Oden v. Chemung County Indus. Development Agency

• Decision Date: 30 November 1995
• Citation: 661 N.E.2d 142,87 N.Y.2d 81,637 N.Y.S.2d 670
• Parties: , 661 N.E.2d 142 Julius ODEN, Respondent, v. CHEMUNG COUNTY INDUSTRIAL DEVELOPMENT AGENCY et al., Defendants and Third-Party Plaintiffs. Streeter Associates, Inc., Third-Party Defendant-Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 670

637 N.Y.S.2d 670

87 N.Y.2d 81, 661 N.E.2d 142

Julius ODEN, Respondent, v. CHEMUNG COUNTY INDUSTRIAL DEVELOPMENT AGENCY et al Defendants and Third-Party Plaintiffs Streeter Associates, Inc., Third-Party Defendant-Appellant.

Court of Appeals of New York.

Nov. 30, 1995.

Williamson, Clune & Stevens, Ithaca (John H. Hanrahan, III, of counsel), for third-party defendant-appellant.

Young and Paniccia, Binghamton (Alfred Paniccia, Jr., of counsel), for respondent.

OPINION OF THE COURT

TITONE, Judge.

CPLR 4545(c) authorizes the court in a personal injury action to reduce the amount of the plaintiff's award if it finds that any element of the economic loss encompassed in the award was or will be replaced, in whole or in part, from a collateral source. The issue before us on this appeal is whether the economic loss portion of an award should be reduced by the proceeds from any collateral source or whether reduction is authorized only when the collateral source payment represents reimbursement for a particular category of loss that corresponds to a category of loss for which damages were awarded. Based on both the language and the purposes of CPLR 4545(c), we now adopt the latter narrower construction of the statute.

The present action arises out of a December 1988 incident in which plaintiff, a 48-year-old ironworker, was injured when he was struck by a falling steel column that was apparently dislodged by a small hydraulic crane. Plaintiff sued the owner of the crane, the crane operator, the contract agency that provided the crane operator and the owner and lessee of the work site, alleging various Labor Law and common-law causes of action. The defendants subsequently asserted cross claims against each other, as well as third-party claims against Streeter Associates, plaintiff's employer.

Following a bifurcated jury trial, plaintiff was awarded damages as follows: $5,752.75 for past medical expenses, $20,000 for pain and suffering, $27,550 for lost past earnings, $66,000 for lost pension benefits and $80,000 for future lost earning and health and welfare benefits. The total was apportioned among the defendants, and all defendants were granted judgment over against third-party defendant Streeter. Following a hearing pursuant to CPLR 4545(c), the court ordered that the total award for future economic loss ($146,000) be reduced by the $141,330, the value of the disability retirement benefits that plaintiff expected to receive over his lifetime.

On plaintiff's appeal, ¹ the Appellate Division modified by restoring the full amount of the $80,000 award for future lost earnings and benefits and adjusting the total damages award upward accordingly. The Court held that "where a jury award for a discrete category of economic loss is wholly satisfied and in fact exceeded by a collateral source of the very same category, [CPLR 4545(c) ] operates only to eliminate the jury award for that category." (211 A.D.2d 997, 999.) The Court impliedly determined that only the award for lost pension benefits was sufficiently related to the collateral disability retirement benefits to qualify for the offset permitted by CPLR 4545(c). Third-party defendant Streeter has appealed by leave of this Court.

Under traditional common-law principles, a personal injury award may not be reduced or offset by the amount of any compensation that the injured person may receive from a source other than the tortfeasor (see, Kish v. Board of Educ., 76 N.Y.2d 379, 384, 559 N.Y.S.2d 687, 558 N.E.2d 1159; Healy v. Rennert, 9 N.Y.2d 202, 206, 213 N.Y.S.2d 44, 173 N.E.2d 777). The collateral source rule, which is both a rule of evidence and a rule of damages, is based on the premise that a negligent defendant should not, in fairness, be permitted to reduce its liability by the proceeds of insurance or some other source to which that defendant has not contributed (Kish v. Board of Educ., supra, at 384, 559 N.Y.S.2d 687, 558 N.E.2d 1159; Healy v. Rennert, supra, at 206, 213 N.Y.S.2d 44, 173 N.E.2d 777; see, Standard Oil Co. v. United States, 153 F.2d 958, affd. 332 U.S. 301, 67 S.Ct. 1604, 91 L.Ed. 2067). Although the rule has been criticized (see, Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C4545:1, at 344), it was not modified or curtailed by the courts of this State.

