Ellsworth v. Schelbrock

• Decision Date: 22 June 2000
• Docket Number: No. 98-0294.,98-0294.
• Citation: 235 Wis.2d 678,2000 WI 63,611 N.W.2d 764
• Parties: Hope J. ELLSWORTH, and Adam John Ellsworth, David Michael Gibson, Jr., and Lewis Jadwin Asfeld, minors, by their Guardian ad Litem, Timothy J. O'Brien, Plaintiffs-Respondents-Cross-Appellants, DUNN COUNTY DEPARTMENT OF HUMAN SERVICES, Plaintiff-Respondent, v. Mark A. SCHELBROCK, Defendant-Appellant-Petitioner, MSI INSURANCE COMPANY, Defendant-Third-Party Plaintiff-Co-Appellant, GENERAL MOTORS CORPORATION, Defendant-Third-Party Defendant-Respondent-Cross-Respondent, ABC INSURANCE COMPANY, Third-Party Defendant.
• Court: Wisconsin Supreme Court

235 Wis.2d 678

2000 WI 63

611 N.W.2d 764

Hope J. ELLSWORTH, and Adam John Ellsworth, David Michael Gibson, Jr., and Lewis Jadwin Asfeld, minors, by their Guardian ad Litem, Timothy J. O'Brien, Plaintiffs-Respondents-Cross-Appellants, DUNN COUNTY DEPARTMENT OF HUMAN SERVICES, Plaintiff-Respondent, v. Mark A. SCHELBROCK, Defendant-Appellant-Petitioner, MSI INSURANCE COMPANY, Defendant-Third-Party Plaintiff-Co-Appellant, GENERAL MOTORS CORPORATION, Defendant-Third-Party Defendant-Respondent-Cross-Respondent, ABC INSURANCE COMPANY, Third-Party Defendant.

No. 98-0294.

Supreme Court of Wisconsin.

Oral argument February 29, 2000.

Decided June 22, 2000.

For the defendant-appellant-petitioner there were briefs by James A. Pelish, Willem J. Noorlander and Thrasher, Doyle, Pelish & Franti, Ltd., Rice Lake, and oral argument by James A. Pelish.

For the plaintiffs-respondents-cross appellants there was a brief by James A. Drill, Brian H. Sande and Doar, Drill & Skow, S.C., New Richmond, and oral argument by Brian H. Sande.

An amicus curiae brief was filed by Arthur P. Simpson and Simpson & Deardorff, Milwaukee, on behalf of Civil Trial Counsel of Wisconsin.

An amicus curiae brief was filed by Edward E. Robinson and Cannon & Dunphy, S.C., Brookfield, on behalf of the Wisconsin Academy of Trial Lawyers.

¶ 1. WILLIAM A. BABLITCH, J.

Mark A. Schelbrock (Schelbrock) seeks review of a published opinion by the court of appeals applying the collateral source rule to Medical Assistance payments. Ellsworth v. Schelbrock, 229 Wis. 2d 542, 600 N.W.2d 247 (Ct. App. 1999). Under the collateral source rule, the amount of damages awarded to a person injured because of another individual's tortious conduct is not reduced when the injured party receives compensation from another source, such as insurance or sick leave. Payne v. Bilco Co., 54 Wis. 2d 424, 433, 195 N.W.2d 641 (1972). Schelbrock, the tortfeasor, argues that the court of appeals erred in applying the collateral source rule here because the injured party, Hope Ellsworth (Ellsworth), did not personally incur liability for her medical expenses and the third-party payer, the State of Wisconsin through Dunn County, had subrogation rights. According to Schelbrock, Ellsworth's award for past medical expenses should be limited to the amount paid by the Medical Assistance program to her health care providers. We disagree.

¶ 2. Medical Assistance is social legislation providing a form of health insurance to certain needy individuals. Program participants receive gratuitous medical services paid for by the state. Because we apply the collateral source rule to insurance as well as to benefits provided gratuitously, we conclude that the rule is also properly applied when damages are awarded to an injured person who was also a Medical Assistance participant. Accordingly, we affirm.

Facts

¶ 3. In April 1994 Schelbrock struck a vehicle driven by Ellsworth. As a result of the collision, Ellsworth was severely burned and required hospitalization for approximately four months. During this time she underwent several surgical procedures as well as extensive physical rehabilitation.

¶ 4. Ellsworth sued Schelbrock and his insurer, MSI Insurance Company. The Dunn County Department of Human Services intervened as party plaintiffs, asserting a claim of subrogation. Additional claims were made against other parties who were joined to the action. These claims are not at issue in this appeal. During the trial, Ellsworth introduced expert testimony stating that she had been the recipient of reasonable and necessary past medical services valued at $597,448.27. No other testimony was introduced by any other party regarding the necessity of any medical treatment or the reasonable value of services provided to Ellsworth. Schelbrock objected to the expert testimony and to the use of any figure for past medical expenses other than $354,941, the amount paid by Medical Assistance to Ellsworth's health care providers. The circuit court judge held that as a matter of law Ellsworth's past medical expenses were $597,448.27, and used this amount in answer to the special verdict question on this matter. The jury found Schelbrock negligent, and that his negligence was a cause of injury to Ellsworth.

