Collateral Source Rule: A Practical Trial Experience

        I had a trial recently where the issue of ‘the collateral source rule’ arose at trial.  Prior to this district court trial, I had believed the collateral source was universally well understood notwithstanding the occasional ‘gamesmanship’ that can occur between trial lawyers in personal injury lawsuits. 

        In this example case, the plaintiff alleged to have suffered a physical injury at a business by the business’ employee.  Prior to trial/during the litigation, the defendant ‘business’ offered ‘medpay’ to the plaintiff’s counsel, who accepted it in an amount that virtually equaled plaintiff’s incurred medical billing, the medpay check/payment accepted by plaintiff’s counsel was $1.60 short.  Prior to trial, defense counsel inquired as to plaintiff’s claimed trial damages, plaintiff’s counsel stated that he intended to board the past (previously paid by medpay) medical billing arguing that he was allowed based on, you guessed it, the collateral source rule.

        At trial, plaintiff’s counsel requested an award for non-economic damages as well as a separate award for past medical billing, essentially, plaintiff’s counsel was attempting to ‘double dip’ in regards to the previously paid medical billing by this same defendant.  Surprising enough, the trial judge appeared to be willing to award this ‘double-dipping’ request by plaintiff’s counsel were it not for defense counsel’s argument at the close of the trial.  

        The Collateral Source defined: A rule of damages stating that benefits received by a plaintiff from a source wholly independent of and collateral to the wrongdoer do not diminish the damages the plaintiff can otherwise recover. Under the collateral source rule, evidence of a plaintiff's alternative or additional sources of payment for expenses or losses for which the plaintiff seeks damages in a civil action, such as insurance coverage, generally is excluded as irrelevant.  The collateral source rule permits an injured person to recover the full amount of his or her provable damages, "regardless of the amount of compensation which the person has received for his injuries from sources unrelated to the tortfeasor." Motor Vehicle Admin. v. Seidel, 326 Md. 237, 253, 604 A.2d 473, 481 (1992).  Haischer v. CSX Transp., Inc., (Court of Appeals of Maryland) 381 Md. 119; 848 A.2d 620 (2004).

        The Eastern District of Virginia, in Karsten, expanded on the use of the collateral source rule during litigation. See Karsten v Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc., 808 F. Supp. 1253 (E.D.Va. 1992).   In Karsten, The Plaintiff Frances Karsten brought a medical malpractice suit against Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc., in the Eastern District of Virginia, Federal Court.  Ms. Karsten as a member of Kaiser, her HMO, sought and received fertility type treatment.  Pursuant to that treatment, Ms. Karsten underwent a ‘cervical conization’ procedure, a procedure that should not be performed on a pregnant woman.  No pregnancy test was performed by Kaiser prior to the performing of this procedure.  The unfortunate result of this departure from the medical standard of care was a miscarriage/still-born child.  Ms. Karsten’s medical billing was paid by her HMO, Kaiser, pursuant to Ms. Karsten’s payment of her membership fees.  At trial, Ms. Karsten submitted her medical billing and the Defendant Kaiser objected to same on the basis that Kaiser had already paid these medical bills.  The trial court ruled in favor of Ms. Karsten and admitted the medical billing under the collateral source rule. 

         The Defendant argued on appeal that “1) the ‘collateral source rule’ would apply where the medical bills were paid by a source collateral to, or other than, Kaiser; 2) Kaiser paid these bills; 3) Kaiser is not collateral; 4) the rule does not apply.”  Id at 1256.  Put another way, Kaiser argued that Kaiser should not have to pay twice and against the Plaintiff ‘double dipping’.  So far, so good.  The Court’s response was that Kaiser’s argument, while citing the stock language of the collateral source rule, Kaiser was ignoring the reasoning behind the rule.  The Court stated “The collateral source rule is concerned with making sure that the defendant as ‘wrongdoer’ compensates the plaintiff for the wrong committed.  Balanced against this is a concern that the plaintiff should only be compensated by the tortfeasor once for the injury received.  But over- emphasizing the word “collateral” ignores the reality that it is possible for a defendant to wear two hats.  The necessity for multiple payments arises not because the defendant is being doubly-penalized, but because the defendant-tortfeasor and defendant-insurer owe the plaintiff multiple legal obligations.” Id.  In short, Kaiser had apparently forgot that they were Ms. Karsten’s HMO.

