American Legion Post No. 57 v. Leahey

• Decision Date: 12 July 1996
• Docket Number: 1930990.
• Parties: AMERICAN LEGION POST NUMBER 57 v. Regenia LEAHEY.
• Court: Alabama Supreme Court

681 So.2d 1337

AMERICAN LEGION POST NUMBER 57 v. Regenia LEAHEY.

1930990.

Supreme Court of Alabama.

July 12, 1996.

James J. Bushnell, Jr. of Gleissner, Bowron, Bushnell & Henderson, Birmingham, Forrest S. Latta and W. Pemble DeLashmet of Pierce, Carr & Alford, P.C., Mobile, for Appellant.

Lee A. Rudolph and Earl P. Underwood, Jr. of Underwood & Rudolph, Anniston, for Appellee.

Richard S. Manley of Manley, Traeger & Perry, Demopolis, J. Mark Hart and Sally A. Broatch of Spain, Gillon, Grooms, Blan & Nettles, Birmingham, for Amicus Curiae Alabama Defense Lawyers Ass'n in support of appellant.

Andrew T. Citrin and David G. Wirtes, Jr. of Cunningham, Bounds, Yance, Crowder & Brown, Mobile, for Amicus Curiae Alabama Trial Lawyers Ass'n in support of appellee.

ALMON, Justice.

This interlocutory appeal comes from an order holding unconstitutional Ala.Code 1975, § 12-21-45, which would allow the defendant in this personal injury action to introduce evidence that the plaintiff received from a collateral source payments for her medical or hospital expenses. Regenia Leahey was injured when she slipped and fell on the premises of American Legion Post Number 57 ("American Legion"); she brought an action against American Legion, alleging that it had negligently or wantonly caused her injuries. Leahey filed a motion to declare § 12-21-45 unconstitutional, and she served a copy of the motion on the attorney general of the State of Alabama. The attorney general acknowledged service of the motion and waived further notice or participation in the action.¹ After proceedings on the motion, the circuit court entered an order granting it, and, pursuant to Rule 5, Ala. R.App. P., stated that the order involved a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal would be beneficial as provided in the rule. This Court granted American Legion's petition for permission to appeal, pursuant to Rule 5.

Section 12-21-45 reads:

"(a) In all civil actions where damages for any medical or hospital expenses are claimed and are legally recoverable for personal injury or death, evidence that the plaintiff's medical or hospital expenses have been or will be paid or reimbursed shall be admissible as competent evidence. In such actions upon admission of evidence respecting reimbursement or payment of medical or hospital expenses, the plaintiff shall be entitled to introduce evidence of the cost of obtaining reimbursement or payment of medical or hospital expenses.

"(b) In such civil actions, information respecting such reimbursement or payment obtained or such reimbursement or payment which may be obtained by the plaintiff for medical or hospital expenses shall be subject to discovery.

"(c) Upon proof by the plaintiff to the court that the plaintiff is obligated to repay the medical or hospital expenses which have been or will be paid or reimbursed, evidence relating to such reimbursement or payment shall be admissible.

"(d) This section shall not apply to any civil action pending on June 11, 1987."

Against the constitutionality of § 12-21-45, Leahey argued, and the circuit court agreed, that it violates: the right to trial by jury as guaranteed by Ala. Const.1901, § 11; the right to a remedy and to access to the courts as guaranteed by § 13; the constitutional guaranties of equal protection, see §§ 1, 6, and 22, and due process, §§ 6 and 13; and the principle of separation of powers as preserved by §§ 42 and 43.

The collateral source rule has been summarized as follows:

"In tort cases, the plaintiff may receive benefits from a third party who is in no way connected with the defendant, and receipt of these benefits from the source collateral to the defendant has the effect of lessening the financial losses which the plaintiff would otherwise have suffered. Thus, if the basic goal of tort law is only that of compensating plaintiff for his losses, evidence of these benefits should be admitted to reduce the total damages assessed against the defendant. At the same time, reducing recovery by the amount of the benefits received by the plaintiff would be, according to most courts, granting a `windfall' to the defendant by allowing him a credit for the reasonable value of those benefits. Such a credit would result in the benefits being effectively directed to the tortfeasor and from the intended party— the injured plaintiff. If there must be a windfall, it is usually considered more just that the injured person should profit, rather than let the wrongdoer be relieved of full responsibility for his wrongdoing. Thus, the courts generally have held that benefits received by the plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer. This is known as the `collateral source rule.' Under it, the wrongdoer cannot take advantage of the contracts or other relation that may exist between the injured person and third persons. Thus, while a plaintiff's recovery under the ordinary negligence rule is limited to damages which will make him whole, the collateral source rule allows a plaintiff further recovery under certain circumstances even though he has suffered no loss."

