Scholle v. Delta Air Lines, Inc.
| Decision Date | 23 May 2019 |
| Docket Number | Court of Appeals Nos. 18CA0049 & 18CA0760 |
| Citation | 486 P.3d 325 |
| Parties | William SCHOLLE, Plaintiff-Appellee and Cross-Appellant, v. DELTA AIR LINES, INC., Defendant-Appellant and Cross-Appellee. |
| Court | Colorado Court of Appeals |
Bendinelli Law Firm, P.C., Marco F. Bendinelli, Blaine L. Milne, Westminster, Colorado, for Plaintiff-Appellee and Cross-Appellant
Treece Alfrey Musat P.C., Michael L. Hutchinson, Carol L. Thomson, Kathleen J. Johnson, Denver, Colorado, for Defendant-Appellant and Cross-Appellee
Opinion by JUDGE NAVARRO
¶ 1 When a plaintiff sues a defendant in tort for damages sustained due to the defendant's conduct, the collateral source rule generally forbids admitting evidence of payments for those damages made to the plaintiff by a collateral source such as an insurance company. For instance, evidence of the amount of the plaintiff's medical expenses paid by an insurer is not admissible; instead, the plaintiff may submit, as a measure of damages, evidence of a higher amount of medical expenses billed by the medical provider.
¶ 2 But what if (1) the plaintiff was insured by workers' compensation insurance, and by statute a medical provider could not collect payment for medical expenses beyond those paid by the workers' compensation insurer; and (2) the defendant, before trial, extinguished the insurer's subrogated interest in the amounts paid by settling the insurer's claim? We hold that the collateral source rule applies all the same — evidence of the amounts paid by the insurer is not admissible at trial, but evidence of the amounts billed is admissible. At most, the defendant, by virtue of its settlement of the insurer's subrogated claim, may receive a post-trial setoff against damages awarded to the plaintiff.
¶ 3In this case, however, the damages awarded to plaintiff William Scholle were reduced during trial through evidence of the amounts his insurer paid to his medical providers and reduced post-trial via a setoff in the amount of the insurer's claim following defendant Delta Air Lines, Inc.’s settlement with the insurer. As a result, Scholle ultimately recovered nothing in economic damages. Because admitting evidence of the amounts paid by the insurer was error, we reverse the judgment in part and remand for a new trial, as limited by the following discussion.
¶ 4 This action arises from a luggage tug collision at Denver International Airport. In 2012, Scholle, a United Airlines employee, was driving a luggage tug in the course of his employment. Scholle was stopped when Daniel Moody, a Delta employee also driving a luggage tug, collided with Scholle. Scholle sustained injuries and missed work.
¶ 5 United, a self-insured employer under Colorado's workers' compensation system, paid for Scholle's medical expenses and some of his lost wages. To the extent of those payments, United was subrogated to Scholle's rights to recover economic damages from Delta and Moody for causing Scholle's injuries.
¶ 6 In 2014, United sued Delta and Moody to recover the amounts United had paid to or on behalf of Scholle. Shortly thereafter, Scholle also sued Delta and Moody to recover for injuries related to the tug collision. The trial court consolidated the actions.
¶ 7Delta eventually settled United's claim, and the court dismissed United's case with prejudice. Scholle's claims against Moody were later dismissed with prejudice as well, leaving only Scholle and Delta as parties. Delta admitted liability but disputed Scholle's claimed damages; so the case went to trial on damages.
¶ 8 In 2016, a jury returned a damages verdict for Scholle totaling approximately $1.5 million. The court, however, granted Delta's motion for a new trial due to misconduct by Scholle's attorney.
¶ 9 The case went to trial again in 2017, this time without a jury and before a new judge. The court considered evidence of the amounts paid by United for Scholle's medical treatment; the court excluded evidence of the higher amounts billed by medical providers. The court awarded Scholle $259,176, including $194,426 in economic damages.1 In light of Delta's settlement of United's claim, the court later entered a setoff order reducing Scholle's economic damages award by the amount that United had paid in workers’ compensation, effectively reducing the amount owed to Scholle for economic damages to zero.
¶ 10 In case number 2018CA0049 (the merits appeal), each party challenges various rulings related to the damages judgment. In case number 2018CA0760 (the costs appeal), Scholle contests a post-trial order denying him costs relating to two expert witnesses struck by the trial court, a ruling at issue in the merits appeal. We consolidated the appeals.