¶ 5. Schelbrock appealed. The court of appeals affirmed the finding of the circuit court regarding past medical expenses. This court granted review pursuant to Wis. Stat. § 808.10 (1997-98).

Analysis

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¶ 6. Wisconsin's tort law recognizes the collateral source rule. Rixmann v. Somerset Pub. Sch., 83 Wis. 2d 571, 582, 266 N.W.2d 326 (1978). The issue presented here is whether the collateral source rule applies to Medical Assistance benefits.¹ This is a question of law reviewed independently of the decisions of the court of appeals and circuit court, although aided by their analyses. Brown v. Dibbell, 227 Wis. 2d 28, 42, 595 N.W.2d 358 (1999). Wisconsin Stat. ch. 49 (1993-94)² regulates public assistance programs, including Medical Assistance. Statutory interpretation is also a question of law, which we review de novo. McDonough v. Department of Workforce Dev., 227 Wis. 2d 271, 277, 595 N.W.2d 686 (1999).

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¶ 7. In general, the collateral source rule provides that a tortfeasor's liability to an injured individual is not reduced because the individual received benefits or payments from other sources. Payne, 54 Wis. 2d at 433. Our tort law applies the collateral source rule as part of a policy seeking to "deter negligent conduct by placing the full cost of the wrongful conduct on the tortfeasor." American Standard Ins. Co. v. Cleveland, 124 Wis. 2d 258, 264, 369 N.W.2d 168 (Ct. App. 1985). The tortfeasor who is legally responsible for causing injury is not relieved of his obligation to the victim simply because the victim had the foresight to arrange, or good fortune to receive, benefits from a collateral source for injuries and expenses. In an early case applying the collateral source rule to wages this court stated:

We see no reason why one whose acts have caused injury to another should reap the entire benefit that comes from the payment of wages made by an employer, either as a gratuity to a faithful employee or because such payments are required by contract. Such payments do not change the nature of the injury which the employee sustains through the wrongful acts of the tortfeasor. If either is to profit by the payments made by the employer, it should be the person who has been injured, not the one whose wrongful acts caused the injury. The extent of the liability of the wrongdoer is dependent upon the extent of the injuries inflicted by his wrongful act, not upon the question whether the employee receives wages during disability from his employer.

Campbell v. Sutliff, 193 Wis. 370, 374, 214 N.W. 374 (1927), overruled on other grounds Powers v. Allstate Ins. Co., 10 Wis. 2d 78, 92, 102 N.W.2d 393 (1960).

¶ 8. In its formulation of the collateral source rule the Restatement (Second) of Torts § 920A cmt. b (1979) states that "it is the tortfeasor's responsibility to compensate for all harm that he [or she] causes, not confined to the net loss that the injured party receives." The Restatement further provides that the collateral source rule applies to benefits from insurance policies, gratuities, and benefits from employment and social legislation. Restatement (Second) of Torts § 920A cmt. c (1979).

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¶ 9. The collateral source rule has been applied in Wisconsin to medical expenses paid directly by Medicare or by an insurance company. Thoreson v. Milwaukee & Suburban Transp. Corp., 56 Wis. 2d 231, 244, 201 N.W.2d 745 (1972). In Thoreson, we held that the collateral source rule "is not limited to paid-for benefits but applies to gratuitous medical services provided or paid for by the state." Thoreson, 56 Wis. 2d at 245.

¶ 10. Medical Assistance is a means of providing gratuitous medical services paid for by the state. Created by Title 19 of the federal Social Security Act of 1965, Medical Assistance is an entitlement program that pays for covered health services for certain low-income individuals. The program is funded jointly by the federal and state government and is administered by the state within federal guidelines. The state pays certified providers for services furnished to program participants. Wisconsin Legislative Fiscal Bureau, Informational Paper #44, Medical Assistance Program (January 1999).

¶ 11. In addition, Medical Assistance, a public assistance program, creates a form of health insurance for certain needy individuals. We agree with the North Carolina Supreme Court, which stated: "Medicaid [Medical Assistance] is a form of insurance paid for by taxes collected from society in general. `The Medicaid [Medical Assistance] program is social legislation; it is the equivalent of health insurance for the needy; and, just as any other insurance form, it is an acceptable collateral source.'" Cates v. Wilson, 361 S.E.2d 734, 738 (N.C. 1987) (quoting Bennett v. Haley, 208 S.E.2d 302, 311 (1974)). As we have noted, the Restatement applies the collateral source rule to social legislation. Restatement (Second) of Torts § 920A cmt. c (4).

¶ 12. Schelbrock, citing to Wis JI-Civil 1756, set forth below, asserts that because Ellsworth did not personally incur any liability for her medical expenses she is not entitled to an award of damages on this basis or to the benefit of the application of the collateral source rule.³ According to Schelbrock, Ellsworth incurred no liability because the health care providers agreed to accept as payment in full the amount received from Medical Assistance. Wis. Admin. Code § HFS 106.04(3) (April, 1999). In addition, Wis. Stat. § 49.49(3m)(a) provides that, in general, a health care provider who accepts the payment made by Medical Assistance may not impose additional charges upon the program participant. We are not persuaded.

¶ 13. The genesis of...