Shirley v. Russell, 94S00-9511-CQ-1271

• Decision Date: 28 March 1996
• Docket Number: No. 94S00-9511-CQ-1271,94S00-9511-CQ-1271
• Citation: 663 N.E.2d 532
• Parties: 108 Ed. Law Rep. 867 SHIRLEY, Margaret, Individually, and as co-personal representative of the Estate of Loren M. Shirley, deceased, and C. Thomas Wagner, as co-personal representatives of the Estate of Loren M. Shirley, deceased, Plaintiffs-Appellees, v. RUSSELL, Gerald R., and Elmer Buchta Trucking, Incorporated, Defendants-Appellants.
• Court: Indiana Supreme Court

Page 532

663 N.E.2d 532

108 Ed. Law Rep. 867

SHIRLEY, Margaret, Individually, and as co-personal representative of the Estate of Loren M. Shirley, deceased and C. Thomas Wagner, as co-personal representatives of the Estate of Loren M. Shirley, deceased, Plaintiffs-Appellees, v. RUSSELL, Gerald R., and Elmer Buchta Trucking, Incorporated Defendants-Appellants.

No. 94S00-9511-CQ-1271.

Supreme Court of Indiana.

March 28, 1996.

G. Byron Overton, Richard C. Rusk, Rusk & Overton, Washington, for Appellees.

D. Timothy Born, Shawn M. Sullivan, Lacey, Terrell, Annakin, Heldt & Baugh, Evansville, for Appellants.

SULLIVAN, Justice.

In response to a certified question from the United States Court of Appeals for the Seventh Circuit, ¹ we hold that the monthly survivor benefits paid to the surviving spouse of the decedent in this case constitute "insurance benefits for which the plaintiff or members of the plaintiff's family have paid for directly" within the meaning of Indiana Code § 34-4-36-2(1)(B). As such, evidence of such benefits is not admissible in a personal injury or wrongful death action to determine the actual amount of the prevailing party's pecuniary loss.

Background

This certified question emanates from a wrongful death action originally brought in the United States District Court for the Southern District of Indiana by the co-personal representatives of Loren Shirley's estate. Following a bench trial, the court found that Shirley had died as a result of injuries sustained in an automobile accident caused by the defendants and awarded plaintiffs approximately $575,000 in damages. On appeal to the United States Court of Appeals for the Seventh Circuit, defendants argued that the district court erred by excluding certain "collateral source payment" evidence when it calculated the damage award.

At the time of his retirement as an Ohio public school teacher, Shirley elected, from the payout options available to him under the Ohio teacher's retirement plan, a "joint and survivor annuity" in order to provide a continuing monthly benefit to his wife upon his death. Had he selected the single life annuity payout option, his monthly gross benefit would have been $1,661.43. Under the terms of the joint and survivor annuity option, his monthly gross benefit was reduced by $158.17 to $1,503.26 and in return his wife became entitled to receive a monthly gross benefit of $751.63, fifty percent of his monthly gross benefit. The trial court excluded evidence of the survivor annuity when it calculated the damages caused by the accident. Defendants argued on appeal that Indiana law--Indiana Code § 34-4-36-1 to § 34-4-36-3, governing "collateral source evidence" in personal injury and wrongful death actions--requires such evidence to be considered both "(1) to enable the trier of fact in a personal injury or wrongful death action to determine the actual amount of the prevailing party's pecuniary loss; and (2) to provide that a prevailing party not recover more than once from all applicable sources for each item of loss sustained." Ind.Code § 34-4-36-1 (1993).

The Seventh Circuit panel assigned to consider defendants' appeal found the issue appropriate for certification. Shirley v. Russell, 69 F.3d 839 (7th Cir.1995). We agreed to accept the question by order dated November 27, 1995, and, following the completion of briefing to our court, held oral argument in Indianapolis on January 9, 1996.

Discussion

This state recognized the common law "collateral source rule" which prohibited defendants from introducing evidence of compensation received by plaintiffs from collateral sources, i.e., sources other than the defendant, to reduce damage awards.

There can be no abatement of damages on the principle of partial compensation received for the injury when it comes from a collateral source independent of the one primarily responsible for the loss. Pittsburgh C.C. & St. L.R. Co. v. Home Ins. Co. [183 Ind. 355, 362, 364, 365, 367, 108 N.E. 525 (1915) ].

Powers v. Ellis, 231 Ind. 273, 279, 108 N.E.2d 132, 135 (1952). As the Seventh Circuit panel certifying this question to us points out, "[t]his rule held tortfeasors fully accountable for the consequences of their conduct regardless of any aid or compensation acquired by plaintiffs through first-party insurance, employment agreements, or gratuitous assistance." Shirley v. Russell, 69 F.3d at 842 (citing Herrick v. Sayler, 160 F.Supp. 25 (N.D.Ind.1958)).

There can be no doubt that evidence of the survivor annuity at issue here would have been prohibited under the common law collateral source rule. In the wrongful death case in which our court first recognized the collateral source rule in Indiana, the defendant sought to reduce the amount of the plaintiff's recovery by the amount of life insurance on the life of the deceased. The court refused to permit the offset, saying "[t]o allow such a defence would defeat actions under law, when the party killed had, by his prudence and foresight, made provision or left means for the support of his wife and children, and the wrong-doer would thus be enabled to protect himself against the consequences of his own wrongful act." Sherlock v. Alling, 44 Ind. 184, 200 (1873). That is, among the most central principles upon which the common law rule was built is that collateral source payments resulting from the victim's own "prudence and foresight" should not offset a damage award. As Shirley's widow's survivor annuity was the result of Shirley's "prudence and foresight," evidence of it would have been barred by the common law collateral source rule.

But our legislature abrogated the common law collateral source rule when, in 1986, it enacted the statute implicated by this case. As quoted in Background, supra, the purpose of the new collateral source rule statute is to determine the actual amount of the prevailing party's pecuniary loss and to preclude that party from recovering more than once from all applicable sources for each item of loss sustained in a personal injury or wrongful death action. Ind.Code § 34-4-36-1. In fact, the new statute abrogated both the substance and the procedure of the common law collateral source rule. Substantively, instead of tortfeasors being "held ... fully accountable for the consequences of their conduct," Shirley, 69 F.3d at 842; now victims may not recover more than once for each item of loss sustained, Ind.Code § 34-4-36-1(2). Procedurally, instead of evidence of collateral source payments being prohibited, Powers, 231 Ind. at 279, 108 N.E.2d at 135; now evidence of collateral source payments may not be prohibited except for specified exceptions. Ind.Code §§ 34-4-36-1 and Ind.Code § 34-4-36-2.

The legislature has provided that the following collateral source payments may not be considered by the finder of fact or the court:

(A) payments of life insurance or other death benefits;

(B)...