Wills v. Foster

NO. 4-06-0674 Filed 4/18/07
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
SHEILA M. WILLS, PATRICK BROOKS, and ) Appeal from
JUNE WILLIAMS, ) Circuit Court of
Plaintiffs-Appellants, ) Sangamon County
v. ) No. 03L36
INMAN E. FOSTER, JR., and CHARLENE R. )
FOSTER, ) Honorable
Defendants-Appellees. ) Patrick W. Kelley,
) Judge Presiding.
JUSTICE APPLETON delivered the opinion of the court:
Plaintiff, Sheila M. Wills, seeks review of the trial
court's order reducing the jury's personal-injury award for
compensatory damages from $80,163.47 to $19,005.50. Plaintiff
claims the collateral-source rule applies and entitles her to the
recovery of the amount of medical expenses billed, not the amount
of medical expenses actually paid at a discounted rate. Defen-
dant Inman E. Foster, Jr., the tortfeasor, argues the collateral-
source rule does not apply to this case because the medical
expenses were paid through Medicare or Medicaid, which provides
health benefits to certain needy individuals. Plaintiff did not
incur liability for her medical expenses, did not bargain for her
coverage, and did not pay any premiums as part of a contractual
relationship. Therefore, defendant claims the governmental
medical benefits do not qualify as a "collateral source" under
the collateral-source rule. We affirm.
I. BACKGROUND
On August 8, 2001, plaintiff and her two passengers,
coplaintiffs Patrick Brooks and June Williams, were injured in an
automobile accident. Defendant drove his vehicle, which was
allegedly owned by codefendant Charlene R. Foster, through a red
light and struck plaintiff's vehicle. (The allegations against
Charlene R. Foster were dismissed with prejudice, and Brooks and
Williams settled their claims prior to trial.) As a result of
the accident, plaintiff aggravated a preexisting condition, which
proximately caused the need to undergo a spinal-cord fusion.
Defendant's liability is not an issue on appeal.
Prior to trial, both parties filed respective motions
in limine concerning the amounts of plaintiff's medical bills
that would be presented to the jury. The amount of medical
expenses billed was $80,163.47; however, the amount actually paid
by Medicare and the medical-assistance program of the Illinois
Department of Healthcare and Family Services (DHFS or Medicaid)
on plaintiff's behalf was $19,005.50. Plaintiff sought to
introduce the evidence of her medical bills in the amount of
$80,163.47, while defendant sought to limit the evidence to the
medical bills that were actually paid in the amount of
$19,005.05. The trial court denied defendant's motion and
granted plaintiff's, allowing the jury to consider $80,163.47 as
the amount of plaintiff's medical expenses.
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On March 20, 2006, the case proceeded to a jury trial
with Judge Patrick E. Kelley presiding. Defendant stipulated to
the admission of plaintiff's exhibit, which demonstrated medical
bills totalling $80,163.47. The jury entered a verdict for
plaintiff in that amount in medical expenses and $7,500 in pain
and suffering. On April 17, 2006, defendant filed a posttrial
motion, asking the trial court to reduce the amount of the jury's
award from $80,163.77 to $19,005.50. On July 14, 2006, the
court, Judge Leo Zappa presiding, allowed defendant's motion
reducing the jury's award as requested. The court's order
provided as follows: "In the event plaintiff's medical providers
seek to recover from plaintiff the difference between the amount
shown on the ledgers and the amount paid by the Illinois Depart-
ment of Public Aid or Medicare, plaintiff may within one year
from the date of this order petition the court for a revision of
this order. The jury's award of $7,500 for pain and suffering
remains in effect." On July 25, 2006, Judge Kelley entered an
identical order. This appeal followed.
II. ANALYSIS
In her appeal, plaintiff claims the trial court erred
in failing to apply the collateral-source rule, thereby reducing
her compensatory-damages award. In support of her claim, plain-
tiff likens herself to the plaintiff in Arthur v. Catour, 216
Ill. 2d 72, 833 N.E.2d 847 (2005). In response, defendant argues
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Arthur is distinguishable and the collateral-source rule does not
apply. Because the facts are uncontroverted and the issue before
this court is the trial court's application of the law to the
facts, our review is de novo. Arthur, 216 Ill. 2d at 78, 833
N.E.2d at 851.