22 Am.Jur.2d Damages § 566 (1988) (citations omitted).

This Court first articulated the collateral source rule in Long v. Kansas City, M. & B. R.R., 170 Ala. 635, 641-42, 54 So. 62, 63-64 (1910):

"If A. negligently or intentionally burns B.'s house, and B. sues him for damages, surely A. cannot defeat this action by pleading and showing that C. had paid B. the full value of his house under a contract of insurance between B. and C., as to which A. is a perfect stranger. It is no concern of A.'s that C. may be, by contract or otherwise, subrogated to the rights of B. in the matter. The question, to whom will the damages belong when recovered, is one in which the defendant has no interest. It does not even affect the measure of his liability; and it is not a proper issue in the suit by B. against A. The insurance of the property is a mere indemnity, and insurer and insured are regarded as one person. The mere fact that the insurer has paid the insured cannot affect the action against the wrongdoer who has destroyed or injured the property, the subject of the insurance.

"This question has been expressly decided a number of times. In the case of Anderson v. Miller, 96 Tenn. 35, 33 S.W. 615, 54 Am.St.Rep. 812, it was so decided (and this case collects and reviews the authorities), the court, among other things, saying: `In regard to the proper parties to the action, we do not think the assignment well taken. If it be conceded that the insurance company, having paid the entire fire loss, is now entitled to be subrogated to the rights of the insured, as against the tort-feasor, or to recover back from him the amount he recovers, still it does not prevent a recovery in the name of the insured for the damages sustained. The question of who will be entitled to the proceeds of the recovery, the insurer or the insured, is a matter between them, and constitutes no defense to an action for the damages, caused by the wrong, which, in any event, must be brought in the name of the owner and insured, although it might be for the use of the insurer.—24 Am. & Eng. Law, pp. 308-330; Perrott v. Shearer, 17 Mich. 48, 55, 56; Clark v. Wilson, 103 Mass. 219-227, 4 Am.Rep. 532; Hayward v. Cain, 105 Mass. 213; Weber v. Morris & E.R. Co., 35 N.J.L. 409, 10 Am. Rep. 253.'

"... The payment is not made by the insurer for the benefit of the wrongdoer, but is made in accordance with the contract of insurance. The owner, of course, has paid the insurer for the insurance or indemnity; and whether this be more or less than the damages for which the wrongdoer is liable is no concern of the latter."

This Court has consistently held that collateral source evidence is inadmissible. See, e.g., Gribble v. Cox,, 349 So.2d 1141, 1143 (Ala.1977); Carlisle v. Miller, 275 Ala. 440, 444, 155 So.2d 689, 691 (1963); Vest v. Gay, 275 Ala. 286, 289, 154 So.2d 297, 299-300 (1963); Sturdivant v. Crawford, 240 Ala. 383, 385, 199 So. 537, 538 (1940).

The leading treatise on the law of evidence in Alabama analyzes this rule as being analogous to the rule that evidence of a defendant's liability insurance is not admissible, a point that is significant in light of the fact that § 12-21-45 does not purport to make evidence of the defendant's insurance admissible:

"The general exclusionary rule which precludes the admission of the defendant's liability insurance coverage also applies to preclude the defendant from introducing evidence that the plaintiff had insurance coverage or has been indemnified for the accident in question. This preclusion would generally be considered simply to be an application of the collateral source rule which provides that the plaintiff's receipt of benefits arising out of an accident does not affect the plaintiff's rights against the defendant. When a person sues for injury to his person or property, the defendant may not prove that an insurance company has paid or is liable to the plaintiff for any or all of his loss and this is true even though the proceeds of any judgment recovered will inure wholly or in part to an insurance company, as subrogee of the plaintiff's claim."

C. Gamble, McElroy's Alabama Evidence, § 189.04(2) (4th ed.1991) (citations omitted).

The legislature, in 1979, eight years before it enacted § 12-21-45, enacted a statute abrogating the collateral source rule in product liability actions. That statute, now § 6-5-522, Ala.Code 1975, reads, in pertinent part:

"In all product liability actions where damages for any medical or hospital expenses are claimed and are legally recoverable for personal injury or death, evidence that the plaintiff's medical or hospital expenses have been or will be paid or reimbursed (1) by medical or

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