Stanley v. Walker

• Citation: 906 N.E.2d 852
• Decision Date: 27 May 2009
• Docket Number: No. 41S01-0810-CV-539.,41S01-0810-CV-539.
• Parties: Brandon STANLEY, Appellant (Defendant below), v. Danny WALKER, Appellee (Plaintiff below).
• Court: Supreme Court of Indiana

906 N.E.2d 852

Brandon STANLEY, Appellant (Defendant below), v. Danny WALKER, Appellee (Plaintiff below).

No. 41S01-0810-CV-539.

Supreme Court of Indiana.

May 27, 2009.

Mark A. Holloway, Indianapolis, IN, Attorney for Appellant.

Donald B. Kite, Sr., Kelly R. Eskew, Indianapolis, IN, James D. Johnson, Evansville, IN, Attorneys for amicus curiae Defense Trial Counsel of Indiana.

Bryan H. Babb, Kelly M. Scanlan, Indianapolis, IN, Attorneys for Amicus Curiae Insurance Institute of Indiana, Inc.

David W. Stone, IV, Anderson, IN, Michael Phelps, Bloomington, IN, Attorneys for Appellee.

On Petition to Transfer from the Indiana Court of Appeals, No. 41A01-0610-CV-462

SULLIVAN, Justice.

The amount of medical expenses actually paid by the plaintiff in this personal injury case was discounted from the amount originally billed because of arrangements between the plaintiff's health insurance company and the medical service providers. The defendant sought to introduce evidence of the discounted amount actually paid over the plaintiff's objection that Indiana's "collateral source" statute bars evidence of insurance benefits. To the extent the discounted amounts may be introduced without referencing insurance, they may be used to determine the reasonable value of medical services.

Background

Brandon Stanley and Danny Walker were involved in an automobile accident in 2004. As a result of the accident, Walker sustained injuries and received treatment from eleven different medical providers. Walker filed a complaint against Stanley arguing that as a result of Stanley's negligence, Walker incurred medical expenses, lost wages, and experienced pain and suffering. Before trial, Stanley admitted negligence; this case proceeded on the issue of damages only.

During the trial, Walker, the plaintiff, introduced redacted medical bills totaling $11,570 showing the amounts medical service providers originally billed him. Stanley, the defendant, made no objection to the introduction of the medical bills into evidence. These bills, to repeat, showed the amounts originally billed but not the amounts totaling $4,750 that were discounted as a result of negotiations between the medical service providers and Walker's health insurance company. Neither Walker nor his insurance company is financially responsible for the amount of the discounts. Walker's medical providers accepted payment from his insurance company of $6,820 ($11,570 minus $4,750) in satisfaction of the medical bills occasioned by Stanley's negligence.

At the close of Walker's testimony, Stanley asked the trial court to admit Walker's discounted medical bills totaling $6,820 into evidence, complete with an offer of proof. Walker objected on grounds that evidence of the discounted bills violated Indiana's collateral source statute, Ind. Code § 34-44-1-2, which in part prohibits the introduction of evidence of "insurance benefits" in personal injury cases. The court sustained Walker's objection. It determined that insurance and "anything flowing from the insurance benefit purchased by the plaintiff ...."¹ would thus be prohibited under the collateral source statute. The court found, in other words, that the discounts constituted "insurance benefits" paid for by the plaintiff.

The jury returned a $70,000 general verdict in favor of Walker. Stanley appealed, asserting that the trial court erred when it barred introduction of Walker's discounted medical bills into evidence. The Court of Appeals affirmed. Stanley v. Walker, 888 N.E.2d 222, 230 (Ind.Ct.App.2008).

Stanley then sought, and we granted, transfer. Stanley v. Walker, 898 N.E.2d 1226 (Ind.2008) (table).

Discussion

I

As set forth above, both the trial court and the Court of Appeals held that it would have violated Indiana's "collateral source" statute for defendant Stanley to present evidence to the jury that plaintiff Walker's medical providers had accepted $4,750 less than the amount they had originally billed in satisfaction of the medical bills occasioned by Stanley's negligence. As such, we begin with a consideration of the "collateral source" statute and its common law predecessor, the "collateral source" rule.

