Mead v. National RR Passenger Corp.

• Citation: 676 F. Supp. 92
• Decision Date: 26 May 1987
• Docket Number: Civ. No. Y-86-717.
• Parties: Richard MEAD v. NATIONAL RAILROAD PASSENGER CORPORATION t/a Amtrak v. HOLLAND COMPANY.
• Court: U.S. District Court — District of Maryland

676 F. Supp. 92

Richard MEAD v. NATIONAL RAILROAD PASSENGER CORPORATION t/a Amtrak v. HOLLAND COMPANY.

Civ. No. Y-86-717.

United States District Court, D. Maryland.

May 26, 1987.

Irving Schwartzman, and Roger J. Greezicki, Balto., Md., for plaintiff.

Joseph P. Gill, Mark J. Daneker, and Michael W. Prokipik, Balto., Md., for defendant.

Jonathan E. Claiborne, Harry S. Johnson, and Warren N. Weaver, Balto., Md., for third-party defendant Holland Co.

MEMORANDUM

JOSEPH H. YOUNG, District Judge.

Richard Mead, injured during the course of his employment with the National Railroad Passenger Corporation ("Amtrak"), sued Amtrak under the Federal Employers' Liability Act, 45 U.S.C. § 51 et seq. Amtrak subsequently impleaded the Holland Company as a third-party defendant. Following a jury trial of Mead's claim against Amtrak, Amtrak's third-party claim against Holland was tried to the Court while the jury deliberated.

Before proceeding to the resolution of Amtrak's claim against Holland, a preliminary issue requires discussion. Prior to trial of Mead's action against his employer, Amtrak filed a motion in limine to preclude plaintiff from introducing any testimony or other evidence regarding medical expenses incurred by Mead which had already been paid by Amtrak. Both parties presented oral argument, following which this Court granted Amtrak's motion in an oral opinion and agreed to issue this written memorandum further explicating its decision.

I. AMTRAK'S MOTION IN LIMINE

Pursuant to the terms of the collective bargaining agreement between the railroad and its employees, the bulk of Mead's medical expenses were paid for by Amtrak through its insurance coverage, the Travelers Insurance Company Group Policy Contract GA-23000. Amtrak sought a pre-trial ruling that medical bills paid by Amtrak or its insurer on behalf of Mead were not governed by the collateral source rule, and that plaintiff should be prohibited from presenting any evidence of these medical expenses.

Plaintiff opposed Amtrak's motion, arguing that it contravened Section 5 of the Federal Employers' Liability Act (FELA), which provides that "any contract ... or device ..., the purpose or intent of which shall be to enable any common carrier to exempt itself from any liability created by this chapter, shall to that extend be void." 45 U.S.C. § 55.¹ Plaintiff contended that an order excluding evidence of medical expenses paid by defendant's insurer would effectively exempt Amtrak from liability for the cost of all medical care resulting from plaintiff's work-related injury.

In support of his argument, plaintiff relied on Poole v. Baltimore & Ohio R.R. Co., 657 F.Supp. 1 (D.Md.1985), wherein a motion in limine identical to the one at issue here was denied. That decision was grounded on the collateral source rule, which prevents a tortfeasor from mitigating damages by setting off payments received by the injured party from an independent source.

Application of the collateral source rule depends upon the character of the benefits received, as explained in Haughton v. Blackships, Inc., 462 F.2d 788 (5th Cir. 1972):

The policy considerations for the collateral source rule are apparent. On the one hand, an employer-tortfeasor who voluntarily undertakes to indemnify itself against liability by payment into a fund for that purpose, should not be penalized by permitting the plaintiff a double recovery of his benefits under the fund as well as his full measure of damages. On the other hand, where the employer-tortfeasor makes payment directly or indirectly into a fund established for an independent reason, or where such payment by the employer should be considered in the nature of a fringe benefit or deferred compensation, the employer should not be entitled to benefit by setting off such income in mitigation of his responsibility as a tortfeasor.

462 F.2d at 791. The decisive factor in determining whether the insurance proceeds at issue constitute a collateral source is the character of the benefits received: fringe benefit versus indemnification. Clark v. Nat'l R.R. Passenger Corp., 654 F.Supp. 376, 377 (D.D.C.1987); Nelson v. Penn Central R.R. Co., 415 F.Supp. 225, 226 (N.D.Ohio 1976).

In Poole it was determined that the insurance coverage provided by Traveler's GA-23000 policy was a fringe benefit given in part consideration for the railroad employee's services. As such, the court ruled, it constituted a collateral source and plaintiff was allowed to introduce evidence concerning the cost of the medical treatment he received.

