Lopez v. Safeway Stores, Inc. ( 2006 )

FILED BY CLERK
FEB 28 2006
IN THE COURT OF APPEALS COURT OF APPEALS
STATE OF ARIZONA DIVISION TWO
DIVISION TWO
LYDIA LOPEZ, a single woman, ) 2 CA-CV 2005-0057
) DEPARTMENT B
Plaintiff/Appellee, )
) OPINION
v. )
)
SAFEWAY STORES, INC., a Delaware )
corporation, )
)
Defendant/Appellant. )
)
APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY
Cause No. C20036972
Honorable Jane L. Eikleberry, Judge
AFFIRMED
Hollingsworth Law Firm
By Louis Hollingsworth and Richard Arrotta Tucson
and
Thomas A. Zlaket, P.L.L.C.
By Thomas A. Zlaket Tucson
Attorneys for Plaintiff/Appellee
Douglas & Cox, L.L.P.
By William H. Douglas Scottsdale
Attorneys for Defendant/Appellant
P E L A N D E R, Chief Judge.
¶1 In this personal injury action, defendant/appellant Safeway Stores, Inc. appeals
from a judgment entered on a jury verdict in favor of plaintiff/appellee Lydia Lopez in the
net amount of $360,000 and from the trial court’s subsequent denial of Safeway’s motion
for a new trial. Safeway argues the trial court erroneously denied Safeway’s motion in
limine and, as a result, erred in admitting a summary of Lopez’s medical expenses, which
included amounts not actually owed or paid by her or anyone else. Finding no reversible
error, we affirm.
BACKGROUND
¶2 Although no trial transcripts have been furnished to this court, it appears
undisputed that Lopez slipped and fell while entering a Safeway store and sustained various
injuries. She then filed this negligence action against Safeway. Before trial, Safeway moved
in limine to prohibit Lopez from presenting evidence “reflecting charges for medical care,
healthcare or psychological care, which charges are above or beyond what was actually
accepted by the healthcare provider in satisfaction of billings.” Based on information
provided by Lopez, Safeway pointed out that, although Lopez’s medical bills totaled
approximately $59,700, more than $42,000 of that total was “completely written off as
adjustments” and the remaining balance of $16,837 was fully satisfied through contractually
agreed-upon payments. In its motion, Safeway argued Lopez should only be able to claim
2
and present evidence on the $16,837, the amount “actually accepted in full satisfaction of
the services rendered.”
¶3 After considering the parties’ memoranda and hearing oral argument, the trial
court denied Safeway’s motion in limine. Thereafter, Lopez’s medical expense summary,
reflecting total medical bills of $59,699.57, was admitted into evidence at trial. The jury
found in favor of Lopez, awarded damages of $400,000, but found her ten percent at fault
and Safeway ninety percent at fault. This appeal followed the trial court’s entry of judgment
on the verdict and subsequent denial of Safeway’s motion for a new trial.
DISCUSSION
I
¶4 Safeway argues “[t]he trial court’s pretrial ruling on [Safeway’s] Motion in
Limine and the subsequent submission of full medical bills constitute reversible error
requiring a retrial.” Relying primarily on Anderson v. Muniz, 21 Ariz. App. 25, 515 P.2d
52 (1973), Safeway maintains a “plaintiff’s recovery for medical expense claims should be
limited to contractually agreed rates accepted in full satisfaction for medical care, not the
face amount of billings.” Therefore, Safeway asserts, the trial court erred in admitting
“evidence at trial of the higher billing amounts which were never paid, and were fully
satisfied through contractually agreed upon reduction in charges.”
¶5 Before turning to Safeway’s argument, we first address two preliminary issues
Lopez raises. First, as she points out, the parties stipulated in their joint pretrial statement
3
“that the medical bills incurred by the Plaintiff, as itemized on a Summary Sheet of Medical
Expenses, will be deemed as reasonable and customary medical expenses to the extent of
the Court’s ruling on the Defendant’s Motion in Limine . . . , as to the amount of medical
bills that will be admissible.” Lopez suggests, without response by Safeway in its reply
brief, that “the foregoing stipulation seems to have mooted the issue now raised on appeal.”
We disagree.
¶6 The apparent purpose of the stipulation was merely to ease the burden, or
expedite the process, of introducing Lopez’s medical expenses into evidence at trial once the
trial court ruled on the legal issue presented in Safeway’s motion in limine.1 The pretrial
statement does not manifest any intent that the court’s ruling on that motion would be
binding or otherwise unchallengeable on appeal. Nor did Lopez so argue at the hearing on
Safeway’s motion in limine or, more importantly, in response to Safeway’s subsequent
motion for new trial. And the trial court did not cite or rely on the parties’ pretrial statement
in denying Safeway’s motion for new trial. Therefore, we find Safeway’s substantive issue
on appeal neither moot nor waived. See Pavlik v. Chinle Unified Sch. Dist. No. 24, 195
1
In its motion in limine, Safeway stated “the parties could stipulate to the damages
once the court has entered its In Limine Ruling regarding the ‘phantom’ medical expenses.”
