Plaintiff's Motion to Exclude Collateral Source Evidence
XXXXXXXXXX ' IN THE COUNTY COURT
VS. ' AT LAW
CXXXXXXXXXX ' OF SMITH COUNTY, TEXAS
PLAINTIFF = S MOTION TO EXCLUDE
COLLATERAL SOURCE EVIDENCE
Comes now Plaintiff, and files this Motion to Exclude Collateral Source Evidence, and pursuant thereto moves the Court for an Order in Limine, prohibiting opposing counsel, Defendant, and witnesses called on behalf of Defendant from mentioning, directly or indirectly, the existence of collateral sources, and would respectfully show the Court as follows.
Defendant may attempt in voir dire, opening statement, through offer of testimony and exhibits, and in final argument, to offer information that discloses the fact that some of Plaintiff=s medical bills have been paid by a third-party private health insurer. Plaintiff moves this Court to prevent Defendant from violating the long-standing collateral source rule by mentioning the existence of health insurance payments. Permitting information concerning any collateral source payments made on any of Plaintiff=s medical bills is in contravention of the collateral source rule, and will unfairly and irreparably prejudice Plaintiff and confuse the jury. Even sustaining objections to such questions, testimony, or documents will not prevent prejudice, but will reinforce the development of questionable evidence.
THE COLLATERAL SOURCE RULE
The judicially created Acollateral source rule@ is both a rule of evidence as well as a rule of damages. Taylor v. American Fabritech, Inc., 132 S.W.3d 613 (Tex. App. B Houston [14th Dist.] 2004). As a rule of evidence, it precludes the introduction of evidence that some of the plaintiff=s damages have been paid by a collateral source. The rationale for such a rule is much like the reasons supporting Texas Rule of Evidence 411 precluding introduction of liability insurance evidence: Whether a party has received or will receive the protection of insurance is not relevant under most circumstances.
Collateral sources include benefits from entities other than the tortfeasor such as the following:
Insurance benefits. Brown v. American transfer & Storage Co., 601 S.W.2d 931 (Tex. 1980).
Fringe benefits. McLemore v. Broussard, 670 S.W.2d 301 (Tex. App. B Houston [1st Dist.] 1983).
Gratuitous services. Oil Country Haulers, Inc. v. Griffin, 668 S.W.2d 903 (Tex. App. B Houston [14th Dist.] 1984). State provided services free of charge. Hall v. Birchfield, 718 S.W.2d 313 (Tex. App. B Texarkana 1986).
Voluntary payment of wages by employer. Houston Belt & Terminal Ry v. Johansen, 179 S.W. 853 (Tex. 1915).
VA income and care benefits. Montandon v Colehour, 469 S.W.2d 222 (Tex. Civ. App. B Fort Worth 1971).
VA disability benefits. Gainer v. Walker, 377 S.W.2d 613 (Tex. 1964).
Social Security benefits. Tex. Gen. Indem. Co. v. Hamilton, 420 S.W.2d 735 (Tex. Civ. App. B San Antonio 1967); Traitors & General Ins. Co. v. Reed, 376 S.W.2d 591 (Tex. Civ. App. B Corpus Christi 1964).
Medicaid benefits. Martinez v. Vela, 2000 WL 12968 (Tex. App. B Austin 2000) (unpublished).
Reductions in medical expenses to those actually paid by Medicaid. Texarkana Memorial Hosp. v. Murdock, 903 S.W.2d 868 (Tex. App. B Texarkana 1995).
Medicare benefits and reductions. Wong v. Graham, 2001 WL 123932 (Tex. App. B Austin 2001) (unpublished).
Medical insurance. Lee-Wright, Inc. v. Hall, 840 S.W.2d 572 (Tex. App. B Houston [1st Dist.] 1992).
Worker=s compensation benefits. Lee-Wright, Inc. v. Hall, 840 S.W.2d 572 (Tex. App. B Houston [1st Dist.] 1992).
As a rule of damages, the collateral source rule precludes the defendant(s) from offsetting the judgment against any receipt of collateral sources by the plaintiff. The rule=s application to offsets comes from Restatement of Torts (Second) '920A which states, A[p]ayments 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.@
The rationale supporting the collateral source rule=s treatment of offsets is that Aa wrongdoer should not have the benefit of insurance independently procured by the injured party, and to which the wrongdoer was not privy.@ Brown v. American Transfer & Storage Co., 602 S.W.2d 931 (Tex. 1980).
TEXAS CIVIL PRACTICE & REMEDIES CODE ' 41.0105
During the 78th Legislative Session in 2003, the state legislature passed House Bill 4, which, among other things, added '41.0105 to the Texas Civil Practice and Remedies Code. It reads:
In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.
Tex. Civ. Pract. Rem. Code '41.0105. An examination of the rejected and current versions of the statute itself, the case law interpreting the collateral source rule, and the legislative history reveal that the Texas legislature did not intend to permanently obliterate or modify the collateral source rule with the passage of '41.0105.
