Murphy v. US, Civ. A. No. 2:92cv1309.

• Decision Date: 24 November 1993
• Docket Number: Civ. A. No. 2:92cv1309.
• Citation: 836 F. Supp. 350
• Parties: Diane V. MURPHY, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

836 F. Supp. 350

Diane V. MURPHY, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. A. No. 2:92cv1309.

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

November 24, 1993.

Malcolm Bernard Higgins, II, Virginia Beach, VA and Linda S. Laibstain, Hofheimer, Nusbaum, McPhaul & Samuels, Norfolk, VA, for plaintiff.

Anita K. Henry, Asst. U.S. Atty., U.S. Attorney's Office, Norfolk, VA, for defendant.

SUPPLEMENTARY OPINION AND ORDER

MORGAN, District Judge.

I. Procedural History

On October 6, 1993, this Court entered judgment in favor of the Plaintiff, Diane V. Murphy, against the United States in the amount of Three Million Five Hundred Thousand Eight Hundred One and 42/100 Dollars ($3,500,801.42), 833 F.Supp. 1199. Included in this verdict was an award to the Plaintiff for medical expenses incurred in the treatment which she received as a result of the injuries suffered in the collision which was the subject of this proceeding. The Court allowed the Plaintiff the full amount of her medical expenses, although the sum of Twenty-Eight Thousand Five Hundred Seventy-Eight and 34/100 Dollars ($28,578.34) had been paid in the Plaintiff's behalf by the United States Government, pursuant to medical benefits to which the Plaintiff was entitled by virtue of her spouse's active-duty service with the United States Navy.

Medical benefits to active duty personnel, as well as their spouses and dependents, may be furnished by two general methods: the first method is through care furnished at naval or other government-operated medical facilities. The second method is in the form of reimbursement to civilian health care providers furnishing medical care to active duty personnel, their spouses, and dependents. When benefits are received through the latter method, they are classified as CHAMPUS benefits.¹

The Twenty-Eight Thousand Five Hundred Seventy-Eight and 34/100 Dollars paid to health care providers in behalf of the Plaintiff in this case was paid pursuant to the CHAMPUS program. The United States is asserting that it is entitled to a lien or off-set, in the foregoing amount, against the judgment which it is obligated to pay the Plaintiff's legal representative in the subject case.

A hearing was conducted upon the United States' Motion for Off-Set on November 15, 1993. At this hearing, evidence was presented in behalf of the United States through Mrs. Judy F. Carroll, a health-care analyst experienced and knowledgeable in the area of CHAMPUS benefits. Mrs. Carroll testified that the Plaintiff's eligibility for CHAMPUS benefits was entirely independent of the judgment which was awarded in this case and that Mrs. Murphy would remain eligible for CHAMPUS benefits so long as her spouse remained on active duty with the United States Navy or served a sufficient number of years to be eligible for retirement benefits. Mrs. Carroll further testified that no effort would be made by the United States to off-set any future CHAMPUS benefits against the judgment. Lastly, she testified that active duty personnel do not make any direct payment for CHAMPUS benefits, nor is any set amount of their pay and allowances allocated to a specific fund in order to cover the costs of such benefits; rather, the costs of such benefits are paid out of the general funds of the United States Treasury. Thus, the eligibility of active duty personnel, their spouses, and dependents for CHAMPUS benefits is earned not by direct financial contribution, but by service on active duty or, in the case or retired personnel, by the earning of retirement status in the same manner as retirement pay is earned.

II. Legal Analysis

The United States does not rely upon or cite any statute granting it a lien against the judgment awarded to the Plaintiff; instead, the Government claims that it is entitled to this off-set based upon case law. While the United States Court of Appeals for the Fourth Circuit has not passed upon the particular issue presently before this Court, the Fourth Circuit in Price v. United States, 179 F.Supp. 309 (E.D.Va.1959), aff'd, 288 F.2d 448 (4th Cir.1961), did decide a similar issue. The United States District Court for the Eastern District of Virginia addressed the issue at bar in the case of Diaz v. United States, 655 F.Supp. 411 (E.D.Va.1987), and an analogous issue in Karsten v. Kaiser Foundation Health Plan, 808 F.Supp. 1253 (E.D.Va.1992).

