Eddie Hoffman v. 21st Century North America Insurance Company and Carolyn Elzy ( 2015 )

Supreme Court of Louisiana
FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #048
FROM: CLERK OF SUPREME COURT OF LOUISIANA
The Opinion handed down on the 2nd day of October, 2015, is as follows:
BY GUIDRY, J.:
2014-C -2279 EDDIE HOFFMAN v. 21ST CENTURY NORTH AMERICA INSURANCE COMPANY AND
CAROLYN ELZY (Parish of E. Baton Rouge)
For the reasons set forth above, we hold that an attorney-
negotiated medical discount or “write-off” is not a payment or
benefit that falls within the ambit of the collateral source
rule. Accordingly, we affirm the judgments of the lower courts.
AFFIRMED
CLARK, J., concurring.
10/02/15
SUPREME COURT OF LOUISIANA
NO. 2014-C-2279
EDDIE HOFFMAN
VERSUS
21ST CENTURY NORTH AMERICA INSURANCE COMPANY
AND CAROLYN ELZY
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
FIRST CIRCUIT, PARISH OF EAST BATON ROUGE
GUIDRY, Justice
We are presented with a question of first impression as to whether a write-
off from a medical provider, negotiated by the plaintiff‟s attorney, may be
considered a collateral source from which the tortfeasor receives no set-off.
Applying Louisiana law and the principles set forth in our Civil Code, we find that
such a write-off does not fall within the scope of the collateral source rule. For the
reasons set forth below, we affirm the lower courts‟ rulings.
FACTS and PROCEDURAL HISTORY
Eddie Hoffman was injured in October 2010, when his vehicle was rear-
ended by a vehicle driven by Carolyn Elzy. The accident occurred at or near the
intersection of Old Hammond Highway and Sharp Road in Baton Rouge,
Louisiana. Mr. Hoffman filed suit against Ms. Elzy and her insurer, 21 st Century
North America Insurance Company (“Century”), for damages allegedly resulting
from the accident.
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A bench trial was conducted in September 2012 on the issue of liability and
damages. At trial, the only witnesses were Mr. Hoffman and Ms. Elzy. The
evidence introduced at trial consisted of Mr. Hoffman‟s medical records, the
deposition transcript of the responding law enforcement officer, photographs of
both vehicles involved, and Century‟s insurance policy. At the conclusion of trial,
the court ruled in favor of Mr. Hoffman as to the issue of liability. It found Ms.
Elzy one-hundred percent (100%) at fault for the accident. The trial court awarded
Mr. Hoffman $4,500.00 in general damages and $2,478.00 for special medical
expenses for a total award of $6,978.00.
Mr. Hoffman appealed the verdict alleging inter alia that the award for
special damages was erroneous. With regard to special damages, Mr. Hoffman
asserted the trial court erred in awarding only $2,478.00 for past medical expenses
even though Mr. Hoffman had presented evidence of $4,528.00 in past medical
expenses. The appellate court affirmed the verdict of the trial court in all respects.
On rehearing, the appellate court affirmed its previous decision, reasoning the trial
court had been presented with two conflicting medical bills and its choice between
them was not manifestly erroneous.
At issue before this court, therefore, is the award for past medical expenses
of $2,478.00, even though Mr. Hoffman submitted bills totaling $4,528.00.
Specifically, Mr. Hoffman argues the requested medical expenses included charges
for two MRIs, each for $1,500.00 (a total of $3,000.00). At trial, Mr. Hoffman
introduced a medical statement for $3,000.00 from the imaging center. However,
Mr. Hoffman was awarded a total of $950.00 ($475.00 for each MRI) based upon a
medical statement from the imaging center introduced by the defendant that
showed charges totaling $3,000.00, $950.00 in payments from the attorney, and a
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bill “ajust [sic]” in the amount of $2050.00. The itemized portion of the statement
indicated an “ATT W/O” of $1025.00 for each MRI. The trial court noted that
plaintiff‟s attorney had “an arrangement” with the medical provider. Mr. Hoffman
contends, under the collateral source rule, he is entitled to the total billed amount,
including the portion of the bill that was “adjusted,” or “written-off,” and his
recovery is not limited to merely the portion actually paid. We granted certiorari to
determine the res nova issue of whether the collateral source rule applies to the
“written-off” portion of a medical bill when the plaintiff‟s attorney negotiated the
discount.