A. Previous rejected versions of the statute.
The previous versions of the current '41.0105 which expressly repealed the collateral source rule, in whole or part, were rejected in favor of the current version. The current '41.0105 is actually the fifth version that was evaluated by the legislature. Version one, HB3, was a new section to the then existing Article 4590i. (See Exhibit A). Version one proposed a sweeping change in the way the collateral source rule was to be applied to medical malpractice cases. It would have repealed the collateral source rule for Medicare, Medicaid, workers= compensation, state or federal disability benefits including social security, or disability insurance benefits. This was rejected.
Version two was the committee substitute for HB4 (CSHB4). (See Exhibit B). The language employed closely tracked that of Version one, however, it expanded its applicability to cases other than just medical negligence cases. Like Version one, Version two repealed the collateral source rule in many situations, and like Version one, it was rejected.
When Version two was presented to the entire House for debate, it was modified and resulted in Version three. (See Exhibit C). Version three ended up containing none of the provisions repealing the collateral source rule. Version three was a modification to the then existing Article 4590i and contained one section dealing with the recovery of past medical expenses. It too was rejected.
HB4 was referred to the Senate and again expanded to apply outside of the medical malpractice context. While making numerous other changes to the medical negligence statute and the damages sections of the Civil Practice and Remedies Code, the Senate created '41.0105 which was yet another approach. (See Exhibit D). Essentially, the section included a limited approach to dealing with governmental benefits, but included nothing discussing private insurance benefits. While this version included only a limited modification of the collateral source rule, it, like the previous versions, was rejected.
The fifth version, our current '41.0105, provides for no admission of collateral source evidence as did the previous versions. The evolutionary process that our current '41.0105 endured reveals the fact that the Texas legislature rejected each and every attempt to repeal the collateral source rule. Instead, it passed '41.0105 which omits all of the previously proposed language permitting the admission and offset of collateral sources.
B. The statute=s language.
The language of '41.0105 expressly allows for recovery of Aamounts paid OR incurred.@ The legislature could have simply said Aamounts paid@ had it wanted to limit a plaintiff=s recovery to just the amount of expenses paid or to be paid by the collateral source. Instead, by using the word Aor,@ the legislature recognized that there is often a difference the amount paid and the amount incurred. Case law confirms this fact. See infra. The legislature is presumed to enact legislation Awith complete knowledge of the existing law and with reference to it.@ Acker v. Texas Water Comm=n, 790 S.W.2d 299, 301 (Tex. 1990).
C. Case law interpretation.
APaid@ and Aincurred@ have very different meanings, not just in the dictionary, but in Texas jurisprudence. Brandon v. Am. Sterilizer Co., 880 S.W.2d 488 (Tex. App. B Austin 1994) (holding that an insurer subrogated to the rights of its insured was entitled to recover the full amount of expenses incurred under a worker=s compensation policy, $52,000.00, even though the actual amount of expenses paid was reduced to $30,000.00 by agreement of the insurer and the worker=s compensation carrier); Daughters of Charity v. Linnstaedter, 151 S.W.3d 667 (Tex. App. B Waco 2004) (holding that a hospital was not entitled to payment of any money over that which it received from a worker=s compensation carrier, since legally the patients could not be charged more than the compensation carrier paid); Black v. Am. Bankers Ins. Co., 478 S.W.2d 434 (Tex. Sup., 1972) (holding that a plaintiff actually incurred the total amount of his medical expenses even though Medicare paid a portion of them on his behalf); Republic Bankers Life Ins. Co. v. Anglin, 433 S.W.2d 795 (Tex App. B Texarkana 1968) (holding that even where plaintiff had private insurance, plaintiff could be held accountable for the entire amount of any bill incurred, and thus was entitled to that amount); Am. Indemnity Co. v. Olesijuk, 353 S.W.2d 71 (Tex. App. B San Antonio 1961) (holding that plaintiff actually incurred expenses that he was reimbursed for, and that such reimbursement does not bar plaintiff=s recovery of that amount); Tx Employers= Ins. Ass= n v. Chappell, 486 S.W.2d 818 (Tex. App. B Corpus Christi 1971) (rev=d on other grounds, 494 S.W.2d 159) (holding that when a patient accepts medical care, he becomes liable for payment of such services, regardless of any complimentary or subsequent coverage).
For example, in Texarkana Memorial Hosp. v. Murdock, 903 S.W.2d 868 (Tex. App. B Texarkana 1995) the jury awarded plaintiff $500,000 in medical expenses Aincurred by@ plaintiff due to defendant=s negligence. Medicaid had a statutory assignment for $352,784 in benefits it paid. The trial court granted a JNOV that plaintiff took nothing, awarded Medicaid $352,784, and dropped the remaining $147,216 out of the verdict. The Court of Appeals reversed, holding that plaintiff was entitled to the amount remaining after Medicaid=s assignment. The defendant argued that plaintiff was not personally liable for expenses in excess of the Medicaid assignment, but the court disagreed, holding that plaintiff would have been liable for all necessary medical expenses had Medicaid not paid. In other words, plaintiff had Aincurred@ all the medical expenses, regardless of the fact the Medicaid only Apaid@ a portion of them. See also, Wong v. Graham, 2001 WL 123932 (Tex. App. B Austin 2001) (unpublished); Martinez v. Vela, 2000 WL 12968 (Tex. App. B Austin 2000) (unpublished) (both cases excluded evidence of Medicaid reductions and benefits as collateral sources).
