Coordination of Benefits

The common-law collateral source rule is intended to ensure that a person who suffers a financial loss as a result of other person’s wrongdoing does not achieve reimbursement of more than 100 percent of the loss from all sources. In Ohio, the modern collateral source rule is governed by a statute that permits the alleged wrongdoer to “introduce evidence of any amount payable as a benefit to the [injured party] as a result of the damages that result from an injury, death or loss to person or property that is the subject of a claim upon which the action is based, except of the source of collateral benefits has… a contractual right of subrogation.” The Supreme Court of Ohio recently considered the application of the statute in determining how much the injured party received in benefits from his health insurer. The case is Jacques v. Manton, 2010 WL 1816324 (S. Ct. Ohio, May 4, 2010).

THE FACTS

Richard Jacques was injured in an auto accident and sued the other driver, Patricia Manton for damages. He incurred medical bills of more than $21,800, but his health providers accepted only about $7,500 as full payment for the services performed for his accident related injuries. Relying on a 2006 decision based on the common-law collateral source rule, the court precluded Manton from offering evidence of the almost $14,400 written off by the health care providers. The jury awarded $25,000 in damages, including $15,500 for Jacques’ medical expenses. Manton asked for a new trial. The court denied the motion and the court of appeals affirmed the decision of the trial court based on the Ohio statute. Manton appealed.

THE DECISION

The Ohio Supreme Court noted that the health plan concluded that both the common-law and statutory versions of the collateral source rule permitted the introduction of evidence of the write-off. It said:

Both versions of the collateral-source rule are concerned with actual payments made by third parties to the benefit of the plaintiff [that is, the injured party], but the focus of the statute is to prevent a double-payment windfall for the plaintiff, while the focus of the common-law rule was to prevent the defendant from escaping the full burden of his tortuous conduct. Write-offs are amounts not paid by third parties, or anyone else, so permitting introduction of evidence of them allows the fact-finder to determine the actual amount of medical expenses incurred as a result of the defendant’s [that is, the tortfeasor’s] conduct. This result supports the traditional goal of compensatory damages- making the plaintiff whole.

The court went on to conclude:

Because [the statute] does not prohibit evidence of write-offs, the admissibility of such evidence is determined under the Rules of Evidence. A plaintiff is entitled to recover the reasonable value of medical expenses incurred due to the defendant’s conduct… The reasonable value may not be either the amount billed by medical providers or the amount accepted as full payment. … Instead, the reasonable value of medical services is a matter for the jury to determine from all the relevant evidence. Both the original medical bill rendered and the amount accepted as full payment are admissible to prove the reasonableness and necessity of charges rendered for medical and hospital care. …[Citations omitted.]

Accordingly, the court reversed the appeals court decision and sent the case back to the trial court for further proceedings.

IMPLICATIONS

Since the insurer in this case had a right of subrogation, it would appear that the $7,500 or so that it paid the providers may not be included in any subsequent verdict in the tort lawsuit. If the subrogation and reimbursement provision is well drafted, it probably would require Jacques to reimburse the $7,500 or so regardless of whether the jury includes all or any part of the medical expenses in its verdict.

It should be noted that Jacques legal fees in connection with the tort action would be at least one-third of the verdict, and perhaps even one-half of it. Thus, on retrial (or in any settlement made in lieu of a retrial), the net recovery to Jacques is likely to be most inadequate to reimburse him for the pain and suffering and loss of income he incurred as a result of the accident.

Nevertheless, the outcome in this case is consistent with the law. Under either approach argues before the court, the insurer should end up being reimbursed for the benefits it paid. However, Jacques might end up agreeing with Charles Dickens, when he said, “The law is an ass.”

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This entry was posted by Adam V. Russo on Wednesday, August 25th, 2010 at 10:53 am and is filed under Ohio, 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.