Beginning in 1975, however, the Legislature initiated efforts to limit the rule's effect in response to a perceived "crisis" in the medical malpractice insurance industry. The first incursion on the rule's scope was an amendment to CPLR 4010 which permitted juries in medical malpractice actions to consider evidence of collateral source payments when determining the award for economic loss (L.1975, ch. 109). This exception was solidified and strengthened in 1981, when the Legislature made the reduction for compensation from collateral sources mandatory and transferred the responsibility for making the reduction from the jury to the court (L.1981, ch. 269).

In 1984, CPLR 4010 was repealed and its provisions were incorporated in the newly enacted CPLR 4545(a) (L.1984, ch. 701). At the same time, the mandatory offset for collateral source payments was extended, on a limited basis, to personal injury and wrongful death awards obtained by public employees (id.; see, CPLR 4545[b] ). ² Additional changes in CPLR 4545(a) were adopted the following year extending the collateral source reduction to dental malpractice awards and to all medical and dental malpractice awards for future economic losses that would, "with reasonable certainty," be reimbursed or indemnified (L.1985, ch. 294, § 8; cf., Ryan v. City of New York, 79 N.Y.2d 792, 579 N.Y.S.2d 634, 587 N.E.2d 272 [noting that Legislature had not extended the rule permitting reduction for future collateral source payments to actions by public employees].

The most recent step in the process was the 1986 enactment of CPLR 4545(c), which applies to all personal injury, property damage and wrongful death actions commenced on or after June 28, 1986 (L.1986, ch. 220, § 36). The statute provides:

"In any action brought to recover damages for personal injury, injury to property or wrongful death, where the plaintiff seeks to recover for the cost of medical care, dental care, custodial care or rehabilitation services, loss of earnings or other economic loss, evidence shall be admissible for consideration by the court to establish that any such past or future cost or expense was or will, with reasonable certainty, be replaced or indemnified, in whole or in part, from any collateral source such as insurance * * *, social security * * * workers' compensation or employee benefit programs".

Under the statute, "[i]f the court finds that any such cost or expense was or will, with reasonable certainty, be replaced or indemnified from any collateral source, it shall reduce the amount of the award by such finding."

Relying on its view of the language and purposes of the statute, appellant Streeter argues that CPLR 4545(c) requires the court to reduce the total award for economic loss by the total amount of collateral source payments for economic loss that the plaintiff has or will receive as a result of the incident that led to the lawsuit. In contrast, plaintiff contends that the award for economic loss should be broken down into categories and the reductions for collateral source payments should then be made only in those categories that correspond to analogous collateral source categories. We conclude that plaintiff has the better of the argument.

We note at the outset that CPLR 4545(c) is a statute enacted in derogation of the common law and, as such, is to be strictly construed (see, McKinney's Cons Laws of NY, Book 1, Statutes § 301[a]; see also, Matter of Bayswater Health Related Facility v. Karagheuzoff, 37 N.Y.2d 408, 414, 373 N.Y.S.2d 49, 335 N.E.2d 282). Further, it is to be construed in the narrowest sense that its words and underlying purposes permit, since the "rules of the common law must be held no further abrogated than the clear import of the language used in the statute absolutely requires" (McKinney's, op. cit., § 301[b] ).

These principles and a close analysis of the statutory text provide support for plaintiff's position. The statute first refers to actions to recover for enumerated and other economic losses and then authorizes the trial court to consider that any "such" losses were or will be replaced from a collateral source. This use of the term "such", which serves as a grammatical echo for its immediate antecedent (McKinney's, op. cit., § 254, at 418), suggests that a direct correspondence between the item of loss and the type of collateral reimbursement must exist before the required statutory offset may be made.

The statute's provision for the offset of "any such cost or expense" by a payment from "any collateral source" (emphasis added) does not contradict this conclusion. The statute's dual reference to "any" cost or expense and "any" collateral source was evidently a legislative effort to establish that, apart from the express statutory reservations, there are to be no...