Delta Air Lines, Inc. v. Scholle

• Decision Date: 12 April 2021
• Docket Number: Supreme Court Case No. 19SC546
• Citation: 484 P.3d 695
• Parties: DELTA AIR LINES, INC., Petitioner, v. William SCHOLLE, Respondent.
• Court: Colorado Supreme Court

484 P.3d 695

DELTA AIR LINES, INC., Petitioner,

v.William SCHOLLE, Respondent.

Supreme Court Case No. 19SC546

Supreme Court of Colorado.

April 12, 2021

Rehearing Denied May 3, 2021

Attorneys for Petitioner: Treece Alfrey Musat P.C., Michael L. Hutchinson, Carol L. Thomson Kathleen, J. Johnson , Denver, Colorado

Attorneys for Respondent: Bendinelli Law Firm, P.C., Marco F. Bendinelli, Jessica L. Schlatter, S. Paige Singleton, Westminster, Colorado

Attorneys for Amicus Curiae Coloradans Protecting Patient Access: Messner Reeves LLP, Kendra N. Beckwith, Darren D. Alberti, Denver, Colorado

Attorneys for Amici Curiae Colorado Defense Lawyers Association, the Colorado Civil Justice League, and the American Tort Reform Association: Messner Reeves LLP, Heather A. Salg, Denver, Colorado, Homiak Law LLC, Kevin D. Homiak, Denver, Colorado

Attorneys for Amicus Curiae The Colorado Trial Lawyers Association: Burg Simpson Eldredge Hersh & Jardine, P.C., Nelson P. Boyle, Jessica L. Derakhshanian, Englewood, Colorado, Ogborn Mihm LLP, Thomas Neville, Denver, Colorado

En Banc

JUSTICE HART delivered the Opinion of the Court.

¶1 In this case and a companion case also announced today, Gill v. Waltz , 2021 CO 21, ––– P.3d ––––, we consider the consequences for an injured employee's claims against a third-party tortfeasor when the employee's workers' compensation insurer settles its subrogation claim with that tortfeasor.¹ We conclude that when, as here, a workers' compensation insurer settles its subrogation claim for reimbursement of medical expenses with a third-party tortfeasor, the injured employee's claim for past medical expenses is extinguished completely. Because the injured employee need not present evidence of either billed or paid medical expenses in the absence of a viable claim for such expenses, the collateral source rule is not implicated under these circumstances. The court of appeals therefore erred in remanding for a new trial on medical expenses based on a perceived misapplication of that rule. Accordingly, we reverse.

I. Facts and Procedural History

¶2 William Scholle worked for United Airlines, Inc., driving luggage tugs from the terminal to waiting planes, loading or unloading the bags, and returning to the terminal. In June 2012, Scholle was stopped at a stop sign on a return trip to the terminal when he was rear-ended by Daniel Moody, an employee of Delta Air Lines, Inc. Scholle sustained several serious injuries that required him to miss work and to receive medical treatment over the course of several years. He promptly applied for and received workers' compensation insurance benefits from United, a self-insured employer under Colorado's workers' compensation scheme. Pursuant to Colorado's workers' compensation laws, United covered all medical expenses resulting from Scholle's on-the-job injuries, as well as a portion of his lost wages. Scholle's medical providers apparently produced bills for the services he received that reflected costs in excess of what is permitted by the workers' compensation fee schedule, though they never tried to collect amounts beyond those permitted by the fee schedule.

¶3 In 2014, United exercised its subrogation right and sued Delta and Moody to recover the payments it made to and on behalf of Scholle. Scholle separately sued Delta and Moody for their negligence, seeking to recover compensation for economic damages, noneconomic damages, physical impairment, and disfigurement he suffered as a result of the collision. The trial court consolidated the actions. Eventually, Delta settled United's subrogation claim, and the trial court dismissed United's case. Scholle's claims against Moody were later dismissed as well, leaving only Scholle and Delta as parties.

Delta admitted liability for the accident, and the case went to trial on damages.

¶4 In pretrial motions in limine, Scholle argued that the collateral source rule should preclude Delta from admitting evidence of the amount paid by Scholle's workers' compensation insurance to cover the medical expenses arising from his injuries. Instead, Scholle contended, the higher amounts billed by his medical providers reflected the true reasonable value of the medical services provided to him and should be admissible at trial.