LAW
Under the collateral source rule, a tortfeasor may not benefit, and an injured
plaintiff‟s tort recovery may not be reduced, because of monies received by the
plaintiff from sources independent of the tortfeasor‟s procuration or contribution.
Louisiana Dep’t of Transp. & Dev. v. Kansas City S. Ry. Co., 02-2349 p. 6 (La.
5/20/03), 846 So.2d 734, 739. Under this doctrine, any payments received by the
plaintiff from an independent source are not deducted from the award the injured
party would otherwise receive from the wrongdoer. Id. In short, the tortfeasor is
not allowed to benefit from the victim‟s foresight in purchasing insurance and
other benefits. Bozeman v. State, 03-1016 p. 9 (La. 7/2/04), 879 So.2d 692, 698.
The collateral source rule can be traced back to its common law roots. The
Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152, 15 L.Ed. 68 (1854).
Two ships (the Propeller Monticello and Northwestern) were involved in a wreck,
causing the Northwestern to sink. The Northwestern, however, was insured and the
insurance paid for the loss of the ship and its cargo. The Supreme Court was
presented with the issue of whether the owner of the other ship was released from
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liability because of the insurance payment. The court held the “contract with the
insurer is in the nature of a wager between third parties, with which the trespasser
has no concern. The insurer does not stand in the relation of a joint trespasser, so
that satisfaction accepted from him shall be a release of others.” Id.Even though originating as a common law doctrine, the collateral source rule
has been recognized under the jurisprudence of this state. See Bozeman, pp. 8-11,
879 So.2d at 697-99. Though many other states have enacted legislation governing
the application of the collateral source rule within those jurisdictions, the rule has
not been altered statutorily in Louisiana. Kansas City. S. Ry., p. 7, 846 So.2d at
739. In Kansas City S. Ry., this court cited the Restatement (Second) of Torts §
920A (1979), which states:
(1) A payment made by a tortfeasor or by a person acting for him to a person
whom he has injured is credited against his tort liability, as are payments
made by another who is, or believes he is, subject to the same tort liability.
(2) 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.
We have explained that the rule serves several public policy purposes. The most
oft-cited reason is that the tortfeasor should not gain an advantage from outside
benefits provided to the victim independently of any act of the tortfeasor. Kansas
City S. Ry., p. 7, 846 So.2d at 739. We have also recognized the collateral source
rule promotes tort deterrence and accident prevention. Id. Finally, absent such a
rule, the reasoning goes, victims would be dissuaded from purchasing insurance or
other forms of reimbursement available to them. Id.
While the collateral source rule has been applied in a variety of
circumstances, it most typically has been applied in tort cases involving insurance
payments and other benefits. Bozeman, 03-1016, p. 9, 879 So.2d at 698. As we
explained in Bellard v. American Cent. Ins. Co, 07-1335, p. 19, 980 So.2d 654,
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668, the courts have struggled with the question of double recovery or windfall that
might arise as a consequence of the victim‟s receipt of an outside payment.
“Double recovery would be in the nature of exemplary or punitive damages, which
are not allowable under Louisiana law unless expressly provided by statute.”
Gagnard v. Baldridge, 612 So.2d 732, 736 (La. 1993). 1 The purpose of tort
damages, we noted in Bellard, is to make the victim whole, and such a purpose is
thwarted, and the law is violated, when the victim is allowed to recover the same
element of damages twice. Id. This court in Bozeman resolved the question to find
that no “windfall” or “double–dipping” will occur when “the injured party‟s
patrimony was diminished to the extent that he was forced to recover against
outside sources and the diminution of patrimony was additional damage suffered
by him.” Bellard, p. 19, 980 So.2d at 668 (quoting Bozeman, p. 10, 879 So.2d at
699)(emphasis in original).
