COLLATERAL SOURCES – WHAT QUALIFIES AND HOW TO
HANDLE THEM AT TRIAL
- WHAT IS THE COLLATERAL SOURCE RULE?
In Michael v. Cole, the Arizona Supreme Court outlined the common law collateral source rule:
Under the collateral source rule, when an injured plaintiff has been compensated for his injuries from a source other than the defendant, the latter cannot benefit from the recovery. The collateral source rule is well established in Arizona tort law. The rule is designed to avoid a windfall to the tortfeasor, if a choice must be made between him and the injured party.
For example, even though a plaintiff claims large financial losses, a defendant is estopped from arguing that the plaintiff has already been made whole for these losses by his own insurance coverage.
122 Ariz. 450, 452, 595 P.2d 995, 997 (1979) (internal citations omitted); Hall v. Olague, 119 Ariz. 73, 579 P.2d 577 (App. 1978); Siverson v. United States, 710 F.2d 557, 559 (9th Cir. 1983) (applying Arizona law); Olivas v. United States, 9th Cir., 506 F.2d 1158 (1974); Restatement (Second) of Torts § 902(2) (1979) ("Payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable."); R.A.J.I. (4th) Personal Injury Damages Instruction No. 1; City of Tucson v. Holliday, 3 Ariz. App. 10, 411 P.2d 183 (1966).
II. THE COLLATERAL SOURCE RULE IN MEDICAL NEGLIGENCE CASES.
A.R.S. § 12-565 modifies the common law collateral source rule in medical negligence cases by allowing evidence of certain collateral source payments. It states:
A. In any medical malpractice action against a licensed health care provider, the defendant may introduce evidence of any amount or other benefit which is or will be payable as a benefit to the plaintiff as a result of the injury or death pursuant to the United States Social Security Act, any state or federal workers' compensation act, any disability, health, sickness, life, income-disability or accident insurance that provides health benefits or income-disability coverage and any other contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the cost of income-disability or medical, hospital, dental or other health care services to establish that any cost, expense, or loss claimed by the plaintiff as a result of the injury or death is subject to reimbursement or indemnification from such collateral sources. Where the defendant elects to introduce such evidence, the plaintiff may introduce evidence of any amount which the plaintiff has paid or contributed to secure his right to any such benefits or that recovery from the defendant is subject to a lien or that a provider of such collateral benefits has a statutory right of recovery against the plaintiff as reimbursement for such benefits or that the provider of such benefits has a right of subrogation to the rights of the plaintiff in the medical malpractice action.
B. Evidence introduced pursuant to this section shall be admissible for the purpose of considering the damages claimed by the plaintiff and shall be accorded such weight as the trier of the facts chooses to give it.
C. Unless otherwise expressly permitted to do so by statute, no provider of collateral benefits, as described in subsection A, shall recover any amount against the plaintiff as reimbursement for such benefits nor shall such provider be subrogated to the rights of the plaintiff.
This statute does not abolish the collateral source rule because the fact finder has discretion to ignore any evidence of collateral benefits. Siverson v. U.S., 710 F.2d 557 (1983); R.A.J.I. 4th Medical Negligence 3 ("You have heard evidence concerning medical and disability benefits that plaintiff has received. It is within your discretion whether and to what extent you consider this evidence in evaluating the plaintiff’s claim for damages.")
III. ARE ALL COLLATERAL SOURCES ADMISSIBLE?
Does A.R.S. § 12-565 render all forms of insurance and benefits a "collateral source" in medical negligence cases? Probably not. The following paragraphs analyze why most life insurance policies should not be considered a collateral sources per A.R.S. § 12-565. You should use the same analysis when trying to determine if the collateral sources in your case fit into one of the categories delineated in the statute.
Because A.R.S. § 12-565 is in derogation of the common law, it must be strictly construed. Ramirez v. Health Partners of Southern Arizona, 193 Ariz. 325, 329, 972 P.2d 658, 662 (1999) (statutes limiting common law liability must be strictly construed).
In strictly construing the statute, one must look at the clauses of the statute that contain the enumerated exceptions to determine the plain meaning of each clause. A.R.S. § 12-565 provides four separate categories of sources of admissible collateral source benefits:
(1) . . . the United States Social Security Act.
