaintiff’s treatment totaled $186,080, but the LHWCA carrier paid only $57,385 in satisfaction of those bills. After a bench trial to Judge Minaldi in the WDLA, the Court ruled that Bozovic Marine was 90% negligent. Plaintiff was awarded $984,395. Judge Minaldi ruled that the collateral source rule barred any discount of the medical expenses that the Longshore carrier was billed, but not required to pay; so, Plaintiff received the full $186,080 in medical expenses billed.

The collateral source rule bars a tortfeasor from reducing his liability by the amount plaintiff recovers from independent sources. Davis v. Odeco, Inc., 18 F.3d 1237, 1243 (5th Cir. 1994). In its simplest form, the rule asks whether the tortfeasor contributed to, or was otherwise responsible for, a particular income source. If not, the income is considered “independent of (or collateral to) the tortfeasor”, and the tortfeasor may not reduce its damages by that amount. Davis, 18 F.3d at 1243. Without the rule, a third party income source would create a windfall for the tortfeasor. In Davis, the 5th Circuit stated, “the current application of the collateral source rule thus turns on the character of the benefits received, as well as the source of those benefits.” Davis, 18 F.3d at 1244. Because the Longshore comp benefits were provided by Plaintiff’s employer and not Bozovic Marine, the collateral source rule applies here, and Bozovic Marine is liable for the medical expenses paid on behalf of the Plaintiff.

The next issue then was whether Bozovic Marine was liable for the amount billed by the medical provider or the amount paid by the Longshore carrier. Plaintiff argued that the Bozovic Marine should not benefit from the Plaintiff’s employer’s LHWCA carrier negotiating a reduced rate on the medical bills and therefore, under the collateral source rule, should have to pay the Plaintiff the full billed amount of the medical bills. Bozovic Marine argued that the Plaintiff was not out of pocket any money for the medical bills, so he should only get to recover the amount of the bills actually paid on his behalf.

The 5th Circuit noted that there was no direct authority regarding the treatment of written-off LHWCA medical expenses in a maritime-tort context, so it looked to persuasive authority on the issue. For example, the Court commented that Mississippi law allows a plaintiff to recover write-offs, but Texas law does not. In Louisiana, a plaintiff may recover a write-off if the plaintiff provided consideration for the benefit or suffered a diminution in patrimony. See Bozeman v. State, 879 So.2d 692, 705-6 (La. 2004). Further, the 5th Circuit had previously ruled that a seaman could only recover the amount paid in cure benefits owed, not the amount billed. See Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373, 381 (5th Cir. 2012).

The Court found the rationale behind Manderson persuasive and most applicable here, stating: “like maritime cure, LHWCA creates a no-fault basis for paying a longshoreman’s medical expenses. 33 U.S.C. § 904(b) … When a third-party tortfeasor is responsible for the employee’s injury, cure and LHWCA insurance function in the same manner: the employer (or its insurer) has an immediate duty to pay medical expenses even though it is not at fault.” The Court thus concluded that “LHWCA medical-expense payments are collateral to a third-party tortfeasor only to the extent paid; in other words, under those circumstances, plaintiff may not recover for expenses billed, but not paid.” Applying this reasoning, the 5th Circuit reduced Plaintiff’s award to compensate only for the $57,385 paid by LHWCA, which resulted in a savings of nearly $130,000 for Bozovic Marine.

There were other interesting issues on appeal in this case worth reading in the opinion, but the collateral source rule’s application to LHWCA benefits will have the most lasting and meaningful effect on Longshore and maritime-tort cases going forward.