Similarly, at oral argument on that motion, held after the parties filed their joint pretrial
statement, Safeway’s counsel explained: “The game plan I have agreed to, stipulated to, is
that we are going to have you [the trial judge] decide the issue, and then either the jury is
going to get this set of medical expenses or this set.” These statements place in context the
stipulation made in the joint pretrial statement and do not reflect any intent to abandon the
legal issue raised in the motion in limine once the trial court had ruled on it.
4
Ariz. 148, ¶ 28, 985 P.2d 633, 640 (App. 1999) (by failing to raise waiver as a defense in
the trial court, defendant “waived its waiver argument”).
¶7 Second, Lopez argues Safeway’s failure to provide the trial transcript makes
it “impossible to analyze or decide any issues raised on this appeal.” Again, we disagree.
Although Lopez questions how we can determine “whether Safeway’s objections [to her
medical expense claim] were properly made and preserved,” the record includes Safeway’s
motion in limine, the transcript of the argument on that motion, and the trial court’s ruling.
Based on that ruling, the court later admitted Lopez’s medical expense summary into
evidence at trial. Safeway’s pretrial motion preserved its objection to the amount of medical
expense Lopez could claim and recover. See State v. Burton, 144 Ariz. 248, 250, 697 P.2d
331, 333 (1985) (“where a motion in limine is made and ruled upon, the objection raised
in that motion is preserved for appeal, despite the absence of a specific objection at trial”);
see also State Bar Committee comment, Ariz. R. Civ. P. 7.2, 16 A.R.S., Pt. 1.
¶8 In addition, although we review a trial court’s evidentiary rulings for abuse of
discretion, Cervantes v. Rijlaarsdam, 190 Ariz. 396, 398, 949 P.2d 56, 58 (App. 1997),
Safeway’s pretrial motion raised a purely legal issue that is subject to our de novo review
and that is not dependent on evidence adduced at trial. See Dean v. Am. Family Mut. Ins.
Co., 535 N.W.2d 342, 343 (Minn. 1995) (when facts are undisputed, issue of whether
collateral source rule applies is reviewed de novo); Smith v. Shaw, 159 S.W.3d 830, 832
(Mo. 2005) (same); Weatherly v. Flournoy, 929 P.2d 296, 298 (Okla. Civ. App. 1996)
5
(same). As Lopez acknowledges, the available record is sufficient to “decide the correctness
of the trial court’s ruling on [the] motion in limine.”2 Accordingly, we do not view “the full
evidence presented at trial” as indispensable to review of that ruling, as Lopez claims.
Finally, if Lopez deemed the trial transcripts relevant or necessary to resolving the central
issue on appeal, she could have designated them for preparation and production to this
court. Ariz. R. Civ. App. P. 11(b)(2), 17B A.R.S.; Orlando v. Northcutt, 103 Ariz. 298,
301, 441 P.2d 58, 61 (1968).
II
¶9 We now turn to Safeway’s argument that the trial court erroneously permitted
Lopez to claim and recover for medical expenses that were never paid. As noted earlier,
Safeway relies primarily on Anderson, contending this court’s 1973 decision in that case is
“directly on point,” “dispositive of the question presented” here, and clearly establishes
2
As Lopez correctly points out, “[r]eversal requires a showing that the alleged error
was prejudicial to Safeway’s substantial rights.” See Ariz. R. Evid. 103(a), 17A A.R.S.
(“Error may not be predicated upon a ruling which admits or excludes evidence unless a
substantial right of the party is affected.”); see also Ariz. Const. art. VI, § 27; Ariz. R. Civ.
P. 61, 16 A.R.S., Pt. 2; Carter-Glogau Labs., Inc. v. Constr., Prod. & Maint. Laborers’
Local 383, 153 Ariz. 351, 358, 736 P.2d 1163, 1170 (App. 1986); but see Hirsh v. Manley,
81 Ariz. 94, 101, 300 P.2d 588, 593 (1956) (new trial ordered when court could not
determine to what extent jury had been influenced by inadmissible evidence and could not
segregate excess damages awarded to plaintiff); Valley Transp. Sys. v. Reinartz, 67 Ariz.
380, 383, 197 P.2d 269, 271 (1948) (“prejudice [is] presumed to exist where improper
evidence is admitted upon which the jury might act”). Nonetheless, if Lopez was
erroneously permitted to claim and recover medical expenses in an amount approximately
3.5 times greater than what the law allows, we are not persuaded that the trial transcript
would be necessary or even helpful in evaluating the question of prejudice here.
