Kornegay v. US, Civil Action No. 2:94cv742.

• Decision Date: 19 June 1996
• Docket Number: Civil Action No. 2:94cv742.
• Citation: 929 F. Supp. 219
• Parties: Charlene T. KORNEGAY, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

929 F. Supp. 219

Charlene T. KORNEGAY, Plaintiff, v. UNITED STATES of America, Defendant.

Civil Action No. 2:94cv742.

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

June 19, 1996.

Thomas B. Shuttleworth, Shuttleworth, Ruloff & Giordano, Lisa Palmer O'Donnell, Shuttleworth, Ruloff & Giordano, Virginia Beach, VA, Douglas Lee Hornsby, Shuttleworth, Ruloff, Giordano & Kahle, P.C., Newport News, VA, for plaintiff.

Anita Kay Henry, United States Attorney's Office, Norfolk, VA, for defendant.

OPINION

DOUMAR, District Judge.

Plaintiff Charlene T. Kornegay brings this medical malpractice action alleging that the defendant United States of America and its agents acted negligently in diagnosing her vulvar cancer. The question presented is whether the plaintiff is entitled to recover any medical expenses already paid by the defendant through the Department of Defense program known as CHAMPUS. For the reasons that follow, the Court holds that she is not.

The full background to this case is set forth in a related opinion and order issued this day. In brief, the plaintiff is a dependent of a military retiree; she was harmed as the result of negligent medical care administered by personnel at the Portsmouth Naval Hospital. Because of said negligence, the plaintiff was required to undergo preoperative radiation treatment for her condition, which resulted in a longer period of recovery from surgery as well as complications from which she continues to suffer. The Court has accordingly awarded the plaintiff damages for her medical expenses and pain and suffering.

The sole question presented here is whether, in recovering the reasonable and necessary medical expenses she incurred as a result of the preoperative radiation treatment, the plaintiff may recover for any medical expenses already paid by the United States. In legal terms, is the payment by the United States from a "collateral source," thus allowing her a damage award for that amount — even though it has already been expended on behalf of the federal government through CHAMPUS? To answer this question requires examination of the "collateral source" rule.

In actions against the United States under the Federal Tort Claims Act, as this case is, the district court must apply the "whole law of the state where the negligent act or omission occurred." Richards v. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 591-92, 7 L.Ed.2d 492 (1962). Virginia follows the collateral source rule, which bars a tortfeasor from offsetting his damages if the tort victim has received compensation or indemnity from a source "collateral" (or other than) to the tortfeasor. Schickling v. Aspinall, 235 Va. 472, 369 S.E.2d 172, 174 (1988). The Virginia Supreme Court recently explained the purpose of the rule:

The collateral source rule is designed to strike a balance between two competing principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make him whole, but no more; and (2) a defendant is liable for all damages that proximately result from his wrong. A plaintiff who receives a double recovery for a single tort enjoys a windfall; a defendant who escapes, in whole or in part, liability for his wrong enjoys a windfall. Because the law must sanction one windfall and deny the other, it favors the victim of the wrong rather than the wrongdoer.

Id.

The rule is easy to apply when the tortfeasor and the person or entity providing the benefit are separate parties. It becomes more difficult, as in the case at bar, when the two parties are the same entity — here, the United States.

The plaintiff is a dependent of a military retiree. The Department of Defense provides medical care to military personnel, retirees, and their dependents through two means: care directly provided at government facilities or through reimbursement to private providers. The latter is covered under the Civilian Health and Medical Program of the Uniformed Services, or CHAMPUS. 10 U.S.C. §§ 1079, 1086. CHAMPUS paid a portion of the total bill for plaintiff's radiation treatment and hospital stay.

Is CHAMPUS a collateral source? In applying the collateral source rule in cases involving federal programs, federal courts have generally focused on this central question:¹ whether or not the plaintiffs had paid into the government program that awarded them the benefit. If so, the courts reasoned that such plaintiffs deserved the benefit of the bargain, and were not barred from recovering both from the tortfeasor and the government program. Conversely, if the individual had not paid money out of his own pocket for the benefit received, the government has been entitled to offset damages against the benefits provided. See, e.g., Manko v. United States, 830 F.2d 831, 836-37 (8th Cir.1987) (collateral source rule applied because plaintiff had contributed to Social Security and Medicare programs). Similarly, courts have characterized the rule by distinguishing between whether the funds came out of "general funds" in the Treasury (not a collateral source), or a "special" or "separately funded" program (a collateral source). See, e.g., Mooney v. United States, 619 F.Supp. 1525 (D.N.H.1985).

Against this background, this case is straightforward: CHAMPUS is not an insurance program to which military personnel contribute. It is funded from the U.S. Treasury by moneys appropriated by Congress in the annual Defense Appropriations Acts. See 32 C.F.R. § 199.1(d) & (e). Therefore, according to the general rule, the collateral source rule should not apply, and the plaintiff may not recover any amount already provided by the United States through CHAMPUS.

One court in this district, however, has held to the contrary. In Murphy v. United States, 836 F.Supp. 350 (E.D.Va.1993), Judge Morgan held that CHAMPUS should be regarded as a collateral source. The Court reasoned that because the payment of benefits under CHAMPUS is "akin to the payment from the insurer to its insured," and because the program constituted "consideration of value equal to a payroll deduction" plan, the plaintiff, an active-duty officer, should be not barred from recovering from both CHAMPUS and the tortfeasor — the United States. Id. at 353. The Murphy Court disagreed with an earlier holding of this Court. Diaz v. United States, 655 F.Supp. 411 (E.D.Va.1987) (Hoffman, J.) (discussed infra).

This Court believes Diaz was properly decided by Judge Walter E. Hoffman and will follow it, and specifically declines to follow Murphy. Although the Fourth Circuit has not squarely addressed the question of whether the collateral source rule should be applied to CHAMPUS benefits, it has discussed the principle in analogous cases. In United States v. Brooks, 176 F.2d 482 (4th Cir.1949), a case under the Federal Tort Claims Act (and based on North Carolina law), the Court offset disability payments made by the Veterans' Administration from tort damages incurred by United States. The Court stated that:

It seems perfectly clear that in making the award of damages to plaintiff nothing should be included on account of hospital or medical expenses which the government has paid or on account of loss of earning power for the period for which he has drawn Army pay. It seems equally clear that the award should be diminished by the amount which he has received or is to receive from the government by way of disability benefits ... for to the extent the government has compensated plaintiff by disability payments for the loss resulting from his injury he cannot be said to have suffered loss by reason thereof.

Id. at 484 (citation omitted).

In United States v. Price, 288 F.2d 448 (4th Cir.1961) (a case involving Virginia law), the Court noted, first, that the fact that the benefit came from the defendant tortfeasor "does not itself preclude the possibility that it is from a collateral source." Id. at 450. The Court ruled that benefits received under the Civil Service Retirement Act should not be setoff against tort damages because the plaintiff had contributed (indeed, was required to contribute by virtue of his federal service) to the retirement program.

Such retirement benefits are obviously not mere gratuities to injured persons paid on account of their injuries. Rather, the Government in its role of employer has ... set up a retirement plan under which both the employees and the employer contribute. These retirement payments are entirely separate from the Government's acknowledged statutory duty as tortfeasor to pay any injured person for particular injuries

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