In Bozeman, the issue before us was whether the collateral source rule
applies to medical expenses “written off” or contractually adjusted by healthcare
providers pursuant to the federal Medicaid program, under which no consideration
is provided by the recipient for the receipt of Medicaid benefits. Bellard, p. 20, 980
So.2d at 668-69. The Bozeman court held Medicaid recipients may not collect the
Medicaid “write-offs” as damages, because no consideration was given for the
benefit. 03-1016, p. 22, 879 So.2d at 705-06. Ultimately, “in holding the
Medicaid recipient is unable to collect the Medicaid „write-off‟ as damages, [in
Bozeman] we rejected a traditional application of the collateral source rule in favor
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We explained in Mosing v Dumas, 02-0012, pp. 8-9 (La. 10/15/02), 830 So.2d 967, 973:
“Exemplary damages in Louisiana reflect „a principle that has been borrowed
from the common law, and, though tacitly and sometimes expressly recognized in
our decisions, it is really an exotic in our system.‟ Dirmeyer v. O'Hern, 39
La.Ann. 961, 964, 3 So. 132 (1887) (vacated on other grounds). Under Louisiana
law, exemplary or other „penalty‟ damages are not allowable unless expressly
authorized by statute. International Harvester Credit v. Seale, 518 So.2d 1039,
1041 (La.1988).”
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of a rule more narrowly tailored to better conform with the compensatory goal of
tort recovery.” Id. That goal of Louisiana tort recovery is set forth in Louisiana
Civil Code article 2315: “Every act whatever of man that causes damage to another
obliges him by whose fault it happened to repair it.” Thus, in both Bozeman and
Bellard, we emphasized a fundamental consideration for application of the
collateral source rule, in addition to tort deterrence, is “whether the victim, by
having a collateral source available as a source of recovery, either paid for such
benefit or suffered some diminution in his or her patrimony because of the
availability of the benefit, such that no actual windfall or double recovery would
result from application of the rule.” Bellard, 07-1335, pp. 20-21, 980 So.2d at 669.
See also Cutsinger v. Redfern, 08-2607 (La. 5/22/09), 12 So.3d 945.
ANALYSIS
With these principles in mind, we turn to the issue of whether a plaintiff can
invoke the collateral source rule to recover for medical expense write-offs
negotiated by his attorney, without having first diminished his patrimony; an issue
of first impression for this court. Here, the plaintiff contends his entire medical bill
totaling $3,000.00 is recoverable under the collateral source rule, rather than only
the amount actually paid and accepted by the provider. We disagree, as explained
below, because we find the collateral source rule does not apply to attorney-
negotiated write-offs or discounts for medical expenses obtained as a product of
the litigation process.
On the record before us, there is no real dispute that Mr. Hoffman‟s attorney
negotiated the discount on the medical statement from the imaging center.
Although there is no specific evidence or testimony in the record regarding the
origin of the write-off, such as a contract or agreement, the notations on the
medical statement speak for themselves. Furthermore, the trial court noted on two
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occasions without objection that the plaintiff‟s attorney had an “arrangement” with
certain medical providers offering discounted medical services. Additionally, there
is no indication the plaintiff, Mr. Hoffman, incurred any expenses for this discount.
Indeed, he testified he was unaware of the write-off or whether he had paid or
given up anything in exchange for the write-off. Nevertheless, the plaintiff seeks to
extend the application of the collateral source rule beyond the typical situation
involving receipt of private insurance benefits to attorney-negotiated discounts of
medical bills under the theory that, pursuant to a contingency fee arrangement, the
plaintiff pays an attorney fee out of his recovery and this attorney fee effects a
diminution in the plaintiff‟s patrimony sufficient to support application of the
collateral source rule.
We decline to extend the collateral source rule to attorney-negotiated
medical discounts obtained through the litigation process. We hold that such a
discount is not a payment or benefit that falls within the ambit of the collateral
source rule. First, allowing the plaintiff to recover an amount for which he has not
paid, and for which he has no obligation to pay, is at cross purposes with the basic
principles of tort recovery in our Civil Code. The wrongdoer is responsible only
for the damages he or she has caused. La. Civ. Code art. 2315. The plaintiff has
suffered no diminution of his patrimony to obtain the write-off, and, therefore, the
defendant in this case cannot be held responsible for any medical bills or services
the plaintiff did not actually incur and which the plaintiff need not repay. Because
the evidence before the trial court was that Mr. Hoffman paid $950.00 for the
MRIs, he is not entitled to recover any additional amount. Any recovery above
$950.00 for the MRIs would amount to a windfall and force the defendant to
compensate the plaintiff for medical expenses the plaintiff has neither incurred nor
is obligated to pay.