6
“that the proper measure of damages for the value of medical services rendered is the
contractually agreed upon rate.” We find Anderson distinguishable but, to the extent it
supports the broad proposition Safeway advocates, we overrule that portion of it.
¶10 In Anderson, the plaintiff was injured on his job, received workers’
compensation benefits, but also filed a third-party personal injury action. In that action,
“[t]he trial court ruled that the [plaintiff’s] doctors could testify as to the amount they
ordinarily would have charged for their services which was higher than the actual amount
charged to and paid by the State Compensation Fund.” 21 Ariz. App. at 28, 515 P.2d at 55.
Adopting the reasoning in Pabon v. Cotton State Mutual Insurance Co., 196 F. Supp. 586
(D.P.R. 1961),3 this court disagreed with the trial court’s ruling and stated: “If on retrial,
it appears that the doctors’ charges were based on a schedule of rates contractually agreed
upon between them and the Fund, then the [plaintiffs] can receive no more than those
charges.” Anderson, 21 Ariz. App. at 29, 515 P.2d at 56.
3
In Pabon, as in Anderson, the plaintiff sustained an on-the-job injury for which he
apparently received workers’ compensation benefits. Similarly, the plaintiff’s physician in
Pabon testified at trial, “he could have reasonably charged [more] for his services” than
allowed by “the schedule of rates contractually agreed upon between him and the Fund,”
but “he never charged or collected” that greater amount. 196 F. Supp. at 588. As Lopez
points out, Anderson also arose from a “workers’ compensation setting,” and “the entire
workers’ compensation scheme was (and still is) created and controlled entirely by statute.”
Thus, neither Anderson nor Pabon involved the type of situation presented here, where a
patient benefits from contractually reduced rates for payment of medical expenses by
collateral sources procured by or available to the patient.
7
¶11 Although at first blush Anderson would seem to apply to this case, on closer
analysis it is distinguishable and, therefore, not controlling. There, the State Compensation
Fund paid the plaintiff’s healthcare providers the “actual amount charged” by each of them.
Id. at 28, 515 P.2d at 55. Thus, as Lopez points out, “the [Anderson] decision stands for
the proposition that a party cannot recover for medical expenses in excess of the amounts
actually charged (i.e., billed) by healthcare providers,” because “the amount billed in that
case was identical to the amount paid by the compensation carrier.”
¶12 Here, in contrast, the billing charges of Lopez’s healthcare providers totaled
almost $59,700, even though the providers accepted only $16,837 in full satisfaction of
those charges based on reduced rates to which the providers had contractually agreed with
Lopez’s medical insurance carriers. At oral argument in this court, Safeway contended the
medical bills reflecting the higher amount had “nothing to do with anything” because they
were largely illusory or “phantom.” But, as noted earlier, Safeway stipulated that all of
Lopez’s medical bills would “be deemed as reasonable and customary medical expenses”
8
for trial purposes.4 In short, we do not find Anderson dispositive; but that does not end our
inquiry.
¶13 At the heart of this appeal is whether the collateral source rule applies to
Lopez’s claim for medical expenses that apparently were charged to her but which neither
she nor her medical insurance carriers had to pay.5 “[T]he collateral source rule,” as our
supreme court has stated, requires that “‘[p]ayments made to or benefits conferred on the
4
Because of that stipulation, the question whether the $16,837 actually paid was, in
fact, the reasonable value of the medical services rendered was not preserved for appeal.
And, aside from that stipulation, the limited record before us does not shed any additional
light on other, potentially relevant issues. For example, from this record we cannot tell
whether Lopez had private medical insurance that covered most of her medical expense.
Nor can we tell whether she paid, in the way of premiums or otherwise, for the benefit of
health insurance coverage under which her providers apparently were bound to accept
adjusted, reduced rates in full payment and satisfaction of their services.
5
See generally A.R.S. §§ 20-1072, 33-931, 33-934; Blankenbaker v. Jonovich, 205
Ariz. 383, ¶¶ 1, 19, 71 P.3d 910, 911, 915 (2003) (holding that § 33-934 “allows an action
to enforce a health care provider lien only against those liable to an injured person, not
against the injured person,” but also stating “[t]he provider can always proceed, even in the
absence of a lien, against the patient for the value of the services rendered”); cf. Samsel v.
Allstate Ins. Co., 204 Ariz. 1, ¶¶ 27, 38, 59 P.3d 281, 289, 291 (2002) (under A.R.S. § 20-
1072, HMO “enrollee is immunized from actions by the [health care] provider for recovery
of charges for services provided and covered by the enrollee’s agreement with the HMO,”
including “direct action[s] for the difference between the provider’s usual fees or charges
and the lesser amount payable pursuant to the contract between the provider and the HMO”;
but “expenses paid by the HMO coverage [patient/claimant] bought and paid for should be
treated [no] differently than expenses paid by a hospital or medical expense policy [she]
might have purchased or any other collateral source [she] might have acquired by her own
efforts”); Nahom v. Blue Cross & Blue Shield of Ariz., 180 Ariz. 548, 550, 553, 885 P.2d
1113, 1115, 1118 (App. 1994) (patient was third-party beneficiary of contract between
hospital and patient’s medical insurer, and contract limited hospital’s payment to a fixed
amount and prevented hospital “from looking to a subscriber [patient] for amounts in
excess” of that limit).