In Arthur, our supreme court held that the injured
plaintiff could present to the jury the amount she was initially
billed for health-care services, rather than the amount that her
private insurance company actually paid to the health-care
providers. Arthur, 216 Ill. 2d at 83, 833 N.E.2d at 854.
Through her insurer's contractual agreements with the providers,
many of the charges for health-care services were discounted.
The health-care providers accepted the discounted amounts as
payment in full. The court held that the plaintiff could present
the amount billed, but she was required to establish that amount
as a reasonable charge for the services rendered. In turn, the
defendant could counter with any evidence that the amount was not
reasonable. Arthur, 216 Ill. 2d at 83, 833 N.E.2d at 854.
In its analysis, the supreme court described the
collateral-source rule as follows: "'[B]enefits received by the
injured party from a source wholly independent of, and collateral
to, the tortfeasor will not diminish damages otherwise recover-
able from the tortfeasor.'" Arthur, 216 Ill. 2d at 78, 833
N.E.2d at 851, quoting Wilson v. Hoffman Group, Inc., 131 Ill. 2d
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308, 320, 546 N.E.2d 524, 530 (1989). "The collateral[-]source
rule protects collateral payments made to or benefits conferred
on the plaintiff by denying the defendant any corresponding
offset or credit. Such collateral benefits do not reduce the
defendant's tort liability, even though they reduce the plain-
tiff's loss." Arthur, 216 Ill. 2d at 78, 833 N.E.2d at 851.
"The rule operates to prevent the jury from learning anything
about collateral income." Arthur, 216 Ill. 2d at 79, 833 N.E.2d
at 852.
"'The justification for [the collateral-source] rule is
that the wrongdoer should not benefit from the expenditures made
by the injured party or take advantage of contracts or other
relations that may exist between the injured party and third
persons.'" Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852, quoting
Wilson, 131 Ill. 2d at 320, 546 N.E.2d at 530. The Arthur court
noted that the application of the collateral-source rule does not
prevent the plaintiff from introducing as evidence the reasonable
cost of health care necessitated by the defendant's conduct.
Arthur, 216 Ill. 2d at 80, 833 N.E.2d at 852. The plaintiff was
liable for the resulting expenses upon receipt of those services.
The fact that the insurance provider and the health-care provider
agreed to satisfy plaintiff's obligation in full by paying a
lesser amount than that billed is not of consequence. That
payment arrangement was a result of a contractual arrangement
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between the insurer and the provider, a contractual arrangement
to which the plaintiff was not privy. Arthur, 216 Ill. 2d at 81,
833 N.E.2d at 853. The effect of that arrangement resulted in
the "plaintiff receiv[ing] the benefit of her bargain with her
insurance company--full coverage for incurred medical expenses."
Arthur, 216 Ill. 2d at 81, 833 N.E.2d at 853.
We must determine whether the court's analysis and
holding in Arthur apply equally to plaintiff's case when plain-
tiff was not required to bargain for her benefits but received
them free of charge from the government based on her status.
After carefully considering the reasoning and justification
behind the court's holding, we conclude that because the benefits
conferred upon plaintiff did not result from a bargained-for
exchange with a third party who provided the benefits, the
collateral-source rule does not apply.
The collateral-source rule is an exception to the
general rule of damages preventing a double recovery by an
injured party. See Muranyi v. Turn Verein Frisch-Auf, 308 Ill.
App. 3d 213, 215, 719 N.E.2d 366, 369 (1999). Typically, how-
ever, the collateral source will have a lien or subrogation right
that prevents a double recovery. The collateral-source rule
operates as both a rule of damages and a rule of evidence.
Arthur, 216 Ill. 2d at 79-80, 833 N.E.2d at 852. As to damages,
the rule prevents any reduction of a plaintiff's recovery due to
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amounts received from third parties, which are "collateral" from
the tortfeasor. Arthur, 216 Ill. 2d at 80, 833 N.E.2d at 852.
As a rule of evidence, it prevents juries from learning anything
about collateral income that could affect their assessment of
damages. Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852. The
rationale for the rule is that the defendant should not be
allowed to benefit from the plaintiff's foresight in acquiring
insurance. Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852.
Another purpose of the collateral-source rule is to
serve as a deterrent to a tortfeasor. Restatement (Second) of
Torts §901(c) (1979). The defendant should not benefit from his
wrongful act by being allowed to pay a lesser amount of damages
than he has caused. Logically, if such is allowed, the deterrent
effect will be diminished. In this vein, it follows that a
tortfeasor should not get a break if he harms a needy person
whose medical bills were paid by Medicaid.