¶5 The trial court disagreed, reasoning that when Delta settled with United, it effectively paid Scholle's medical expenses, such that amounts paid for those expenses were no longer payments by a collateral source. The court further noted that, under the workers' compensation statute, any amount billed for medical treatment in excess of the statutory fee schedule is "unlawful," "void," and "unenforceable." § 8-42-101(3)(a)(I), C.R.S. (2020). Therefore, the court determined that "[a]llowing Scholle to introduce evidence of any amount billed in excess of that actually paid by United would allow Scholle to seek damages for bills that never, as a matter of law, amounted to a legal obligation to pay." Finally, the court concluded that, in the context of payments made under the workers' compensation statute, amounts billed are irrelevant under CRE 401 and, "even if remotely relevant," would confuse the issues and should be excluded under CRE 403.

¶6 At trial, the jury returned a verdict for Scholle totaling approximately $1.5 million. This verdict was, however, set aside after the court granted Delta's motion for a new trial due to misconduct by Scholle's counsel, the details of which are not relevant here. In the resulting bench trial, the court awarded Scholle $64,750 in noneconomic damages and $194,426 in economic damages. In light of Delta's settlement with United, the court reduced the award by the amount that United paid in workers' compensation, effectively reducing Scholle's economic damages award to zero.

¶7 A split division of the court of appeals reversed the judgment with respect to Scholle's medical expenses. Scholle v. Delta Air Lines, Inc., 2019 COA 81M, ¶ 93, ––– P.3d ––––. The majority began by explaining the evidentiary component of Colorado's collateral source rule, codified at section 10-1-135(10)(a), C.R.S. (2020). Scholle, ¶¶ 17-18. The majority noted that the policy rationale behind the rule is that a tortfeasor should not benefit, through reduced liability, from compensation or benefits that an injured party receives from an entirely collateral source. Id. at ¶ 19. Moreover, the benefits encompassed by the collateral source rule may include not only direct payments but also the benefits of an insurance arrangement through which a medical provider agreed to accept a discounted rate for services. Id. at ¶ 21 (citing Volunteers of Am. Colo. Branch v. Gardenswartz , 242 P.3d 1080, 1085 (Colo. 2010) ).

¶8 Workers' compensation payments, the majority concluded, are collateral source benefits because an employee's entitlement to receive them arises out of the employment contract between the employee and employer. Id. at ¶ 33. Delta had not contributed to the contract between Scholle and United and was not entitled to "reap the benefit of a contract for which [it] paid no compensation." Id. at ¶ 34 (quoting Gardenswartz, 242 P.3d at 1083 ). Therefore, the majority determined, the trial court should not have permitted Delta to introduce evidence of the amounts United paid Scholle's medical providers for the services he received. Id. at ¶ 32.

¶9 The division majority rejected Delta's argument that because any amount billed in excess of the workers' compensation fee schedule is "void," "unlawful," and "unenforceable," § 8-42-101(3)(a)(I), Scholle could not claim entitlement to any damages for medical expenses beyond the amount United already paid. Scholle, ¶¶ 45-49. The majority found this case indistinguishable from Gardenswartz , in which we held that even billed amounts for which a plaintiff could not be liable pursuant to the terms of his insurance contract could form the basis for determining the reasonable value of medical services in a suit against a tortfeasor. Gardenswartz, 242 P.3d at 1085-88. Accordingly, the division remanded for a new trial on Scholle's past medical expenses. Scholle, ¶ 54.

¶10 Judge Richman dissented on this issue, arguing that the court did not need to reach the evidentiary question presented in this case because Scholle's claim for past medical expenses was extinguished when Delta settled United's subrogation claim. Id. at ¶ 96 (Richman, J., concurring in part and dissenting in part). Further, the dissent reasoned that because any amount billed in excess of the workers' compensation fee schedule was void as a matter of law, Scholle should not be permitted to pursue any amounts for past medical expenses in excess of what United already paid. Id. at ¶ 97.

¶11 Delta petitioned this court for certiorari review, which we granted.

II. Analysis

¶12 After discussing the appropriate standard of review, we turn to the text of the Workers' Compensation Act ("WCA" or "Act") to examine the scope and consequences of a workers' compensation insurer's subrogation rights when a workplace injury was caused by the negligence of a third-party tortfeasor. We then consider whether a plaintiff-employee can pursue damages for amounts billed in excess of the workers' compensation fee schedule after an insurer has settled its subrogation claim with a third-party tortfeasor. We conclude that United's settlement with Delta extinguished Scholle's claim for medical expense damages with regard to those services paid for by his workers' compensation insurance. Because Scholle cannot pursue a claim against Delta for damages arising out of past medical expenses relating to the services covered by workers' compensation, the collateral source rule has no application in this case.

A. Standard of Review

¶13 The dispute between the parties in this case is a matter of statutory interpretation and is therefore subject to de novo review. People v. Baker , 2019 CO 97M, ¶ 13, 452 P.3d 759, 762. Our principal responsibility when construing...