9
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.’” Taylor v. S. Pac.
Transp. Co., 130 Ariz. 516, 519, 637 P.2d 726, 729 (1981), quoting Restatement (Second)
of Torts § 920A(2) (1979); see also Hall v. Olague, 119 Ariz. 73, 73, 579 P.2d 577, 577
(App. 1978) (“The so-called ‘collateral source rule’ states that total or partial compensation
for an injury which the injured party receives from a collateral source wholly independent
of the wrongdoer does not operate to reduce the damages recoverable from the
wrongdoer.”). “The collateral source rule is well established in Arizona tort law.” Michael
v. Cole, 122 Ariz. 450, 452, 595 P.2d 995, 997 (1979); see also S. Dev. Co. v. Pima
Capital Mgmt. Co., 201 Ariz. 10, ¶ 33, 31 P.3d 123, 134 (App. 2001); Hall, 119 Ariz. at
74, 579 P.2d at 578.
¶14 In many respects, the rule “‘is punitive’” because it “allows a plaintiff to fully
recover from a defendant for an injury even when the plaintiff has recovered from a source
other than the defendant for the same injury.” Norwest Bank (Minnesota), N.A. v.
Symington, 197 Ariz. 181, ¶ 36, 3 P.3d 1101, 1109 (App. 2000), quoting Grover v. Ratliff,
120 Ariz. 368, 370, 586 P.2d 213, 215 (App. 1978), quoting Patent Scaffolding Co. v.
William Simpson Constr. Co., 64 Cal. Rptr. 187, 191 (Cal. App. 1967). As the court in
Taylor explained: “The rationale for this rule is that simply because the injured party might
have provided by contract for reimbursement of medical expenses, it should not be used to
10
lessen the tortfeasor’s liability. There should be no windfall for a tortfeasor because he
injured an insured instead of a non-insured.” 130 Ariz. at 519-20, 637 P.2d at 729-30.
¶15 “The collateral source rule is most often applied in cases where an injured
party recovers from a tortfeasor amounts for which plaintiff has already been compensated
by his insurer.” Id. at 519, 637 P.2d at 729; see also Norwest Bank, 197 Ariz. 181, ¶ 36,
3 P.3d at 1109. But the rule also applies when, due to a healthcare provider’s gratuitous
treatment, a plaintiff neither incurs nor is responsible for payment of the reasonable value
of medical services, but nonetheless can claim and recover compensation for that value from
the tortfeasor. See Restatement (Second) of Torts § 920A cmt. c(3); 2 Dan B. Dobbs, Law
of Remedies, § 8.6(3), at 493-94 (2d ed. 1993) (Under the collateral source rule, “gratuitous
benefits conferred by others . . . do not reduce the defendant’s tort liability, even though the
payments operate to reduce the plaintiff’s loss. . . . The plaintiff has been allowed to recover
fully against the defendant even though the injury has been partly compensated for by
gratuitous donations by third persons, as where . . . he receives free medical treatment.”).
¶16 Not surprisingly, the parties disagree on whether the collateral source rule
applies to the issue presented here, and they point to different sections of the Restatement
(Second) of Torts to support their positions.6 Relying on Restatement § 911, comment h,
6
Pointing to footnote one in the Anderson decision, which cited “cases[,] Annot. 7
A.L.R. 3d 516 Damages-Collateral Source Rule,” 21 Ariz. App. at 28 n.1, 515 P.2d at 55
n.1, Safeway also contends this court was “fully aware of collateral source rule issues” when
it ruled as it did in that case. As noted above, however, we find Anderson distinguishable
and, despite the cryptic reference in footnote one of that decision, the court there did not
11
Safeway argues “limiting damages to contractually agreed upon rates is not contrary to the
‘collateral source rule.’” Section 911 is entitled “Value,” a part of the chapter that deals
generally with “Damages,” and provides in part: “As used in this Chapter, value means
exchange value or the value to the owner if this is greater than the exchange value.”
Restatement § 911(1). Based on this language, Safeway contends § 911 “is the defining
section for the term ‘value’ throughout the chapter, including those instances where the term
value appears in Sections 920A and 924,” on which Lopez relies.
