Melo v. Allstate Ins. Co.

• Decision Date: 26 May 2011
• Docket Number: Case No. 2:10–cv–104.
• Citation: 800 F.Supp.2d 596
• Parties: Daniel MELO, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Vermont

800 F.Supp.2d 596

Daniel MELO, Plaintiff,

v.ALLSTATE INSURANCE COMPANY, Defendant.

Case No. 2:10–cv–104.

United States District Court, D. Vermont.

May 26, 2011.

Chad V. Bonanni, Esq., Bergeron, Paradis & Fitzpatrick, Essex Junction, VT, John J. Bergeron, Bergeron, Paradis & Fitzpatrick, LLP, Burlington, VT, for Plaintiff.

Richard H. Wadhams, Jr., Pierson Wadhams Quinn Yates & Coffrin, LLP, Burlington, VT, for Defendant.

Memorandum and Order

WILLIAM K. SESSIONS III, District Judge.

Plaintiff Daniel Melo has filed a motion in limine seeking a pretrial order that will define the reasonable value of his medical bills to be the amount his healthcare providers charged him for his care, and not the amount that the providers received from his healthcare insurance; and exclude from evidence any testimony, references and/or arguments that his lost income should be limited to an after-tax amount. Pl.'s Mot. in Limine Re: Medical Specials & Lost Wages 1 (ECF No. 37). For the reasons that follow, the motion is granted in part and denied in part.

I. Background

Melo was struck by a vehicle operated by an underinsured driver. The driver's insurance company tendered the limits of its policy, and Melo seeks compensation from Defendant Allstate Insurance Company (“Allstate”), his automobile insurance carrier, for his injuries and losses that exceed the amount received from the driver's insurance. Allstate has admitted its liability for underinsured motorists benefits, and the only issue remaining for trial is the amount of Melo's damages.

Melo sustained serious injuries; he was hospitalized for nineteen days, and underwent extensive outpatient care. The total amount billed by his medical providers as of the date of his motion was $149,816.17. He avers that he will require surgery in the future, and will incur significant future medical expenses.

Melo, owner of Shelburne Dental Group in Shelburne, Vermont, also suffered significant loss of income from his dental practice as a result of the accident. He was unable to work from October 4, 2008, to January 4, 2009. He has calculated his loss of income at $174,231.00.

Melo asserts that his medical services should be valued at the amounts actually charged by his medical providers. Allstate contends that the only admissible evidence of the value of Melo's medical services is the amount actually accepted by his medical providers as payment in full.

Melo also asserts that reimbursement for lost income should be valued at his net operating income after business expenses but before taxes. Allstate counters that it is proper for a jury to hear evidence of Melo's post-tax lost income and for it to be instructed that any amount awarded to Melo will not be taxable income.

II. Discussion ¹A. The Reasonable Value of Medical Services

In personal injury cases, as in other tort cases, “compensation is provided, as nearly as possible, to restore a person damaged to the position he would have been in had the wrong not been committed.” My Sister's Place v. City of Burlington, 139 Vt. 602, 433 A.2d 275, 281 (1981). “For [considerably] more than a century, Vermont courts have applied the collateral source doctrine to deny to a defendant a setoff for payment the plaintiff receives from a third, or collateral, source,” however. Hall v. Miller, 143 Vt. 135, 465 A.2d 222, 225 (1983); accord Windsor Sch. Dist. v. State, 2008 VT 27, ¶ 32, 183 Vt. 452, 956 A.2d 528, 542; see Harding v. Town of Townshend, 43 Vt. 536, 538 (1871) (“The policy of insurance is ... in the nature of a wager between the plaintiff and a third person, the insurer, to which the defendant was in no measure privy ...; [there is no] legal principle which seems to require that it be ultimately appropriated to the defendant's use and benefit.”).

The purpose for the collateral source rule is “to prevent the wrongdoer from escaping liability for his or her misconduct,” regardless of whether a plaintiff may ultimately also be compensated for injuries by a source independent of the tortfeasor. Windsor Sch. Dist., 2008 VT 27, ¶¶ 32, 34, 956 A.2d at 542; My Sister's Place, 433 A.2d at 281. The rule, and the cases interpreting the rule, “reflect the philosophy that a tortfeasor should not reap the benefits of a victim's providence” in obtaining insurance. Id.; see Windsor Sch. Dist., 2008 VT 27, ¶ 32, 183 Vt. 452, 956 A.2d 528; see generally Kevin S. Marshall & Patrick W. Fitzgerald, The Collateral Source Rule and its Abolition: an Economic Perspective, 15 Kan. J.L. & Pub. Pol'y 57, 58–60 (2005) (quoting Harding v. Town of Townshend in a discussion of the collateral source rule and its origin).

Evidence that a plaintiff has received compensation for his injuries from insurance or any other third party collateral source is therefore inadmissible in mitigation of damages. Houghton v. Leinwohl, 135 Vt. 380, 376 A.2d 733, 737 (1977). Allstate argues nevertheless that evidence of payment from Melo's healthcare insurance is admissible for another purpose, that is, as evidence of the reasonable value of medical services.

