10th Circuit: Under Collateral Source Rule, Evidence of Discounted Med Pay to Medical Providers By Workers’ Comp Payer May Not Be Considered By Jury

In a complex medical malpractice diversity action involving multiple issues, the Tenth Circuit Court of Appeals recently affirmed a federal district court’s judgment on a $7 million verdict in favor of an injured plaintiff, and reversed the district court’s remittitur of the plaintiff’s wife’s loss-of-consortium award–the district court reduced the jury’s $2 million verdict to $500,000–holding in relevant part that the district court did not err when it utilized the collateral source rule to exclude evidence of payments made to plaintiff’s medical care providers pursuant to Wyoming’s workers’ compensation law [Prager v. Campbell County Mem. Hosp., 2013 U.S. App. LEXIS 16893 (10th Cir., Aug. 12, 2013)].  

Prager sustained injuries when the truck that he was driving skidded on ice, rolled five times, and eventually came to rest upside down in the snow. Prager contended that in spite of obvious facial injuries and his specific complaints of neck and head pain, defendants negligently failed to diagnose Prager’s broken neck following the accident, resulting in serious nerve damage to his left arm, pain and suffering, and other injuries, as well as loss of consortium by his wife.

At trial, Prager introduced evidence of the billings he received for medical treatment. The medical care providers had actually accepted payment from the workers’ compensation payer of less than the full amount billed and the defendants sought to introduce evidence to the jury of this lesser, or discounted, amount. Defendants contended that the lesser amount accepted by the providers was a more accurate reflection of the plaintiff’s medical expenses, and that amount should have been considered by the jury in determining a reasonable quantum of damages. The district court refused to allow the introduction by the defendants of such information.

The 10th Circuit held that the district court correctly applied the collateral-source rule in keeping out evidence of the discounted payments. The court observed that the rule derived from the common law and essentially provides that 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. The court acknowledged that the rule thus permitted an injured plaintiff to recover more than the damages he had suffered as the result of an injury. The court said this is allowed because public policy favors giving the plaintiff a double recovery rather than allowing a wrongdoer to enjoy reduced liability simply because the plaintiff received compensation from an independent source.

As to defendants’ argument that the lesser amount accepted by the providers was a more accurate reflection of Prager’s medical expenses, the 10th Circuit countered that such a position conflicted with a fundamental tenet of the collateral-source rule: that a tortfeasor may not reap the benefit of any special payment arrangement involving a collateral source. The court concluded that to limit Prager’s damages to the amount paid by the workers’ compensation
payer would confer an unintended and inappropriate benefit on the defendants, that any discounts or write-offs reflected in Prager’s medical bills were a benefit that came as a direct result of negotiations with those providers and that this was a source independent of the defendants.

Accordingly, the defendants, as tortfeasors, could not receive any consideration or benefit stemming from the discounts or write-offs. There was no abuse of discretion by the district court in excluding the evidence of the workers’ compensation payments.