¶17 In support, Safeway primarily focuses on comment h to § 911, which is
entitled “Value of services rendered” and states in part:
When the plaintiff seeks to recover for expenditures
made or liability incurred to third persons for services rendered,
normally the amount recovered is the reasonable value of the
services rather than the amount paid or charged. If, however,
the injured person paid less than the exchange rate, he can
recover no more than the amount paid, except when the low
rate was intended as a gift to him. A person can recover even
for an exorbitant amount that he was reasonable in paying in
order to avert further harm. (See § 919). (Emphasis added.)
Pointing to the italicized language, Safeway maintains that comment is dispositive here and
limits Lopez’s medical-expense claim to $16,837, the amount her insurers actually paid. See
also 25 CJS Damages § 153, at 542 (2002) (“Where the amount paid for medical services
is in accordance with a contractual schedule of rates, the recovery is limited to that amount
although the reasonable value of the services in the absence of the contract is higher.”).
analyze how the argument Safeway makes here might implicate the collateral source rule.
12
¶18 In contrast, Lopez argues § 911 and its comment h are inapplicable because
they only “pertain[] to suits resulting from fraud or duress or involving mitigation of
damages.” That argument has some force because the first sentence of comment h states:
“The measure of recovery of a person who sues for the value of his services tortiously
obtained by the defendant’s fraud or duress, or for the value of services rendered in an
attempt to mitigate damages, is the reasonable exchange value of the services at the time and
place.” Arguably the balance of comment h, including the portion on which Safeway relies,
refers to that limited context.7 See Bynum v. Magno, 101 P.3d 1149, 1158-60 (Haw. 2004);
Robinson v. Bates, 828 N.E.2d 657, 664-65 (Ohio App. 2005).
¶19 Lopez contends the Restatement provisions that actually apply and support
the trial court’s ruling are §§ 920A and 924. Restatement § 920A(2), adopted by our
supreme court in Taylor, 130 Ariz. at 519, 637 P.2d at 729, states: “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.” Comment b to that section, entitled “[b]enefits from collateral sources,” states:
Payments made or benefits conferred by other sources
are known as collateral-source benefits. They do not have the
effect of reducing the recovery against the defendant. The
7
As Safeway points out, a citation to Restatement § 919 appears at the end of
comment h. That section, however, relates to mitigation of damages, a scenario specifically
mentioned in the first sentence of comment h and not at issue here.
13
injured party’s net loss may have been reduced correspondingly,
and to the extent that the defendant is required to pay the total
amount there may be a double compensation for a part of the
plaintiff’s injury. But it is the position of the law that a benefit
that is directed to the injured party should not be shifted so as
to become a windfall for the tortfeasor. If the plaintiff was
himself responsible for the benefit, as by maintaining his own
insurance or by making advantageous employment
arrangements, the law allows him to keep it for himself. If the
benefit was a gift to the plaintiff from a third party or
established for him by law, he should not be deprived of the
advantage that it confers. The law does not differentiate
between the nature of the benefits, so long as they did not come
from the defendant or a person acting for him. One way of
stating this conclusion is to say that it is the tortfeasor’s
responsibility to compensate for all harm that he causes, not
confined to the net loss that the injured party receives.
¶20 Similarly, Restatement § 924, which is entitled “Harm to the Person” and
found under the topic heading of “Compensatory Damages for Specific Types of Harm,”
provides that a tort victim may recover damages for “reasonable medical and other
expenses.”8 Much like the collateral source rule, comment f to § 924 states in part:
The injured person is entitled to damages for all expenses
and for the value of services reasonably made necessary by the
harm. . . . The value of medical services made necessary by the
tort can ordinarily be recovered although they have created no
liability or expense to the injured person, as when a physician
donates his services. (See § 920A).
8
Consistent with that provision, the trial court instructed the jurors that if they found
Safeway liable, they should “decide the full amount of money that will reasonably and fairly
compensate” Lopez for her damages, including “reasonable expenses of necessary medical
care, treatment, and services rendered.”
14
See also Am. Jur. 2d Damages § 396, at 358 (2003) (generally, “a plaintiff who has been
injured by the tortious conduct of the defendant is entitled to recover the reasonable value
of medical and nursing services reasonably required by the injury,” and “recovery is not
necessarily limited to expenditures actually made or obligations incurred for medical care”).
¶21 In our view, although these various Restatement provisions overlap and
arguably conflict, Restatement §§ 920A and 924 are more specific and directly applicable
to the issue presented here. Cf. City of Phoenix v. Superior Court, 139 Ariz. 175, 178, 677
P.2d 1283, 1286 (1984) (“special or specific statutory provisions will usually control over
those that are general”). In fact, several courts have recognized that those Restatement
sections, rather than § 911, are applicable to cases such as this. See, e.g., Bynum, 101 P.3d
at 1159-60; Robinson, 828 N.E.2d at 664-65; see also Amlotte v. United States, 292
F. Supp. 2d 922, 927-28 (E.D. Mich. 2003); Fye v. Kennedy, 991 S.W.2d 754, 763 (Tenn.
App. 1998); Koffman v. Leichtfuss, 630 N.W.2d 201, 209-10 (Wis. 2001). But, to the
extent § 911 and its comment h support Safeway’s position, we decline to follow them. See
Ramirez v. Health Partners of S. Ariz., 193 Ariz. 325, ¶ 26, 972 P.2d 658, 665 (App. 1998)
(although Arizona courts generally follow Restatement if no controlling statute or case on
the subject exists, “we will not do so blindly,” but rather, “must consider whether the
Restatement position, as applied to a particular claim, is logical, furthers the interests of
justice, is consistent with Arizona law and policy, and has been generally acknowledged
elsewhere”).
