United States: Louisiana Supreme Court Concludes Collateral Source Rule Does Not Apply To Medical Expenses Written Off Under Workers' Compensation

New Orleans, La. (April 23, 2020) - In Simmons v. Cornerstone Invs., LLC, 282 So.3d 199 (La. 2019), the Louisiana Supreme Court (Court) evaluated whether the lower courts had erred in prohibiting a plaintiff from introducing the full amount of medical expenses billed as well as limited evidence of the amount actually paid by the employer through workers' compensation. The Court affirmed the lower courts' holdings and concluded that the collateral source rule does not apply to amounts that were written off, because the plaintiff did not pay it and would never be obligated to pay it.

In examining the question, the Louisiana Supreme Court succinctly surveyed the development of the rule in Louisiana. The Court noted that in 2004, in Bozeman v. State, 879 So.2d 692 (La. 2004), it had evaluated whether the collateral source rule applied to medical expenses written off under the Medicaid program. Since the plaintiff in Bozeman had paid “no enrollment fee, has no wages deducted, and otherwise provides no consideration for the collateral source benefits he receives, we hold that the plaintiff is unable to recover the ‘write-off' amount.”

Next, the Court referred to its 2008 conclusion in Bellard v. Amer. Cent. Ins. Co., 980 So.2d 654 (La. 2008), holding that an employer's uninsured motorist insurer could receive a credit for the amount of workers' compensation payments to the plaintiff. In 2009, the Court concluded that the UM carrier could receive a credit for workers' compensation benefits paid by the plaintiff's employer, even though the plaintiff had paid for the UM coverage herself. Cutsinger v. Redfern, 12 So.3d 945 (La. 2009).

The Court then discussed its ruling in Hoffman v. 21st Century North American Ins. Co., 209 So.2d 702 (La. 2015), in which it went further and concluded that the collateral source rule did not apply to attorney-negotiated medical discounts. In that case, the Court focused on the fact that the discount was not an amount that the plaintiff paid or was ever obligated to pay. Allowing recovery would be contrary to the “basic principles of tort recovery” of making the plaintiff whole. Since the plaintiff had also “suffered no diminution of his patrimony to obtain the write-off,” there as nothing for the defendant to repay, or for which to make the plaintiff whole.

The Simmons Court thus concluded that the collateral source rule “exists to prevent the tortfeasor from benefitting from the victim's receipt of monies from independent sources. … Thus, it is clear that the collateral source rule is tethered to payments actually received by the plaintiff.” Notably, the Court rejected the plaintiff's argument that the plaintiff had paid consideration for workers' comp benefits by being subjected to the scheme in the first place. It stated that the connection between the employee giving up a tort claim in exchange for free medical care was too indirect and not the kind of diminution of the plaintiff's patrimony that the defendant was to compensate. Compare Lockett v. UV Ins. Risk Retention Grp., Inc., 180 So.3 557 (La.App. 5 Cir. 2015) (holding that the collateral source rule applied to medical expense write-offs that the plaintiff herself had negotiated with the healthcare provider).

Accordingly, the jury was entitled to know only the amount actually paid for medical treatment and not the write off amount, as it was a “phantom charge that Plaintiff has not ever paid nor one he will ever be obligated to pay.”

Epilogue

Also, in 2019, three different judges of the U.S. District Court for the Eastern District of Louisiana, which includes New Orleans, addressed the collateral source rule with regard to medical expense funding companies. In all three cases, a funding company had purchased the accounts receivable of at least one of plaintiff's medical providers. In the arrangement, the funding company paid the provider a discounted amount such as 40% of the total, and the provider considered the bill paid in full. The funding company in turn expected to receive the amount over 40% from the ultimate tort recovery.

In Williams v. IQS Ins. Risk Retention, 2019 U.S. Dist. LEXIS 30217 (E.D.La. 2/26/19)(J. Zainey), the plaintiff attorney had contracted with the funding company. The court concluded that the collateral source rule did not apply to the difference between what the funding company paid and the full amount of the bill, because the plaintiff did not pay for the benefit or show she suffered any diminution in her patrimony to be able to receive the benefit.

However, in DuPont v. Costco Wholesale Corp., 2019 U.S. Dist. LEXIS 197241 (E.D.La. 11/13/19)(J. Lemmon), the court found otherwise, based on factual findings that the plaintiff remained liable for the full amount of the bill, even though the obligation had transferred to the funding company. The contract there was between the healthcare provider and the funding company.

Finally, in Collins v. Benton, 2019 U.S. Dist. LEXIS 214241 (E.D.La. 12/12/19)(J. Brown), the court ordered the production of the funding company's agreement with the healthcare provider in order to determine if the collateral source rule applied to the difference between what the funding company paid and the full amount of the bill, citing Bozeman, Hoffman, and Simmons. The court also noted that the contract was admissible for the purpose of showing that the healthcare providers had an incentive to help the plaintiffs and therefore undermined their credibility.

Originally published by Lewis Brisbois, April 2020

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