Martinez v. Milburn Enterprises, Inc., No. 100,865 (Kan. 6/4/2010)

• Decision Date: 04 June 2010
• Docket Number: No. 100,865.,100,865.
• Parties: KAREN MARTINEZ, <I>Appellant,</I> v. MILBURN ENTERPRISES, INC., <I>Appellee.</I>
• Court: Kansas Supreme Court

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KAREN MARTINEZ, Appellant, v. MILBURN ENTERPRISES, INC., Appellee.

No. 100,865.

Supreme Court of Kansas.

Opinion filed June 4, 2010.

SYLLABUS BY THE COURT

1. At common law, the collateral source rule prevented the jury from hearing evidence of payments made to an injured person by a source independent of the tortfeasor as a result of the occurrence upon which the personal injury action is based. Under the collateral source rule, benefits received by the plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer.

2. The abuse of discretion standard of review includes review to determine that the district court's discretion was not guided by erroneous legal conclusions.

3. The purpose of awarding damages is to make a party whole by restoring that party to the position he or she was in prior to the injury.

4. The collateral source rule applies to payments received gratuitously as well as those received as a result of an obligation. As a result, a benefit secured by the injured party through insurance contracts, advantageous employment arrangements, or gratuity from family or friends should not benefit the tortfeasor by reducing his or her liability for damages.

5. The reasonable expense of an injured plaintiff's medical treatment is a proper element of economic damages, including when the medical services are self-administered or gratuitously provided by family members. The reasonableness of the expenses is a question for the finder of fact. Consequently, the defendant has the right to challenge the reasonableness of plaintiff's medical expenses.

6. Evidence relevant to determining the reasonable value of an injured plaintiff's medical expenses may include the amount actually billed by the health care provider. The evidence may also include write-offs or other acknowledgments that something less than the charged amount has satisfied, or will satisfy, the amount billed. Accordingly, neither the amount billed nor the amount actually accepted after a write-off conclusively establishes the reasonable value of medical services.

7. When a finder of fact is determining the reasonable value of medical services, the collateral source rule bars admission of evidence stating that the expenses were paid by a collateral source. However, the rule does not address, much less bar, the admission of evidence indicating that something less than the charged amount has satisfied, or will satisfy, the amount billed.

8. When evidence is introduced for a limited purpose, the trial court should explain the limitation to the jury at the time of its introduction and limit its application to that purpose.

9. Under PIK Civ. 4th 102.40, whenever any evidence has been admitted limited to one purpose, the jury is to be instructed that it should not consider that evidence for any other purpose.

10. Relevant evidence is any evidence having any tendency in reason to prove any material fact. Relevance only requires a logical connection between the asserted facts and the inferences they are intended to establish.

11. In a negligence action, recovery may be had only where there is evidence showing with reasonable certainty the damage was sustained as a result of the negligence. Recovery may not be had where the alleged damages are too conjectural or speculative to form a basis for measurement. To warrant recovery of damages, therefore, there must be some reasonable basis for computation which will enable the trier of fact to arrive at an estimate of the amount of the loss.

12. In this personal injury case involving private health insurance write-offs, it is held that the collateral source rule does not apply to bar evidence of (1) the amount originally billed by the health care provider for plaintiff's medical treatment or (2) the reduced amount accepted by the provider in full satisfaction of the amount billed, regardless of the source of payment. However, evidence of the source itself is inadmissible under the collateral source rule. Evidence of the amount originally billed and the reduced amount accepted in full satisfaction are relevant to prove the reasonable value of the medical treatment, which is a question for the finder of fact.

Appeal from Rice district court; MIKE KEELEY, judge. Opinion filed June 4, 2010. Reversed and remanded.

Mitchell Rice, of Bretz Law Offices, L.L.C., of Hutchinson, argued the cause, and Matthew L. Bretz, of the same firm, was with him on the brief for appellant.

Dustin L. DeVaughn, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., of Wichita, argued the cause and was on the brief for appellee.

James R. Howell, of Prochaska, Giroux & Howell, of Wichita, was on the brief for amicus curiae Kansas Association for Justice.

Lyndon W. Vix, of Fleeson, Gooing, Coulson & Kitch, L.L.C. of Wichita, was on the brief for amicus curiae Kansas Association of Defense Counsel.