15
¶22 The parties also rely on several out-of-state cases to support their respective
positions. Safeway relies primarily on Moorhead v. Crozer Chester Medical Center, 765
A.2d 786 (Pa. 2001), and Hanif v. Housing Authority, 246 Cal. Rptr. 192 (Cal. App.
1988). In Moorhead, “[t]he fair and reasonable value of the medical services rendered” to
the patient was approximately $108,668, but the Medicare allowance for those services was
only $12,167. 765 A.2d at 788. Plaintiffs sought recovery of the full $108,668, even
though, as the Pennsylvania Supreme Court noted, she “never was and never will be legally
obligated to pay more than $12,167.40 for the medical services.” Id. That court concluded
plaintiff was only “entitled to the amount actually paid,” and therefore could not collect the
additional amount of approximately $96,500. Id. at 789. In so ruling, the court relied in
part on Restatement § 911, comment h, and stated:
[W]here, as here, the exact amount of expenses has been
established by contract and those expenses have been satisfied,
there is no longer any issue as to the amount of expenses for
which the plaintiff will be liable. In the latter case, the injured
party should be limited to recovering the amount paid for the
medical services . . . .
....
Awarding [plaintiff] the additional amount of $96,500.91
would provide her with a windfall and would violate
fundamental tenets of just compensation. It is a basic principle
of tort law that “damages are to be compensatory to the full
extent of the injury sustained, but the award should be limited
to compensation and compensation alone.” [Plaintiff] never
has, and never will, incur the $96,500.91 sum from [defendant]
as an expense. We discern no principled basis upon which to
justify awarding that additional amount.
16
....
Clearly, [plaintiff] is entitled to recover $12,167.40, the
amount which was paid on her behalf by Medicare and Blue
Cross, the collateral sources. But the essential point to
recognize is that [defendant] is not seeking to diminish
[plaintiff’s] recovery by this amount. Rather, the issue is
whether [plaintiff] is entitled to collect the additional amount
of $96,500.91 as an expense. [Plaintiff] did not pay
$96,500.91, nor did Medicare or Blue Cross pay that amount
on her behalf. The collateral source rule does not apply to the
illusory “charge” of $96,500.91 since that amount was not paid
by any collateral source.
Id. at 789-91 (citations omitted).
¶23 Applying similar reasoning, the California Court of Appeals previously
concluded in Hanif that the proper measure of damages is the amount actually paid for
medical services pursuant to a contractually agreed-upon rate, rather than the face amount
of original billings. As that court stated:
The question here involves the application of that measure, i.e.,
whether the “reasonable value” measure of recovery means that
an injured plaintiff may recover from the tortfeasor more than
the actual amount he paid or for which he incurred liability for
past medical care and services. Fundamental principles
underlying recovery of compensatory damages in tort actions
compel the following answer: no.
Hanif, 246 Cal. Rptr. at 194-95; see also Nishihama v. City and County of San Francisco,
112 Cal. Rptr. 2d 861, 866-67 (Cal. App. 2001).
17
¶24 But, as Lopez points out, those cases represent a distinct minority view and
have not been followed by other courts.9 A majority of courts have concluded, contrary to
Moorhead and Hanif, that plaintiffs are entitled to claim and recover the full amount of
reasonable medical expenses charged, based on the reasonable value of medical services
rendered, including amounts written off from the bills pursuant to contractual rate
reductions. See, e.g., Lindholm v. Hassan, 369 F. Supp. 2d 1104, 1110 (D.S.D. 2005);
Mitchell v. Haldar, 883 A.2d 32, 40 (Del. 2005); Hardi v. Mezzanotte, 818 A.2d 974, 985
(D.C. 2003); Olariu v. Marrero, 549 S.E.2d 121, 123 (Ga. Ct. App. 2001); Bynum, 101
P.3d at 1160-62; Arthur v. Catour, 803 N.E.2d 647, 650 (Ill. App. 2004); Bozeman v.
Louisiana, 879 So. 2d 692, 705-06 (La. 2004); Wal-Mart Stores, Inc. v. Frierson, 818
So. 2d 1135, 1139-40 (Miss. 2002); Brown v. Van Noy, 879 S.W.2d 667, 676 (Mo. App.