Although the Arthur court held that a plaintiff may
present evidence of prediscounted medical bills, it did so in the
context of a plaintiff with a contractual arrangement with a
private insurance company. The court did not reassess or even
discuss its previous decision in Peterson v. Lou Bachrodt Chevro-
let Co., 76 Ill. 2d 353, 363, 392 N.E.2d 1, 5 (1979), where the
court forbade recovery when the plaintiff had not incurred any
liability. In effect, the Arthur holding created what seemed to
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be a windfall in favor of the plaintiff. We discern that the
primary reason for such a holding was the existence of the
insurance contract. This would explain the justification for
allowing an apparent windfall for the plaintiff--a concept that
had been earlier rejected in Peterson. See Peterson, 76 Ill. 2d
at 363, 392 N.E.2d at 5-6. Perhaps the Arthur court presumed the
insurance company would enforce a subrogation lien.
Because the Arthur court did not specifically overrule
Peterson, we must continue to follow Peterson as it is the case
more factually similar to the case sub judice. In Peterson, the
plaintiffs sued an automobile dealer after the plaintiff's
daughter was killed and his son was injured in an accident,
allegedly caused by a defective braking system in a used car sold
by the dealer to a third party. The court addressed the issue of
whether the plaintiff could recover the value of free medical
services rendered by the Shriners' Hospital for Crippled Children
in performing surgery on the plaintiff's son's leg. Relying on
the court's decision in Jones & Adams Co. v. George, 227 Ill. 64,
69, 81 N.E. 4, 6 (1907), which held that a plaintiff could not
recover for the value of nursing services rendered by the plain-
tiff's family, the Peterson court held that "[a]n individual is
not entitled to recover for the value of services that he has
obtained without expense, obligation, or liabililty." Peterson,
76 Ill. 2d at 362, 392 N.E.2d at 5.
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The court found that "the policy behind the collateral-
source rule simply is not applicable if the plaintiff has in-
curred no expense, obligation, or liability in obtaining the
services for which he seeks compensation." Peterson, 76 Ill. 2d
at 362, 392 N.E.2d at 5. The court noted that the justification
for the rule was the ideal that the "'wrongdoer should not
benefit from the expenditures made by the injured party in
procuring insurance coverage.'" (Emphasis in original.) Peter-
son, 76 Ill. 2d at 362-63, 392 N.E.2d at 5, quoting 22 Am. Jur.
2d Damages §210, at 293-94 (1965). Without an expenditure,
liability, or obligation on the plaintiff's part, application of
the rule was not justified. The court refused to apply the rule,
noting that the purpose of compensatory damages was to compen-
sate, not to punish the defendant or to create a windfall in the
plaintiff's favor. Peterson, 76 Ill. 2d at 363, 392 N.E.2d at 5.
Although this issue is a matter of first impression in
Illinois, other states have considered whether Medicare benefits
are an acceptable collateral source to come within the purview of
the rule. For example, Florida and Idaho have held that Medicare
benefits are not a collateral source and not recoverable because
the plaintiff never became liable and the federal government has
no right to reimbursement. See Cooperative Leasing, Inc. v.
Johnson, 872 So. 2d 956, 960 (Fla. Dist. App. 2004); Dyet v.
McKinley, 139 Idaho 526, 529, 81 P.3d 1236, 1239 (2003).
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However, several states have held otherwise. South
Carolina, Mississippi, Wisconsin, North Carolina, and Hawaii, for
example, have held that Medicaid payments are subject to the
collateral-source rule. These courts have included gratuitous
services in the rule's protection, reasoning that tortfeasors
should be liable for the value of medical services, rather than
the cost. See Haselden v. Davis, 353 S.C. 481, 483, 579 S.E.2d
293, 294 (2003); Brandon HMA, Inc. v. Bradshaw, 809 So. 2d 611,
619 (Miss. 2001); Ellsworth v. Schelbrock, 235 Wis. 2d 678, 685,
611 N.W.2d 764, 767 (2000); Cates v. Wilson, 321 N.C. 1, 6, 361
S.E.2d 734, 738 (1987); Bynum v. Magno, 106 Haw. 81, 88, 101 P.3d
1149, 1156 (2004).
