Helfend v. Southern Cal. Rapid Transit Dist.

• Decision Date: 18 February 1970
• Citation: 2 Cal.3d 1,465 P.2d 61,84 Cal.Rptr. 173
• Court: California Supreme Court
• Parties: , 465 P.2d 61, 77 A.L.R.3d 398 Julius J. HELFEND, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA RAPID TRANSIT DISTRICT et al., Defendants and Appellants. L.A. 29688.

Page 173

84 Cal.Rptr. 173

2 Cal.3d 1, 465 P.2d 61, 77 A.L.R.3d 398

Julius J. HELFEND, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA RAPID TRANSIT DISTRICT et al., Defendants and Appellants.

L.A. 29688.

Supreme Court of California,

In Bank.

Feb. 18, 1970.

Victor Rosenblatt, Los Angeles, for defendants and appellants.

John D. Maharg, County Counsel, Los Angeles, and Peter R. Krichman, Deputy County Counsel, as amici curiae on behalf of defendants and appellants.

Caidin, Bloomgarden & Kalman and Newton Kalman, Beverly Hills, for plaintiff and respondent.

TOBRINER, Acting Chief Justice.

Defendants appeal from a judgment of the Los Angeles Superior Court entered on a verdict in favor of plaintiff, Julius J. Helfend, for $16,400 in general and special damages for injuries sustained in a bus-auto collision that occurred on July 19, 1965, in the City of Los Angeles.

We have concluded that the judgment for plaintiff in this tort action against the defendant governmental entity should be affirmed. The trial court properly followed the collateral source rule in excluding evidence that a portion of plaintiff's medical bills had been paid through a medical insurance plan that requires the refund of benefits from tort recoveries.

1. The facts.

Shortly before noon on July 19, 1965, plaintiff drove his car in central Los Angeles east on Third Street approaching Grandview. At this point Third Street has six lanes, four for traffic and one parking lane on each side of the thoroughfare. While traveling in the second lane from the curb, plaintiff observed an automobile driven by Glen A. Raney, Jr., stopping in his lane and preparing to back into a parking space. Plaintiff put out his left arm to signal the traffic behind him that he intended to stop; he then brought his vehicle to a halt so that the other driver could park.

At about this time Kenneth A. Mitchell, a bus driver for the Southern California Rapid Transit District, pulled out of a bus stop at the curb of Third Street and headed in the same direction as plaintiff. Approaching plaintiff's and Raney's cars which were stopped in the second lane from the curb, Mitchell pulled out into the lane closest to the center of the street in order to pass. The right rear of the bus sideswiped plaintiff's vehicle, knocking off the rearview mirror and crushing plaintiff's arm, which had been hanging down at the side of his car in the stopping signal position.

An ambulance took plaintiff to Central Receiving Hospital for emergency first aid treatment. Upon release from the hospital plaintiff proceeded to consult Dr. Saxon, an orthopedic specialist, who sent plaintiff immediately to the Sherman Oaks Community Hospital where he received treatment for about a week. Plaintiff underwent physical therapy for about six months in order to regain normal use of his left arm and hand. He acquired some permanent discomfort but no permanent disability from the injuries sustained in the accident. At the time of the injury plaintiff was 67 years of age and had a life expectancy of about 11 years. He owned the Jewel Homes Investment Company which possessed and maintained small rental properties. Prior to the accident plaintiff had performed much of the minor maintenance on his properties including some painting and minor plumbing. For the six-month healing period he hired a man to do all the work he had formerly performed and at the time of the trial still employed him for such work as he himself could not undertake.

Plaintiff filed a tort action against the Southern California Rapid Transit District, a public entity, and Mitchell, an employee of the transit district. At trial plaintiff claimed slightly more than $2,700 in special damages, including $921 in doctor's bills, a $336.99 hospital bill, and about $45 for medicines. ¹ Defendant requested permission to show that about 80 percent of the plaintiff's hospital bill had been paid by plaintiff's Blue Cross insurance carrier and that some of his other medical expenses may have been paid by other insurance. The superior court thoroughly considered the then very recent case of City of Salinas v. Souza & McCue Construction Company (1967) 66 Cal.2d 217, 57 Cal.Rptr. 337, 424 P.2d 921, distinguished the Souza case on the ground that Souza involved a contract setting, and concluded that the judgment should not be reduced to the extent of the amount of insurance payments which plaintiff received. The court ruled that defendants should not be permitted to show that plaintiff had received medical coverage from any collateral source.