1994); Robinson, 828 N.E.2d at 673; Haselden v. Davis, 579 S.E.2d 293, 294 (S.C. 2003);
Acuar v. Letourneau, 531 S.E.2d 316, 322 (Va. 2000); Koffman, 630 N.W.2d at 208.
¶25 These courts have decided that, for purposes of the collateral source rule, no
rational distinction exists between payments made by an insurance carrier on behalf of an
9
In addition, as Professor Dobbs has observed: “If confined to their facts, both [Hanif
and Moorhead ] could be interpreted narrowly. Hanif involved a Medi-Cal (Medicaid)
public assistance plaintiff and might be limited to such cases.” 2 Dan B. Dobbs, The Law
of Torts, § 380 (Supp. 2005), at 134 n.23.25. And, he notes, in Moorhead “the tortfeasor
and the health care provider were in fact the same.” Id. at 134 n.23.35; see also Hardi v.
Mezzanotte, 818 A.2d 974, 985 (D.C. 2003) (“[r]egardless of any broad language in the
opinion in Moorhead, that case involved medical services provided by the tortfeasor itself
so that an application of the collateral source rule would have required, in effect, double
payment”).
18
injured plaintiff, see Brown, 879 S.W.2d at 676; a healthcare provider’s acceptance of
reduced payments from health maintenance organizations (HMOs) and government payors,
see Mitchell, 883 A.2d at 40; or a provider’s write-off of portions of billed charges to
patients pursuant to contractual relationships with HMOs or government payors. See Acuar,
531 S.E.2d at 322.10 Illustrative of this view is Acuar, in which the Virginia Supreme Court
stated:
[Defendant] contends that the collateral source rule is not
applicable to the present case because [plaintiff] is not, and
never will be, legally obligated to pay those portions of his
medical bills that were written off, nor were those amounts paid
on his behalf. According to [defendant], the amounts written
off by health care providers are not benefits derived from a
collateral source, and to allow [plaintiff] to recover such
amounts as damages in this tort action would create a double
recovery or windfall in his favor.
....
. . . That argument overlooks the fundamental purpose of
the [collateral source] rule, explained above, to prevent a
tortfeasor from deriving any benefit from compensation or
indemnity that an injured party has received from a collateral
source. In other words, the focal point of the collateral source
rule is not whether an injured party has “incurred” certain
medical expenses. Rather, it is whether a tort victim has
received benefits from a collateral source that cannot be used to
reduce the amount of damages owed by a tortfeasor.
In addition, as noted in ¶ 15, supra, “a plaintiff could recover from a tortfeasor for
10
the reasonable value of medical services provided even if those services were provided
gratuitously.” Mitchell v. Haldar, 883 A.2d 32, 38 (Del. 2005). Safeway does not explain
how that type of “gift” scenario, in which a claimant can recover for charges never incurred
or even billed, differs in any material way from the situation presented here.
19
[Plaintiff] is entitled to seek full compensation from
[defendant]. Based on the cases cited above dealing with the
collateral source rule, we conclude that [defendant] cannot
deduct from that full compensation any part of the benefits
[plaintiff] received from his contractual arrangement with his
health insurance carrier, whether those benefits took the form
of medical expense payments or amounts written off because of
agreements between his health insurance carrier and his health
care providers. Those amounts written off are as much of a
benefit for which [plaintiff] paid consideration as are the actual
cash payments made by his health insurance carrier to the
health care providers. The portions of medical expenses that
health care providers write off constitute “compensation or
indemnity received by a tort victim from a source collateral to
the tortfeasor . . . .”
This conclusion is consistent with the purpose of
compensatory damages, which is to make a tort victim whole.
However, the injured party should be made whole by the
tortfeasor, not by a combination of compensation from the
tortfeasor and collateral sources. The wrongdoer cannot reap
the benefit of a contract for which the wrongdoer paid no
compensation. The extent of [defendant’s] liability to [plaintiff]
cannot be “measured by deducting financial benefits received by
[plaintiff] from collateral sources.” In other words, “it is the
tortfeasor’s responsibility to compensate for all harm that he [or
she] causes, not confined to the net loss that the injured party
receives.” Restatement (Second) of Torts § 920A cmt. b
(1977).
To the extent that such a result provides a windfall to the
injured party, we have previously recognized that consequence
and concluded that the victim of the wrong rather than the
wrongdoer should receive the windfall.
531 S.E.2d at 321-23 (citations omitted); see also Radvany v. Davis, 551 S.E.2d 347, 348
(Va. 2001) (“Payments made to a medical provider by an insurance carrier on behalf of an
insured and amounts accepted by medical providers are one and the same. Regardless of
20
the label used, they are payments made by a collateral source and, thus, are not admissible
in evidence for that reason.”).