It is well established that in suits brought under the Federal Tort Claims Act, federal courts are required to apply "the whole law of the State where the act or omission occurred." Richards v. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 592, 7 L.Ed.2d 492 (1962); see also Stancil v. United States, 200 F.Supp. 36, 43 (E.D.Va.1961). In this context, Virginia law has long held that compensation from a collateral source should be disregarded in assessing tort damages. See Karsten, 808 F.Supp. at 1254-1256; Schickling v. Aspinall, 235 Va. 472, 369 S.E.2d 172, 174 (1988); Walthew v. Davis, 201 Va. 557, 111 S.E.2d 784, 787-788 (1960); Burks v. Webb, 199 Va. 296, 99 S.E.2d 629, 636 (1957); Johnson v. Kellam, 162 Va. 757, 175 S.E. 634, 636-637 (1934). Explaining the collateral source rule, the Virginia Supreme Court recently opined:

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.

Schickling, 235 Va. 472, 369 S.E.2d at 174.

In light of this case law, the issue now confronting the Court turns upon whether payment of medical benefits to the Plaintiff pursuant to the CHAMPUS program is collateral to the payment of the judgment by the United States as a tortfeasor. The United States argues, admittedly with some authority in support of its position,² that CHAMPUS benefits are not a collateral source since both CHAMPUS benefits and the tort judgment are paid from the general revenues of the United States. On the other hand, in United States v. Price and in Karsten v. Kaiser Foundation Health Plan, courts have recognized that the nature of the benefit may be such that the benefits should be considered collateral, as opposed to double compensation, even though the same defendant may be the payor of both sums:

Although when compensation comes from someone other than the defendant, courts are more prone to call it "collateral," and some may always consider it such, without examining closely the nature of the benefit, the fact that it comes from the defendant tortfeasor does not itself preclude the possibility that it is from a collateral source. The plaintiff may receive benefits from the defendant himself which, because of their nature, are not considered double compensation for the same injury but deemed collateral.

Price, 288 F.2d at 450 (cited with approval in Karsten, 808 F.Supp. at 1256); see also Mooney v. United States, 619 F.Supp. 1525 (D.N.H.1985) (tort judgment against the United States not reduced by amount of medical costs already paid by CHAMPUS).

This Court is persuaded by the reasoning in Price, Karsten, and Mooney and, therefore, finds that in deciding this issue it should place its primary reliance upon the nature of the benefit, as opposed to the source of the payment. The Price Court determined that benefits received by Price from the Civil Service Retirement Act were a collateral source and therefore such payments should not be off-set against the tort judgment. 288 F.2d at 450-451. The Fourth Circuit pointed out here that participation in the retirement program was compulsory for most civilian employees of the United States, a situation which is analogous to that of the Plaintiff. Id. In the instant case, Lt. Murphy has no option as to whether he will participate in the medical benefits program or the retirement program offered by the United States Navy; on the contrary, he is compelled to do so. Lt. Murphy cannot call upon the Navy to increase his salary with the proviso that he will fund his own retirement or family medical protection, but instead he receives such benefits as part of his pay. Accordingly, this Court FINDS that Lt. Murphy has earned his medical benefits, his retirement benefits, and the other fringe benefits attendant to naval service just as surely as if he had paid periodic premiums to a private insurer or retirement system.

While there may other factors present which could distinguish the Murphy's situation from that in Price, the rationale is the same. In Price, the injured party had made cash contributions to a retirement fund which was maintained as a separate account. This fund consisted of contributions from both the employees as well as from the United States as the employer. In the view of this Court, however, Lt. Murphy's active duty naval service merits the same consideration as the cash contribution of a civilian employee of the United States Government. The fact that the Government elects not to maintain a separate fund from which CHAMPUS benefits are distributed should in no way diminish the integrity of the medical benefits earned by Lt. Murphy.

Relying upon Price, the United States District Court for the Eastern District of Virginia emphasized in Karsten that:

The first payment of medical bills by the defendant was in its capacity as plaintiff's insurer, pursuant to the insurance agreement entered into between the plaintiff and defendant, for which the plaintiff personally contributed valuable consideration by way of a deduction taken out of her paychecks. The defendant admits that it was obligated under the contract to

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