After the jury verdict in favor of plaintiff in the sum of $16,300, defendants appealed, raising only two contentions: (1) The trial court committed prejudicial error in refusing to allow the introduction of evidence to the effect that a portion of the plaintiff's medical bills had been paid from a collateral source. (2) The trial court erred in denying defendant the opportunity to determine if plaintiff had been compensated from more than one collateral source for damages sustained in the accident.

We must decide whether the collateral source rule applies to tort actions involving public entities and public employees in which the plaintiff has received benefits from his medical insurance coverage.

2. The collateral source rule.

The Supreme Court of California has long adhered to the doctrine that if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor. (See, e.g., Peri v. Los Angeles Junction Ry. Co. (1943) 22 Cal.2d 111, 131, 137 P.2d 441.) ² As recently as August 1968 we unanimously reaffirmed our adherence to this doctrine, which is known as the 'collateral source rule.' (De Cruz v. Reid (1968) 69 Cal.2d 217, 223--227, 70 Cal.Rptr. 550, 444 P.2d 342; see City of Salinas v. Souza & McCue Construction Co., supra, 66 Cal.2d 217, 226, 57 Cal.Rptr. 337, 424 P.2d 921.)

Although the collateral source rule remains generally accepted in the United States, ³ nevertheless many other jurisdictions ⁴ have restricted ⁵ or repealed it. In this country most commentators have criticized the rule and called for its early demise. ⁶ In Souza we took note of the academic criticism of the rule, characterized the rule as 'punitive,' and held it inapplicable to the governmental entity involved in that case.

We must, however, review the particular facts of Souza in order to determine whether it applies to the present case. The City of Salinas brought suit against Souza & McCue Construction Company, a public works contractor, and its pipe supplier for breach of a contract to construct a sewer pipe line. Souza cross-complained against the city, alleging fraudulent misrepresentation and breach of implied warranty of site conditions; and against the pipe supplier, alleging a guarantee of performance of the piping and a promise to indemnify Souza for any losses. The trial court found that the city materially misrepresented soil conditions by failing to inform Souza of unstable conditions known to the city, that with the city's knowledge Souza relied upon the misrepresentations in bidding, and that Souza should recover damages proximately caused by the city's fraudulent breach.

We held that the trial court improperly determined damages against the city by refusing to allow the city to show that the supplier had recompensed Souza for some of the damages caused by the city's breach. In this contract setting in which the supplier did not constitute a wholly independent collateral source, ⁷ we held that the collateral source rule cannot be applied against public entities because the collateral source rule appears punitive in nature ⁸ and punitive damages cannot be imposed on public entities. ⁹

Although Souza's reasoning as to punitive damages might appear to apply to private tortfeasors ¹⁰ as well as public entities and to torts as well as contract actions, ¹¹ we did not there consider the collateral source rule in contexts different from the specific contractual setting and particular relationship of the parties involved. We distinguish the present case from Souza on the ground that in Souza the plaintiff received payments from his subcontractor which, in the contractual setting of that case, did not constitute a truly independent source. Obviously, such a 'source' differs entirely from the instant one, which derives from plaintiff's payment of insurance premiums. Here plaintiff received benefits from his medical insurance coverage only because he had long paid premiums to obtain them. Such an origin does constitute a completely independent source. Hence, although we reaffirm the holding in Souza, we do not believe that its reasoning either compels the abolition of the collateral source rule in all cases or requires an unwarranted exemption from the rule of public entities and their employees involved in tort actions. ¹² Souza does not even suggest that public employees should be charged with the extra liability which an exemption for public entities might imply. ¹³

The collateral source rule as applied here embodies the venerable concept that a person who has invested years of insurance premiums to assure his medical care should receive the benefits of his thrift. ¹⁴ The tortfeasor should not garner the benefits of his victim's providence.

The collateral source rule expresses a policy judgment in favor of encouraging citizens to purchase and maintain insurance for personal injuries and for other eventualities. Courts consider insurance a form of investment, the benefits of which become payable without respect to any other possible source of funds. If we were to permit a tortfeasor to mitigate damages with payments from plaintiff's insurance, plaintiff would be in a position inferior to that of having bought no insurance, because his...