This Court respectfully disagrees with the analysis in Poole. The express terms of the collective bargaining agreement between Amtrak and its employees establishes that Group Policy Contract GA-23000 is designed to indemnify the railroad against liability, and is not intended as a fringe benefit for the employees:

In case of an injury or a sickness for which an employee who is eligible for employee benefits under Group Policy Contract GA-23000 and may have a right of recovery against either the employing railroad or a third party tort-feasor ..., or both, benefits will be provided under the policy contract subject to the provisions hereinafter set forth. The parties hereto do not intend that benefits provided under the policy contract will duplicate, in whole or in part, any amount recovered from either the employing railroad or a third party tort-feasor for hospital, surgical, medical or related expenses of any kind specified in the policy contract, and they intend that benefits provided under the policy contract will satisfy any right of recovery against the employing railroad for such benefits to the extent of the benefits so provided. Accordingly, —

(1) Benefits provided under the policy contract will be offset against any right of recovery the employee may have against the employing railroad for hospital, surgical, medical or related expenses of any kind specified in the policy contract.

Article III, Section A, of the Health and Welfare Agreement dated October 22, 1975. "The parties to the collective bargaining agreement have made unmistakably clear their intent that the insurance policy at issue here is not a fringe benefit for employees...." Clark v. Nat'l R.R. Passenger Corp., supra, 654 F.Supp. at 378.

Because the insurance policy is not a fringe benefit, proceeds paid out under it do not constitute a collateral source. Accordingly, plaintiff has no right to recover as damages those medical expenses paid by Amtrak or its insurer. Evidence of those bills is not relevant to plaintiff's case and should not be admitted. Accord Fuhrman v. Reading Co., 439 F.2d 10, 14 (3d Cir. 1971); Clark v. Nat'l R.R. Passenger Corp., supra (court granted motion in limine to preclude plaintiff from offering evidence of medical expenses paid by defendant or under Group Policy GA-23000); Gonzalez v. Indiana Harbor Belt R.R. Co., 638 F.Supp. 308, 310 (N.D.Ind.1986) (same); Nelson v. Penn Central R.R. Co., supra (insurance policy GA-23000 is indemnity against liability rather than a fringe benefit); Thomas v. Penn Central Co., 379 F.Supp. 24, 26-27 (W.D.Penn. 1974).

Courts which have refused to allow the insurance payments to be set off against a railroad's FELA liability have done so in the absence of the provision in the collective bargaining agreement outlined above. See Patterson v. Norfolk and Western Ry. Co., 489 F.2d 303 (6th Cir.1973); Blake v. Delaware and Hudson Ry. Co., 484 F.2d 204 (2d Cir.1973); Hall v. Minnesota Transfer Ry. Co., 322 F.Supp. 92 (D.Minn. 1971). Indeed, Judge Friendly pointed out in Blake that if "the railroads wish to avoid the harsh result reached by the district court," which allowed an employee to recover the cost of medical care paid for by the railroad, "they can accomplish this by specific provision in the collective bargaining agreement." 484 F.2d at 207 (Friendly, J., concurring). This is precisely what was accomplished by the 1975 agreement providing for setoff.

Returning to plaintiff's original argument against Amtrak's motion, indemnification against FELA liability does not violate Section 5 of FELA. That provision bars railroads from creating devices or entering into contracts that exempt themselves from full liability for employee injuries. The overall concern of the section "is that an employee be compensated to the full extent of his loss, not that an employer be precluded from indemnifying himself against potential FELA liability as, for instance, by carrying liability insurance coverage." Hall v. Minnesota Transfer Ry. Co., supra, 322 F.Supp. at 95. Indemnification against liability is not the same as exemption from liability. The insurance policy at issue does not excuse Amtrak from liability, and thus does not contravene Section 5 of FELA. Clark v. National R.R. Passenger Corp., supra, 654 F.Supp. at 378. Accord Thomas v. Penn Central Co., supra, 379 F.Supp. at 27.

For the foregoing reasons, and in accordance with the oral opinion given at trial, Amtrak's motion in limine was granted.

II. AMTRAK'S CLAIM AGAINST HOLLAND COMPANY

Amtrak's third-party complaint alleges that Holland Company agreed to imdemnify Amtrak against the type of claim brought by Richard Mead. In September 1983, Amtrak hired Holland to perform welding on railroad ties. According to Section V of the purchase-order agreement between Amtrak and Holland, Holland agreed that it would "be responsible for initiating, maintaining and supervising all safety precautions ... in connection with the work." Third-Party Plaintiff Exhibit 3. Holland also agreed:

... to protect, indemnify and save harmless AMTRAK from and against any suit, claim, damage and expense by reason of any accident, injuries, or damages which may occur as a result of the work performed by HOLLAND. HOLLAND shall be responsible for all damages and expenses on account of injuries (including death) to any of the employees of AMTRAK while on the premises of

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