¶ 11 Regarding the merits appeal, we reverse the damages judgment insofar as it relates to Scholle's past medical expenses because the trial court misapplied the collateral source rule. Because this evidentiary error affected only the medical expenses portion of the damages award, we affirm the judgment insofar as it pertains to (1) economic damages for lost wages and (2) noneconomic damages.
¶ 12 We affirm the order granting a new trial as well as various pre-trial rulings addressing issues that are likely to recur on remand. Because we remand for a new trial as to past medical expenses, we decline to decide any post-trial issues raised by the parties, including any claim raised in the costs appeal.
¶ 13 Scholle contends that the trial court erred by admitting evidence of the amount of medical expenses paid by his workers' compensation insurer (United), rather than the amounts billed by his medical providers. He says that the payments were collateral source benefits and, therefore, the pre-verdict evidentiary component of the collateral source rule prohibited their admission into evidence.
¶ 14 Delta responds that the trial court properly concluded that the collateral source rule did not apply because Delta's settlement with United meant that the insurance payments no longer constituted payments from a collateral source. Rather, Delta effectively became a source of those payments. In other words, Delta says that, by extinguishing United's interest in recouping the insurance payments, Delta paid compensation for, or contributed to, the source of those payments. Further, Delta argues that the court properly excluded evidence of the amounts billed by Scholle's medical providers because he was not liable for those amounts.
¶ 15 We agree with Scholle that the trial court misconstrued Colorado law.
¶ 16 "We review a trial court's evidentiary rulings for an abuse of discretion." Sunahara v. State Farm Mut. Auto. Ins. Co. , 2012 CO 30M, ¶ 12, 280 P.3d 649. A court abuses its discretion if its decision is based on an incorrect legal standard. Id. We review de novo whether the court applied the correct legal standard. Id.
¶ 17 Colorado's collateral source rule consists of two components: (1) a post-verdict setoff rule, codified at section 13-21-111.6, C.R.S 2018; and (2) a pre-verdict evidentiary component, established by common law and codified at section 10-1-135(10), C.R.S. 2018. Sunahara , ¶ 13. The first component requires a trial court to set off tort verdicts by the amount of certain collateral source payments received by the plaintiff unless the payments were made because of a contract entered into and paid for on the plaintiff's behalf. § 13-21-111.6.
¶ 18 The second component bars evidence of a plaintiff's receipt or entitlement to benefits received from a collateral source, most often an insurance company, "because such evidence could lead the fact-finder to improperly reduce the plaintiff's damages award on the grounds that the plaintiff already recovered his loss from the collateral source." Wal-Mart Stores, Inc. v. Crossgrove , 2012 CO 31, ¶¶ 12, 20, 276 P.3d 562. "A plaintiff's insurer is a collateral source because it is a third party wholly independent of the tortfeasor to which the tortfeasor has not contributed." Id. at ¶ 25.
¶ 19 The rule's purpose is to prevent a tortfeasor from benefitting, in the form of reduced liability, from compensation in the form of money or services that the victim may receive from a third-party source. Volunteers of Am. Colo. Branch v. Gardenswartz , 242 P.3d 1080, 1083 (Colo. 2010). Our supreme court has explained that, if either party is to receive a windfall, "the rule awards it to the injured plaintiff who was wise enough or fortunate enough to secure compensation from an independent source, and not to the tortfeasor, who has done nothing to provide the compensation and seeks only to take advantage of third-party benefits obtained by the plaintiff." Id.
¶ 20 In 2010, the General Assembly codified the collateral source rule's pre-verdict evidentiary component in section 10-1-135(10)(a), which provides in pertinent part: "The fact or amount of any collateral source payment or benefits shall not be admitted as evidence in any action against an alleged third-party tortfeasor ...." See Smith v. Jeppsen , 2012 CO 32, ¶ 17, 277 P.3d 224. This statute applies to "cases resulting in recoveries occurring after August 11, 2010," and excludes evidence of the amounts paid by a plaintiff's insurer for medical expenses. Id. at ¶¶ 12, 20.
¶ 21 In addition, where a plaintiff's insurer has obliged a medical provider to accept a discounted rate for services (or a "write off" of a portion of the bill), the reduced rate constitutes a benefit received from a collateral source. Gardenswartz , 242 P.3d at 1085. Because the plaintiff would have been responsible for the entire billed amount if the plaintiff had not been insured, the discounts "are as much of a benefit for which [the plaintiff] paid consideration as are the actual cash payments by his health insurance carrier to the health care providers." Id. (...
To continue reading
Request your trial