“The damage measure for medical expenses is ... the reasonable value of the services rendered to the plaintiff.” Smedberg v. Detlef's Custodial Serv., Inc., 2007 VT 99, ¶ 37, 182 Vt. 349, 940 A.2d 674, 685 (quotation marks and citation omitted).

The Vermont Supreme Court has not decided whether the collateral source rule applies to bar evidence of third party payment that is directed to proof of the value of medical services rendered rather than to proof of the amount of damages owed by a defendant. Vermont's trial courts have reached different conclusions, although the majority have ruled that evidence of collateral source payments is not admissible to prove the reasonable value of medical services rendered. See, e.g., Beaudin v. Kupersmith, No. S0803–07 CnC, slip op. at 3 (Vt.Super.Ct. Oct. 26, 2010) (Skoglund, J., Supreme Court Justice sitting in Superior Court) (holding that to permit evidence of amounts paid by a third-party source would circumvent the purpose of the collateral source rule); O'Bryan v. Hannaford Bros., Inc., No. 10–1–07 Ancv, slip op. at 3–4, 2008 WL 6825535 (Vt.Super.Ct. Dec. 30, 2008) (Corsones, J.) (holding that the collateral source rule bars the admission of evidence of third-party payments, even if offered to determine the reasonable value of medical treatment rendered); Rosa v. Dartmouth–Hitchcock Med. Ctr., No. 93–2–06 Wmcv, slip op. at 3 (Vt.Super.Ct. Nov. 26, 2008) (Suntag, J.) (granting motion to exclude evidence of Medicare/Medicaid payments made on plaintiff's behalf); Madrid v. Paquette, No. 194–7–07 Ancv, slip op. at 3–4 (Vt.Super.Ct. July 28, 2008) (Toor, J.) (holding that evidence of collateral source payments is inadmissible to prove reasonable value of medical services); Buker v. King, No. 523–11–05 WRCV, slip op. at 3, 2008 WL 7414616 (Vt.Super.Ct. June 23, 2008) (Morris, J.) (granting motion in limine excluding evidence of amounts paid by Medicaid for medical services rendered as violating collateral source rule); Gaston v. Nickerson, No. S1349–01 CnC, slip op. at 3 (Vt.Super.Ct. Dec. 2, 2003) (Bryan, J.) (holding that the collateral source rule applied to require submission to the jury of amounts billed rather than amounts actually paid). But see McGowan v. Chase, No. S0739–06 Cnc, slip op. at 2–3, 2009 WL 2969645 (Vt.Super.Ct. May 11, 2009) (Pearson, J.) (observing in dictum that the more appropriate measure of damages is the amount received by the medical provider); Bora v. Chittenden Cnty. Transp. Auth., No. S0243–04 CnC, slip op. at 4, 2006 WL 4660871 (Vt.Super.Ct. Apr. 14, 2006) (Joseph, J.) (limiting damages evidence to amounts actually paid to healthcare providers).

In addressing an unsettled area of state law, a federal court sitting in diversity must “ ‘carefully predict how the state's highest court would resolve the uncertaint[y].’ ” Travelers Ins. Co. v. Carpenter, 411 F.3d 323, 329 (2d Cir.2005) (quoting Santalucia v. Sebright Transp., Inc., 232 F.3d 293, 297 (2d Cir.2000)). “ ‘In making this prediction, [the Court] give[s] the fullest weight to pronouncements of the state's highest court, here the Vermont Supreme Court, while giving proper regard to relevant rulings of the state's lower courts. [The Court] may also consider decisions in other jurisdictions on the same or analogous issues.’ ” Id. (quoting Maska U.S., Inc. v. Kansa Gen. Ins. Co., 198 F.3d 74, 78 (2d Cir.1999)).

The Vermont Supreme Court has steadfastly adhered to the collateral source rule, noting that it is most commonly applied where, as here, insurance companies have compensated plaintiffs for their injuries. See Windsor Sch. Dist., 2008 VT 27, ¶ 32, 956 A.2d at 542. The collateral source rule applies to actions sounding in contract and breach of warranty, see Hall, 465 A.2d at 226, and actions where liability is determined without a finding of fault. See Windsor Sch. Dist., 2008 VT 27, ¶¶ 33, 41, 956 A.2d at 542, 544. In Windsor School District, the Court cited to a decision of the Supreme Court of Wisconsin in its discussion of the policy goals of the collateral source rule. See id. ¶ 35, 956 A.2d at 543 (citing Leitinger v. DBart, Inc., 2007 WI 84, ¶ 33, 302 Wis.2d 110, 736 N.W.2d 1, 10).

The issue in Leitinger was identical to the issue presented here. Leitinger was a suit for damages from an injury suffered by an employee at a construction site. The parties disputed the reasonable value of the plaintiff's medical treatment, where the healthcare provider billed the plaintiff $154,818.51 for the treatment, but accepted $111,394.73 from the plaintiff's health insurance company. At issue was whether the collateral source rule barred the introduction of evidence of the amount paid by the health insurance company when offered for the purpose of establishing the reasonable value of the medical treatment rendered. Leitinger, 2007 WI 84, ¶¶ 3–4, 736 N.W.2d at 3.

The Leitinger court held “that...