¶26 We find the reasoning in Acuar sound and consistent with Arizona’s broad
application of the collateral source rule and the clear majority view.11 Therefore, we hold
that Lopez was entitled to claim and recover the full amount of her reasonable medical
expenses for which she was charged, without any reduction for the amounts apparently
written off by her healthcare providers pursuant to contractually agreed-upon rates with her
medical insurance carriers. As this court has stated, the collateral source rule
is an attempt to resolve a basic conflict between two guiding
principles of tort law, namely, (1) the limitation of
compensation to the injured party to the amount necessary to
make him whole and (2) the avoidance of a windfall to the
11
Recognizing that majority view, Professor Dobbs states:
Because the provider who writes off the balance usually
does so in compliance with terms of a contract with the insurer
or Medicare, it is possible to conceptualize the write-off as a
collateral source benefit paid for by way of the insurer’s
contractual agreement with the provider. Alternatively, some
courts have said that whether or not the write-off is a true
collateral source situation, the rationale and policy behind the
collateral source rules, statutory or common law, apply. . . . In
line with the basic measure of damages—the reasonable value
of the medical services rendered—most courts passing on the
issue in recent years have made rulings that permit the plaintiff
to prove all of the reasonable medical charges, even though
some of those charges were waived by the provider.
2 Dan B. Dobbs, The Law of Torts, § 380 (Supp. 2005), at 132-33.
21
tortfeasor if a choice must be made between him and the injured
party.
Hall, 119 Ariz. at 74, 579 P.2d at 578; see also Mitchell, 883 A.2d at 38. “‘Because the
law must sanction one windfall and deny the other, it favors the victim of the wrong rather
than the wrongdoer.’” Acuar, 531 S.E.2d at 323, quoting Schickling v. Aspinall, 369
S.E.2d 172, 174 (Va. 1988).
¶27 This court has recognized, however, that “commentators have generally
opposed the rule.” Hall, 119 Ariz. at 74 n.1, 579 P.2d at 578 n.1 (citing articles); see also
Eastin v. Broomfield, 116 Ariz. 576, 583, 570 P.2d 744, 751 (1977) (“The validity of these
rationales [in support of the collateral source rule] has been questioned by commentators
. . . . In a day of increased insurance protection, this rule has allowed plaintiffs to effectuate
double and even triple recovery as a result of injuries received by them.”); 2 Dan B. Dobbs,
Law of Remedies, § 8.6(3), at 496 (2d ed. 1993) (“[I]f the collateral source rule were
abolished, the plaintiff will have paid for security and not for the opportunity of a double
recovery. He has paid for more only because the law, by allowing double recovery, in effect
requires him to pay for more.”); 2 Dan B. Dobbs, The Law of Torts, § 380, at 1059 (2001)
(“Considering the matter prospectively rather than after the fact, it may well be that
compensation could be more cheaply secured without the collateral source rule.”).
¶28 We also recognize that the legislature is free to limit or abandon the collateral
source rule in various areas, as it did in the medical malpractice arena. See A.R.S. § 12-565
(permitting medical malpractice defendant to introduce evidence of collateral source
22
payments, which the trier then may consider in assessing damages); see also Eastin, 116
Ariz. at 584, 570 P.2d at 752 (upholding constitutionality of § 12-565 and stating, “[w]e
believe that the legislature has the right to abolish the collateral source rule as it affects
medical malpractice cases just as it has done in the workmen’s compensation field”); Goble
v. Frohman, 901 So. 2d 830, 833 (Fla. 2005) (contractual discounts, representing difference
between amounts billed by claimant’s healthcare providers and amounts paid to them
pursuant to fee schedules in contracts between healthcare providers and HMO, fit within
statutory definition of “collateral sources”; therefore, amount of contractual discounts, for
which no right of reimbursement or subrogation existed, was amount that should be set off
against award of compensatory damages to plaintiff). But, absent any such limiting statute
or supreme court authority suggesting that the collateral source rule does not control in a
situation such as that presented here, we join with the majority of courts in finding it
applicable.
III
¶29 In sum, the trial court did not err in denying Safeway’s pretrial motion in
limine. Likewise, the court did not abuse its discretion in denying Safeway’s motion for new
trial, which re-urged the same argument made in its pretrial motion. See Larsen v. Decker,
196 Ariz. 239, ¶ 27, 995 P.2d 281, 286 (App. 2000) (we review denial of motion for new
trial for manifest abuse of discretion). Therefore, the trial court’s judgment and its order
denying the motion for new trial are affirmed.
23
____________________________________
JOHN PELANDER, Chief Judge
CONCURRING:
____________________________________
PHILIP G. ESPINOSA, Presiding Judge
____________________________________
WILLIAM E. DRUKE, Judge*
*A retired judge of the Arizona Court of Appeals authorized and assigned to sit as a judge
on the Court of Appeals, Division Two, pursuant to Arizona Supreme Court Order filed
December 6, 2005.
24