The opinion of the court was delivered by

NUSS, J.:

This civil interlocutory appeal concerns the possible application of the collateral source rule to medical bill write-offs.

FACTS AND HOLDING

The essential facts are straightforward. On July 23, 2005, plaintiff Karen Martinez slipped and fell while shopping at defendant's business in Lyons, Kansas. She underwent back surgery at Wesley Medical Center and was ultimately billed $70,496.15. The hospital accepted $5,310 in satisfaction of the bill: $4,689 from plaintiff's private health insurance company, Coventry Health Systems (Coventry), and $621 from plaintiff as her deductible and co-pay. Pursuant to its contract with Coventry, the hospital wrote off the balance of $65,186.15.

In plaintiff's suit for recovery of damages, defendant filed a motion in limine asking the district court to prohibit plaintiff from claiming the full $70,496.15 as damages. The defendant apparently erred in its recitation of the specific amounts paid by each source to satisfy the bill, as well as the total amount paid to the hospital. Those errors apparently were repeated by plaintiff and the district court and by the parties in their briefs to this court. The facts and resultant parties' arguments in this opinion have been modified to conform with the amounts stated in Coventry's Explanation of Benefits, which was attached to defendant's motion.

The court granted defendant's motion, limiting plaintiff's recovery to those amounts actually paid by Coventry and plaintiff ($5,310) and preventing her from submitting evidence of medical expenses in excess of that amount. The court made the findings required by K.S.A. 60-2102(c) for an interlocutory appeal, and the Court of Appeals granted plaintiff's application. We transferred the case on our own motion pursuant to K.S.A. 20-3018(c).

The issue on appeal is whether in a case involving private health insurance write-offs, the collateral source rule applies to bar evidence of (1) the amount originally billed for medical treatment or (2) the reduced amount accepted by the medical provider in full satisfaction of the amount billed, regardless of the source of payment. We hold that the rule does not bar either type of evidence; both are relevant to prove the reasonable value of the medical treatment, which is a question for the finder of fact. Accordingly, we reverse and remand to the district court for further proceedings.

ANALYSIS

Collateral source rule and the parties' arguments

Our analysis starts with this court's past description of the collateral source rule as follows:

"`At common law, the collateral source rule prevented the jury from hearing evidence of payments made to an injured person by a source independent of the tortfeasor as a result of the occurrence upon which the personal injury action is based. The court has stated the rule as follows: "Under the `collateral source rule,' benefits received by the plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer." (Emphasis added.) Rose v. Via Christi Health System, Inc., 279 Kan. 523, 529, 113 P.3d 241 (2005) (Rose II) (quoting Farley v. Engelken, 241 Kan. 663, Syl. ¶ 1, 740 P.2d 1058 [1987]; Thompson v. KFB Ins. Co., 252 Kan. 1010, 1014, 850 P.2d 773 [1993]).

After a lengthy recitation of the Kansas appellate court decisions on the collateral source rule, plaintiff contends they create the following standard: "[W]hen an injured person has negotiated for, paid for or contributed in kind for a benefit that reduces his obligation to pay for injuries caused by a tortfeasor, that benefit should not be used to reward the tortfeasor or anyone responsible for his debt." Consequently, she argues that the district court failed to apply the collateral source rule and, as a result, $65,186.15 of the original hospital bill, $70,496.15, would be incorrectly withheld from the jury's consideration of her damages.

In holding that the collateral source rule is inapplicable to the $65,186.15 write-off, the district court explained "The court finds the Collateral Source Rule is inapplicable in this case as that is set forth in Bates v. Hogg, 22 Kan. App. 2d 705 (1996). The court finds this is a pretrial declaration of law that the plaintiff's recovery should be limited to the amount actually paid by the private insurance company. The court finds the proper measure of damages for medical expenses under these facts and circumstances is the actual amount paid by the plaintiff's own private insurance company . . . . To allow for the write-off amount is a misleading piece of evidence that did not actually occur as damage to the plaintiff. The evidence is the plaintiff cannot and will not be held responsible for the write-off, pursuant to the contract between the hospital and her own private insurance company. Therefore, only her actual medical damage is [$5,310] . . . . To require the defendant to pay for some amount that was not...