        “The first payment of medical bills by the defendant was in its capacity as plaintiff's insurer, pursuant to the insurance agreement entered into between the plaintiff and defendant, for which the plaintiff personally contributed valuable consideration by way of a deduction taken out of each of her paychecks. The defendant admits that it was obligated under the contract to pay for the now challenged medical bills. The defendant is now being asked to pay these same medical expenses as compensatory damages. Even though the same defendant is being asked to pay the same damages twice, it is patent that the nature of the two payments is different. The nature of the first is as a payment from defendant as insurer to the plaintiff as the insured. The nature of the second is as a payment from defendant as tortfeasor to the plaintiff as the party injured by the defendant's negligence. It is axiomatic that the plaintiff is entitled to receive the benefit of her bargain under the insurance contract, irrespective of the fact that the carrier servicing that contract may also be the tortfeasor.” Id at 1257-58. 

         It has long been the common law rule that a plaintiff's damages are not reduced on account of payments made for treatment under hospitalization or medical insurance plan, if the plaintiff, a member of her family, or even her employer, paid the premiums and the tortfeasor did not. See The Atlas, 93 U.S. 302, 310-11, 23 L.Ed.863 (1876) ("a wrong-doer . . . cannot claim the benefit of the contract of insurance if effected by the person . . . he has injured"); Smith v. United States, 587 F.2d 1013, 1015 (3rd Cir. 1978) (under Pennsylvania law "one can justify a double recovery where the original source was supplied by the plaintiff, himself, out of resources that would otherwise have been available to him for other' purposes"); Grayson v. Williams, 256 F.2d 61, 65-66 (10th Cir. 1958) (plaintiff was entitled to payment by tortfeasor for medical expenses already covered by plaintiff's employee hospital association where plaintiff had contributed regularly to the association during employment); Rayfield v. Lawrence, 253 F.2d 209, 212-14 (4th Cir. 1958) (applying Virginia law); Jeffords v. Florence County, 165 S.C. 15, 162 S.E. 574, 576 (S.C. 1932).  Id at 1258. 

        Undersigned defense counsel’s district court trial argument prevailed and the claimed medicals were cut down to $1.60 from approximately $6,000.00, based upon this defendant’s prior payment to this plaintiff via ‘medpay’ for same.  I naively never imagined to have to argue for the collateral source rule at trial in the defense capacity.  “The world wonders."

Milton P. Warren, Of Counsel

“Where is Task Force Thirty-Four? The world wonders” was a radio message sent by Admiral Nimitz to Admiral ‘Bull’ Halsey during the Battle of Leyte Gulf in World War II.

DISTRICT OF COLUMBIA COURT OF APPEALS EXPANDS ON SLIP AND FALL ACTIONS, HOLDING THAT HOSPITAL EMPLOYEE THAT CREATED HAZARDOUS CONDITION WAS ON CONSTRUCTIVE NOTICE OF SAME.

Carolyn L. Greene v. Children’s National Medical Center, No. 21-CV-0354

        Plaintiff Carolyn Greene slipped and fell while visiting her grandson at Children’s National Medical Center (“Children’s) and suffered severe and permanent injuries to her left upper extremity as a result of her fall.  She brought suit against Children’s, alleging: (1) that she slipped in liquid residue left behind by a ride-on floor scrubbing machine operated by one of its custodians; and (2) that there were no warning signs or “wet-floor” cones in the vicinity to alert her of the wet floor.  The hospital moved for summary judgment at the end of discovery, arguing that they were not on notice that the floor was wet where Greene slipped.  The trial court granted Children’s motion for summary judgment reasoning that Greene's claim required speculation to show that Children's was on notice of the dangerous condition that led to her fall, i.e. that liquid was left behind by the use of a floor scrubbing machine.  Greene timely appealed.