(2) any state of federal workers’ compensation act.
(3) Any disability, health, sickness, life, income-disability or accident insurance that provides health
benefits or income-disability
coverage and
(4) any other contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the cost of income-disability
or medical
, hospital
,
dental
or other health care services
to establish that any cost, expense, or loss claimed by the plaintiff as a result of the injury or death is subject to reimbursement or indemnification from such collateral sources.
Id. (emphasis added)
"It is a cardinal rule of statutory construction that statutory provisions must be considered in the context of the entire statute and consideration must be given to all of the statute’s provisions to determine the legislative intent manifested by the entire act." Guzman v. Guzman, 175 Ariz. 183, 187, 854 P.2d 1169, 1173 (App. 1993).
Both the third and fourth categories have limiting clauses regarding the type of benefits which are admissible, while the first and second do not.
While the third category mentions certain types of policies that includes life insurance, it limits
the application of the statute to "insurance that provides health
benefits or income-disability
coverage." The word "insurance" which immediately precedes the limiting clause applies to all the listed types of insurance in the category and, therefore, the limiting clause applies to the entire list, including life insurance. Only when these insurance policies provide health
or disability
benefits, are they admissible. There is no
provision that makes "death benefits" (or any payments other than for health or disability) from any of those policies an admissible collateral source.
Applying the statute to all benefits received from the listed insurances (including life) would render the legislature’s inclusion of the limitation (to health
and income-disability
coverage) superfluous. Courts "must presume that the legislature does not enact superfluous or reiterative legislation." Phoenix Newspapers, Inc. v. Department of Corrections, 188 Ariz. 237, 244, 934 P.2d 801, 808 (Ct. App. 1997); see
Guzman, 175 Ariz. at 187, 854 P.2d at 1173; see
also
Central Housing Inv. Corp. v. Federal Nat. Mortg. Ass’n., 74 Ariz. 308, 311, 248 P.2d 866 (1952) ("the doctrine of ‘expressio unius’ is that the expression … of one or more things of a class, implies the exclusion of all things not expressed, although all would have been impliedly included had none been specifically expressed").
Consequently, evidence of benefits other than health and disability paid by life insurance should not be admissible under § 12-565.
IV. STRATEGIES WITH COLLATERAL SOURCES.
- Consider whether your expert economist should address the collateral source offsets in disclosure.
- Not in my opinion because you are simply doing the defendants’ work for them. They can then use your expert as their trial expert.
- If the defendants do not retain an expert to calculate the collateral source offsets, move in limine to preclude them from arguing or referencing any collateral sources. Without foundation delineating the amount of the probable offsets, the jury would be left to inappropriately speculate on the issue. Farr v. Occidental Life Ins. Co., 145 Ariz. 1, 699 P.2d 376 (App.) (1984) (damages must be established without speculation).
2. Consider whether to allow the defendants to raise the collateral source issue in their case-in-chief, or whether it makes sense for you to address the issue affirmatively in your opening statement and case-in-chief.
- It is usually better to draw the sting.
- Before raising the issue, make sure the defendants have laid the necessary foundation to introduce the collateral source. Do they have an expert that has calculated the offset? If not, move in limine before trial to exclude any reference of the collateral source.
3. If the collateral source evidence comes in, make sure to discuss reimbursement/lien/subrogation issues.
- How do you lay foundation for the reimbursement/lien/subrogation?
- Have client testify about it? Have expert economist testify about it? Call the ERISA/AHCCCS/Medicare representative? Call Richard Burnham? Offer the statute and ask the court to take judicial notice??
- Request that the jury be instructed regarding the plaintiff’s reimbursement obligations. Remember,
"in determining whether a jury instruction is justified, we must view the evidence in the strongest manner supporting the theory of the party requesting the instruction. If there is any evidence
tending to establish such a theory, the instruction should be given even if contradictory facts are also presented. It is for the jury to find the facts and apply the instructions to the facts as they find them." Pioneer Roofing Co. v. Mardian Construction Co., 152 Ariz. 455, 462, 733 P.2d 652, 659 (App. 1986) (emphasis added).
- Should you try to compromise the liens before trial so that you can give the jury definite offset figures?