Karsten v. Kaiser Foundation Health Plan, Civ. A. No. 92-554-A.

• Court: United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
• Writing for the Court: Stephen M. Garver, Cheryl G. Rice, Reston, VA, for plaintiff
• Citation: 808 F. Supp. 1253
• Parties: Frances T. KARSTEN v. KAISER FOUNDATION HEALTH PLAN OF the MID-ATLANTIC STATES, INC.
• Docket Number: Civ. A. No. 92-554-A.
• Decision Date: 21 December 1992

808 F. Supp. 1253

Frances T. KARSTEN
v.
KAISER FOUNDATION HEALTH PLAN OF the MID-ATLANTIC STATES, INC.

Civ. A. No. 92-554-A.

United States District Court, E.D. Virginia, Alexandria Division.

December 21, 1992.

Stephen M. Garver, Cheryl G. Rice, Reston, VA, for plaintiff.

R. Harrison Pledger, Jr., McLean, VA, for defendant.

MEMORANDUM OPINION

CACHERIS, Chief Judge.

At issue is whether under Virginia law the collateral source rule¹ allows a plaintiff

808 F. Supp. 1254

to recover compensatory damages for medical bills previously satisfied by her health maintenance organization ("HMO"), whom she has successfully sued for medical malpractice. For reasons discussed herein, this Court finds that the collateral source rule applies so that plaintiff may receive compensatory damages for medical bills already paid according to her HMO contract, where that same HMO is also liable as the tortfeasor.²

Plaintiff, Frances T. Karsten ("Karsten"), sued her HMO, Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. ("Kaiser") for malpractice, alleging that their negligent care and treatment caused her to deliver a premature stillborn fetus on April 2, 1990. Although Kaiser denied any malpractice, on November 12, 1992 a jury awarded Karsten $210,000.00.

Karsten is a member and subscriber to Kaiser's Health Maintenance Plan. She personally paid a portion of the premium for the plan with a deduction that was taken regularly from her paycheck. At trial she introduced exhibits three through seven, which are hospital bills incurred as a result of the incident in question. These bills were paid by Kaiser prior to trial. Kaiser agrees that it was required to pay these medical bills regardless of fault, based upon its contractual obligation to the plaintiff as a plan subscriber. Kaiser objected to the bills as part of the plaintiff's compensatory damages, arguing that Karsten should have been barred from presenting the bills to the jury because Kaiser already had paid them.

This case falls within the Court's jurisdiction based upon diversity of citizenship, and accordingly, the Court must apply the substantive law of Virginia, which includes Virginia's articulation of the collateral source rule. See Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); United States v. Price, 288 F.2d 448, 449-50 (4th Cir.1961). Before this Court can determine whether the collateral source rule applies, it must first decide what statement of the collateral source rule the Virginia Supreme Court would apply to the proffered medical bills. The choice lies between a statutory statement of the rule verses the common law distillation of the rule as stated by the Virginia high court.

Plaintiff first points to a statute that she claims is the Virginia legislature's general codification of the collateral source rule:

In any suit brought for personal injury or death, provable damages for loss of income due to such injury or death shall not be diminished because of reimbursement of income to the plaintiff or decedent from any other source, nor shall the fact of any such reimbursement be admitted into evidence.

808 F. Supp. 1255

Va.Code Ann. § 8.01-35 (Michie 1992). Yet this statute on its face states that it applies only to "damages for loss of income." The word "income" is defined as "a gain or recurrent benefit usually measured in money that derives from capital or labor." Webster's Ninth New Collegiate Dictionary 610 (9th ed. 1986). Medical bills can in no way be construed to fall within this meaning of the word "income." Thus, the statute is interpreted to apply to situations where there truly was a "loss of income"; namely, where the plaintiff has lost the ability to earn wages or benefits through the application of labor or capital. This interpretation is in keeping with Virginia cases construing the phrase "loss of income" as a part of compensatory damages separate and distinct from losses incurred due to "medical bills or expenses." See, e.g., Davoudlarian v. Krombein, 244 Va. 88, 418 S.E.2d 868, 870 (1992); Johnson v. Smith, 241 Va. 396, 403 S.E.2d 685 (1991); Bulala v. Boyd, 239 Va. 218, 389 S.E.2d 670 (1990).

It is also noted that in other statutes dealing with damages, the Virginia legislature itself distinguishes between loss of income and losses incurred for medical bills or expenses. See, e.g., Va.Code Ann. § 8.01-52 (Michie 1992). Thus, this Court finds that section 8.01-35 is limited by its own terms to damages for "loss of income," and that the Virginia Supreme Court and the Virginia legislature view this as separate and distinct from losses incurred because of medical expenses. Therefore, section 8.01-35 does not apply where the plaintiff seeks to introduce medical bills.

Although the Court finds section 8.01-35 inapplicable to this situation, this does not answer the question of whether the common law collateral source rule as applied generally by the Virginia courts would allow the plaintiff to present the medical bills as evidence of damages. Thus, the Court turns next to an examination of the collateral source rule as applied in the Virginia courts.

The Virginia Supreme Court has discussed the collateral source rule in several cases. See Schickling v. Aspinall, 235 Va. 472, 369 S.E.2d 172, 174 (1988); Walthew v. Davis, 201 Va. 557, 111 S.E.2d 784, 787-88 (1960); Burks v. Webb, 199 Va. 296, 99 S.E.2d 629, 636 (1957); Johnson v. Kellam, 162 Va. 757, 175 S.E. 634, 636-37 (1934); Owen v. Dixon, 162 Va. 601, 175 S.E. 41, 43 (1934); Baltimore & Ohio R.R. v. Wightman's Adm'r, 70 Va. 431, 445-46 (1877), rev'd on other grounds sub nom. Railroad Co. v. Koontz, 104 U.S. 5, 26 L.Ed. 643 (1881).

In applying the collateral source rule, the Virginia Supreme Court has stated:

the reason for this rule is that the defendant, who by his negligence has injured another, owes to such other compensation for the injuries he has inflicted, and the payment for those injuries from a collateral source cannot relieve the defendant of his obligation.

. . . . .

"There can be no abatement of damages on the principle of partial compensation received for the injury, where it comes from a collateral source, wholly independent of the defendant, and is as to him res inter alios acta."

. . . . .

The payment of such moneys not being procured by the defendant, and they not having been either paid or received to satisfy in whole or in part his liability, he can derive no advantage therefrom in mitigation of damages for which he is liable.

Johnson, 175 S.E. at 636-37 (quoting Regan v. New York & New England R. Co., 60 Conn. 124, 22 A. 503, 505 (1891)). The other Virginia cases dealing with the collateral source rule have continued to echo this reasoning. See Schickling, 369 S.E.2d at 174; Walthew, 111 S.E.2d at 787-88; Burks, 99 S.E.2d at 636; Owen, 175 S.E. at 43. The rub here is that both sides can point to different portions of the above quoted language in support of their conflicting positions. The reality is that the Virginia Supreme Court has not yet considered whether the collateral source rule applies where the insurer and tortfeasor are the same.

808 F. Supp. 1256

Defendant's argument as to why the medical bills should be excluded stems from a facile fixation on the shorthand nomenclature — "collateral source rule" — attached to the proposition rather than discussing the reasoning that led to the common law's development of the rule. Defendant's logic proceeds thus: 1) the "collateral source rule" would apply where...