            To establish a claim for negligence in D.C., a plaintiff must show that: (1) the defendant owed a duty of care to the plaintiff; (2) the defendant breached that duty; and (3) the breach of duty proximately caused damage to the plaintiff.  There was no dispute that Children’s owed Greene a duty of care to protect against, and warn about, any hazards that it knew about and/or had constructive notice of same.  However, if Children’s, via its employees, was responsible for creating the dangerous condition that led to Greene’s injuries, that alone would put it on constructive notice of the hazard.  Therefore, the primary concern for the Appellate Court was to decide whether, based on the evidence presented in discovery, a reasonable jury could conclude that Greene slipped and fell on water that was left behind by a Children’s employee, i.e., whether Children’s created the dangerous condition that led to her injury such that Greene did not have to make an additional showing of notice.   

            Prior to the incident, Greene arrived at the hospital to visit her grandson around 8:00 am and walked around the majority of the fourth floor without seeing any liquid on the floor, wet floor signs, or scrubbing machines.  Around 9:00 am, Greene decided to leave her grandson’s room when she slipped and fell in the hallway between her grandson’s room and the nurse’s station. As she attempted to get up, she saw that the floor was wet behind her, with visible streaks of water both in front of and behind her.  After the fall, several employees came to help her, including a custodian who began to mop up the floor and stated, “where are the signs that should have been on the floor? I didn’t see any signs.”  As Greene was transported to a nearby nurse’s station, she noticed another hospital custodian, Parker, driving a ride-on auto scrubbing machine in other areas of the fourth floor.  Specifically, the machine left water on the floor behind him, in the same streaks that were visible to Greene where she fell moments before.  Greene was unable to ascertain whether the machine’s brushes were down but insisted that the employee was cleaning the floor and leaving water on both sides of the hall where it had been. The subject employee, Parker, was later asked by a manager whether he was operating the machine in the specific area where Green fell, and he denied it. In his deposition, Parker stated he was “dust mopping” and had placed caution signs on the floor to alert others he was dust mopping.  Further, he claimed that he “never got around to actually scrubbing the floors with the machine that day” and that he would not have done so before nine in the morning, as the sick children are usually sleeping. Lastly, Parker denied knowing anything about Greene’s slip and fall until the day after the incident; however, an email was presented establishing that Parker had spoken with a manager about Greene’s fall at or around 10:30 am the previous morning and that he claimed to have put up wet floor and/or caution signs.  Greene presented expert testimony regarding commercial cleaning systems and practices establishing that it was highly probable the liquid she slipped on came from the scrubbing machine because it is “quite a common occurrence when using that machine.” Further, Greene’s expert rejected the notion that Greene might have slipped in some liquid spilled by a patron, because there was liquid in a lot of areas, and it would not make logical sense for there to be spills in other areas of the fourth floor.

Ultimately, the Court held that Greene adduced sufficient evidence at trial for a reasonable jury to conclude that Children’s, via its employees, created the dangerous condition such that it was on constructive notice.  The Appellate Court was swayed by the following factors: (1) Greene saw the substance she slipped on and could roughly describe it as “streaks of water”; (2) Greene saw Parker on a nearby floor scrubber leaving similar water streaks around him; (3) she presented expert testimony that the streaks of water she fell on most likely came from a floor scrubber; (4) the email provided corroboration from a nurse that Parker had used the floor scrubber on the floor shortly before Greene’s fall; (5) another Children’s employee asked immediately after the incident where the sings “that should have been on the floor” were; and (6) Parker’s own testimony that he put wet floor signs in place after the dust mopping. 

Children’s argued that the evidence presented was all circumstantial evidence and there was no direct evidence that Greene either saw the machine brushes on the floor, or that anyone witnessed Parker even drive the floor scrubbing machine in the subject area in the minutes before her fall. In short, although there was no direct evidence that the scrubbing machine did not go by right where Greene fell, the Court held that the circumstantial facts could allow the jury to justify an inference that Greene slipped and fell on liquid negligently left behind by Parker, without adequate warning signs, and that these negligent conditions caused her injuries. Accordingly, the Court of Appeals reverse the entry of summary judgment in Children’s favor and remanded the case to proceed to trial.

Since “notice” is a fact-specific inquiry into every premises liability action, this holding provides further insight on what factors the Court finds relevant and what circumstantial evidence allows juries to make a reasonable inference of notice and/or control over a hazardous condition.

-       Regan Leavitt, Associate