Coordination of Benefits Handbook

Alabama’s collateral source rule statute has been through a turbulent history since it was enacted in 1987. In 1996, the Alabama Supreme Court ruled that the statute violated the due process and equal protection guarantees of the Alabama Constitution. However, in 2000, the Alabama Supreme Court reversed its earlier decision holding that statute to be unconstitutional. A recent decision by a U.S. District Court in Alabama dealt with the complexities resulting from this turbulent history. The case is Shelley v. White, 2010 WL 1904043 (M.D. Ala., May 10, 2010).

THE FACTS

In a lawsuit seeking damages for injuries incurred, the plaintiff moved to exclude all evidence of reimbursement of his medical and hospital expenses on the grounds that admission of that evidence is barred under the federal rules of evidence. The defendants argue that the Alabama collateral source rule authorizes the admission of that evidence to show that his medical expenses were paid by the employer’s workers’ compensation insurer and possibly other insurers. The applicable statute (Ala. Code §12-21-45) provides:

a. In all civil actions where damages for any medical or hospital expenses are claimed and are legally recoverable for personal injury or death, evidence that the plaintiff’s medical or hospital expenses have been or will be paid or reimbursed shall be admissible as competent evidence. In such actions upon admission of evidence respecting reimbursement or payment of medical or hospital expenses, the plaintiff shall be entitled to introduce evidence of the cost of obtaining reimbursement or payment of medical or hospital expenses.

b. …

c. Upon proof by the plaintiff to the court that the plaintiff is obligated to repay the medical or hospital expenses which have been or will be paid or reimbursed, evidence relating to such reimbursement or payment shall be admissible.

THE DECISION

The court reviewed the history of the litigation over the constitutional validity of the statute. It noted that the 11th U.S. Circuit Court of Appeals (which includes Alabama) addressed the applicability of the law in a 1996 opinion before the ruling of the Alabama Supreme Court holding that the statute violated the Alabama Constitution, finding that it was a substantive rather than procedural rule. After the Alabama Supreme Court’s decision holding the law unconstitutional, it issued a second opinion to conform to that decision.

Having said that, the district court ruled that it is clear that the statute is now constitutional, and that the part of the second ruling of the appeals court that the law was substantive had not been reversed. Accordingly, it held that evidence regarding the plaintiff’s reimbursement of expenses for doctors and hospitals was admissible. Thus, on proper proof, the plaintiff’s measure of damages for medical expenses will be based on what he is obligated to reimburse, along with any additional expense he is legally obligated to pay as well as any cost to him for his coverage.

IMPLICATIONS

This decision is contrary to two federal district court cases that relied on the second decision of the appeals court. However, the court in this case noted that those decisions did not analyze the first decision of the appeals court, and thus concluded that those cases were not correct.

Although the medical expenses in this case were paid by a worker’s compensation insurer and not an employer-sponsored health plan, this decision appears to be correct and would apply in the event another case involving an employer-sponsored health plan arises.

Tags:

This entry was posted by Adam V. Russo on Wednesday, August 25th, 2010 at 10:45 am and is filed under Alabama, Subrogation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.