D. Legislative history.
During Senate debates, Bill Ratliff, the Senate author of HB4, explained the intent behind '41.0105 by stating the following:
[I]t means that economic damages are limited to those actually incurred. You can=t recover more than you=ve actually paid or been charged for your health care expenses in the past or what the evidence shows you will probably be charged in the future.
Senate Journal, 78th Legislature, Regular Session (June 1, 2003) page 5003-5008 (See Exhibit E). Senator Ratliff draws the same distinction the Murdock court did between Aincurred@ or Acharged@ and Apaid.@ Knowing that these terms have different meanings, the legislature included them in '41.0105, and allowed for the recovery of either.
THE EFFECT, IF ANY, OF CPRC ' 41.0105
Whether '41.0105 will have any effect on a case depends on the circumstances. For example, if a plaintiff introduces medical bills showing amounts billed by a provider but a defendant can establish that the plaintiff never incurred liability for those bills, then '41.0105 would arguably limit plaintiff=s recovery to just the amount actually paid by or on behalf of the plaintiff.
This situation may arise when a military servicemember is treated at a military hospital or a member of an HMO receives treatment at their HMO facility. In those situations, the patient never incurs liability for the cost of those health care services. They are never billed and under no circumstances would they become liable for the cost of the treatment. If their treatment was for injuries resulting from the negligence of a third-party, the facility or government simply places a value on the services it provided and asserts a lien against the patient=s potential recovery.
In these cases, therefore, the Aamount incurred@ is zero and the Aamount paid@ is simply the amount of the lien. Section 41.0105 would arguably limit the plaintiff=s recovery for medical expenses to the amount paid, or the amount of the lien, regardless of whether plaintiff could show the cost of reasonable and necessary medical expenses was higher. The amount incurred in these cases is irrelevant since the plaintiff did not incur liability for any of the medical expenses, separate from the lien on their recovery.
On the other hand, in situations like this case, where the Plaintiff incurs liability for the entire medical bill, '41.0105 permits the Plaintiff to recover whatever amount he establishes as the reasonable and necessary medical expenses, regardless of what amount, if any, was paid. In this case, Plaintiff has been billed and has incurred the amount of the total medical bill. The fact that Plaintiff had the foresight to pre-pay his medical expenses by purchasing health insurance does not change the analysis. What expenses his health insurer has paid or refused to pay is pure collateral source evidence that remains excluded by '41.0105. If Plaintiff=s health insurer refused to pay any of his medical bills because they fell outside the scope of his coverage, one can be sure Plaintiff would be wholly liable for such bills.
The Texas legislature considered obliterating the collateral source rule and decided against it. Allowing evidence of, or offsets for, collateral sources would be acting directly against what the legislature has decided. Moreover, the injection of collateral source evidence into the trial would essentially create a Atrial within a trial,@ as both parties would be forced to present testimony concerning medical expenses, health care benefit plans, group plan discount rates, premium payments, and subrogation rights. This would be unfairly prejudicial to the plaintiff, would constitute a waste of time, and would confuse the jury. Plaintiff respectfully requests that this Court prevent the introduction of collateral source evidence during trial and deny any requested offsets against a judgment against Defendant(s).
Wherefore, premises considered, Plaintiff prays this court grant this Motion to Exclude Collateral Source Evidence, and enter an order prohibiting opposing counsel, Defendant(s), and witnesses called on behalf of Defendant(s) from mentioning, directly or indirectly, the existence of collateral sources, and for such and other relief to which Plaintiff may be entitled.
State Bar Number 06134750
Earl Drott Law
Bank of America Southeast Center
3301 Golden Road, Suite 411
Tyler, Texas 75701
Phone (903) 531-9300
Fax (903) 531-0221
Attorney for the Plaintiff
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing has been forwarded to XXXXXXXXXX by Certified Mail Return Receipt, on this the ____ day of February, 2008.
CAUSE NO. 54,423-A
ROSIE JEAN BALDWIN ' IN THE COUNTY COURT
VS. ' AT LAW #2
CAROL LAWRENCE PERKINS ' OF SMITH COUNTY, TEXAS
ORDER ON PLAINTIFF =S MOTION TO EXCLUDE
COLLATERAL SOURCE EVIDENCE
On this day came on to be considered Plaintiff=s Motion To Exclude Collateral Source Evidence. The Court, having considered the Motion, is of the opinion that same should be granted.
IT IS, THEREFORE, ORDERED that Defendant, Defendant=s counsel, and witnesses called on behalf of Defendant are prohibited from mentioning, directly or indirectly, the existence of collateral sources.
SIGNED AND ENTERED this ____ day of _______________________, 20_____.