With our supreme court's decision in Peterson, it
appears Illinois has aligned itself with the former set of cases
and intends to exclude Medicaid and Medicare payments as "collat-
eral sources" within the meaning of the rule. Akin to the
plaintiff in Peterson, those individuals, like plaintiff here,
covered by Medicaid or Medicare do not make "expenditures" and
have not bargained for their coverage. A covered plaintiff's
liability is nonexistent as well because by accepting payments
from DHFS, Medicare, or Medicaid, health-care providers have
agreed such payments constitute full satisfaction of their fees.
See 305 ILCS 5/11-13 (West 2004); 89 Ill. Adm. Code §140.12(i),
as amended by 24 Ill. Reg. 18320 (eff. December 1, 2000). We
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therefore hold that plaintiff is precluded from recovering the
billed amounts and is limited to recovery of those amounts paid
by DHFS and Medicare.
We affirm the trial court's order reducing plaintiff's
compensatory damages for medical expenses to $19,005.50, reflect-
ing the amount paid by DHFS and Medicare to the health-care
providers on plaintiff's behalf.
Affirmed.
TURNER, J., concurs.
COOK, J., dissents.
JUSTICE COOK, dissenting:
I respectfully dissent and would reverse.
I disagree that Peterson prohibits application of the
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collateral-source rule when the plaintiff's medical expenses were
paid through Medicare or Medicaid. Peterson addressed whether a
plaintiff could recover the value of medical services provided
gratuitously by a philanthropic third party. In this case, the
government paid the plaintiff's medical expenses because the
plaintiff presumably could not afford private insurance. Consid-
ering the drastic changes in the health-insurance industry since
Peterson was decided in 1979, this court should not extend the
reasoning of the more than 25-year-old case.
Rising health-insurance costs have forced more people
to rely on the government to cover health expenses. The outcome
of the majority's decision is Medicare and Medicaid recipients,
who lack the funds to acquire insurance, are placed at a disad-
vantage from those who are financially able to secure insurance.
A plaintiff who can afford private insurance is unquestionably
allowed a double recovery and may even receive more than what his
insurance provider actually paid. See Arthur, 216 Ill. 2d 72,
833 N.E.2d 847. Further, our decision provides a benefit to the
wrongdoer who injures an aid recipient because a tortfeasor who
happens to injure such a plaintiff does not have to pay for the
injuries that he caused.
The majority finds that Arthur should not apply in this
case. In Arthur, our supreme court focused on whether the
plaintiff could establish the reasonable charge for services
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rendered even if that meant recovering more than her insurer
actually paid. The court in Arthur noted that part of the
justification for the collateral-source rule is that the "'wrong-
doer should not *** take advantage of contracts or other rela-
tions that may exist between the injured party and third per-
sons.'" Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852, quoting
Wilson, 131 Ill. 2d at 320, 546 N.E.2d at 530. The majority's
decision allows the tortfeasor to take advantage of the relation
between the aid recipient and the government simply because the
injured recipient cannot afford to acquire or bargain for insur-
ance. A tortfeasor would be required to pay an injured plain-
tiff's medical expenses if that plaintiff is obliged to pay all
of his expenses on his own. The tortfeasor should not be excused
from paying simply because the government pays the needy plain-
tiff's medical expenses. When a windfall is inevitable, should
the wrongdoer or the innocent and needy plaintiff receive that
windfall?
Because Arthur did not specifically overrule Peterson,
the majority finds that we must continue to follow Peterson. In
Peterson, though, the court addressed a case where an outside
source generously agreed to provide medical service without cost.
A Medicare or Medicaid recipient is not the lucky receiver of the
generosity of some benevolent third party, but rather a needy
person who did not have the ability or resources to acquire
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private insurance. When our supreme court in Peterson decided to
exclude gratuities from the operation of the collateral-source
rule, Illinois became one of only a few jurisdictions to apply
such a limit. See Arthur, 216 Ill. 2d at 91, 833 N.E.2d at 858-
59 (McMorrow, C.J., dissenting). While Arthur did not reassess
its decision in Peterson, the court refused to further limit the
operation of the collateral-source rule, suggesting the court's
movement away from extending the limit any further beyond the
exclusion of gratuities. This court should not now extend
Peterson to further limit the collateral-source rule to exclude
Medicaid and Medicare recipients.
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