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Second, we reject plaintiff‟s argument that consideration for the benefit is
given for attorney-negotiated medical discounts by virtue of the contractual
obligation of the plaintiff to pay attorney fees, albeit only in the event of a
recovery. This argument is based on the assumption that the payment of an
attorney‟s fee is additional damage suffered by the tort victim. However, “[i]t is
… well recognized in the jurisprudence of this state that as a general rule attorney
fees are not allowed except when authorized by statute or contract.” Killebrew v.
Abbott Laboratories, 359 So.2d 1275, 1278 (La. 1978). Because the tortfeasor is
not liable for, and the tort victim has no right to recover, attorney fees, the payment
of an attorney fee is not additional damage to the plaintiff‟s patrimony so as to
justify the “windfall” or “double recovery” represented by the attorney-negotiated
discount.
Third, we adopt a bright-line rule that such attorney-negotiated discounts do
not fall within the ambit of the collateral source rule because to do otherwise
would invite a variety of evidentiary and ethical dilemmas for counsel. For
example, an evidentiary hearing inquiring into the details of the attorney-client
relationship to uncover a “diminution in patrimony” resulting from the attorney-
negotiated medical discount might intrude upon the privilege surrounding the
employment contract and communications as to fee arrangements. See La. Code
Evid. Art. 506(B)(1). Additionally, a lawyer who negotiates a discount with a
medical provider and then attempts to recover the undiscounted full “cost” from
the defendant might run afoul of Rule 4.1 of the Rules of Professional Conduct,
entitled “Truthfulness in Statements to Others,” which provides in Subsection (a)
that a lawyer in the course of representing a client shall not knowingly make a false
statement of material fact to a third person.
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While state courts differ in their interpretation of when the collateral source
rule applies, and many legislatures have adopted rules governing the application of
the doctrine, we have not discovered, nor have the parties pointed to, any other
jurisprudence that has directly addressed the issue of whether attorney-negotiated
“write-offs” are recoverable under the collateral source rule. However, at least one
court has thoroughly considered whether the collateral source rule applies to
discounted medical bills and has concluded that it does not. In Howell v. Hamilton
Meats & Provisions, Inc., 52 Cal.4th 541, 548-49, 129 Cal.Rptr.3d 325, 257 P.3d
1130 (2011), the court held the collateral source rule should not expand the scope
of economic damages to include expenses the plaintiff never incurred. There, the
plaintiff‟s health care providers, pursuant to an agreement with her insurer, waived
$94,894 of the plaintiff‟s $122,841 medical bill. As such, the Howell court
explained, the plaintiff did not incur, nor was she otherwise obligated to pay, the
full charges presented on the medical bill, and therefore the collateral source rule
did not apply. Id., 52 Cal.4th at 566, 129 Cal.Rptr.3d at 343, 257 P.3d at 1145 (“an
injured plaintiff whose medical expenses are paid through private insurance may
recover as economic damages no more than the amounts paid by the plaintiff or his
or her insurer for the medical services received or still owing at the time of trial”).
CONCLUSION
In the present case, Mr. Hoffman did not incur any additional expense in
order to receive the attorney-negotiated “write-off,” nor has he suffered any
diminution in his patrimony. Therefore, he cannot receive the advantage of the
collateral source rule. Bozeman, supra. Additionally, allowing the plaintiff to
recover expenses he has not actually incurred himself, and for which he has no
obligation to pay, is contrary to Louisiana Civil Code article 2315. Because Mr.
Hoffman did not actually incur the “written-off” portion of the charges, the
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collateral source rule does not apply. We thus find the appellate court did not err in
determining that Mr. Hoffman was entitled to reimbursement of $950.00, the
actual amount paid to and accepted by the medical provider, as opposed to the
initial charged amount of $3,000.00.
DECREE
For the reasons set forth above, we hold that an attorney-negotiated medical
discount or “write-off” is not a payment or benefit that falls within the ambit of the
collateral source rule. Accordingly, we affirm the judgments of the lower courts.
AFFIRMED
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10/02/15
SUPREME COURT OF LOUISIANA
NO. 2014-C-2279
EDDIE HOFFMAN
VERSUS
21ST CENTURY NORTH AMERICA INSURANCE COMPANY
AND CAROLYN ELZY
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
FIRST CIRCUIT, PARISH OF EAST BATON ROUGE
CLARK, J., concurring
Based on the bare-bones record before us, I concur in the result.
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