At common law, the collateral source rule prohibited defendants from introducing evidence of compensation received by plaintiffs from collateral sources, that is, sources other than the defendant, to reduce damage awards. This rule held tortfeasors accountable for the full extent of 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, 663 N.E.2d 532, 534 (Ind.1996) (quoting Shirley v. Russell, 69 F.3d 839, 842 (7th Cir.1995)).

The Legislature abrogated the common law collateral source rule by enacting the collateral source statute. Shirley, 663 N.E.2d at 534.² Pursuant to our collateral source statute, evidence of collateral source payments may not be prohibited except for specified exceptions. See id. The statute provides the following:

In a personal injury or wrongful death action, the court shall allow the admission into evidence of:

(1) proof of collateral source payments other than:

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

(B) insurance benefits for which the plaintiff or members of the plaintiff's family have paid for directly; or

(C) payments made by:

(i) the state or the United States; or

(ii) any agency, instrumentality, or subdivision of the state or the United States;

that have been made before trial to a plaintiff as compensation for the loss or injury for which the action is brought[.]

I.C. § 34-44-1-2.

The purpose of the collateral source 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. I.C. § 34-44-1-1(1)-(2). At the same time, it retains the common law principle that collateral source payments should not reduce a damage award if they resulted from the victim's own foresight—both insurance purchased by the victim and also government benefits—presumably because the victim has paid for those benefits through taxes.

An injured plaintiff is entitled to recover damages for medical expenses that were both necessary and reasonable. See Cook v. Whitsell-Sherman, 796 N.E.2d 271, 277 (Ind.2003). Thus we are confronted with the question of how to determine the reasonable value of medical services when an injured plaintiff's medical treatment is paid from a collateral source at a discounted rate.

Other jurisdictions have considered this issue with varying results. In one approach, courts apply the collateral source rule to negotiated discounts on the plaintiff's medical care for which the plaintiff paid consideration. See Arthur v. Catour, 216 Ill.2d 72, 295, Ill.Dec. 641, 833 N.E.2d 847, 853-54 (2005) (holding that plaintiffs may present evidence of the billed amount of their medical services and defendants may challenge the reasonableness of the billed amount without specifying what evidence the defendant could introduce to challenge the billed amount); Mitchell v. Haldar, 883 A.2d 32, 40 (Del.2005) (holding that the plaintiff can present evidence of the billed amount as representing the reasonable value of the medical services without addressing whether the defendant was barred from introducing evidence of the discount).

Two states courts have held that the medical discounts were a collateral source, but that they were compelled to set off the collateral source amount against an award of compensatory damages under their respective state statutes. See Goble v. Frohman, 901 So.2d 830, 832-33 (Fla.2005); Slack v. Kelleher, 140 Idaho 916, 104 P.3d 958, 967 (2004).

In another approach, the Ohio Supreme Court has allowed both the amount paid and the amount billed into evidence to prove the reasonable value of medical services. See Robinson v. Bates, 112 Ohio St.3d 17, 857 N.E.2d 1195, 1200 (2006) (holding that the jury may determine that the reasonable value of medical services is the amount originally billed, the amount accepted as payment, or some amount in between).

II

Indiana Evidence Rule 413 provides one method of proving the reasonable value of medical expenses. It reads as follows: "[s]tatements of charges for medical, hospital or other health care expenses for diagnosis or treatment occasioned by an injury are admissible into evidence. Such statements shall constitute prima facie evidence that the charges are reasonable." Evid. R. 413. By its terms, Rule 413 allows actual past medical charges to serve as prima facie evidence that the charges are reasonable.

The purpose of Rule 413 is to provide a simpler method of proving amount of medical expenses when there is no substantial issue that they are reasonable and were caused by the tort. If there is a dispute, of course the party opposing them may offer evidence to the contrary, including expert opinion. By permitting medical bills to serve as prima facie proof that the expenses are reasonable, the rule eliminates the need for testimony on that often uncontested issue. Finally, the fact that a statement was submitted is at least some evidence that the charge is normal for the treatment involved, and it was necessary to be performed.

Cook, 796 N.E.2d at 277-78. Thus, medical bills can be introduced to prove the amount of medical expenses when there is no substantial issue that the medical expenses are reasonable.

However, in cases where the reasonable value of medical services is disputed, the method outlined in Rule 413 is not the end of the story. See Cook, 796 N.E.2d at 277. The opposing party may produce contradictory evidence to challenge the reasonableness of the proffered medical bills, including expert testimony. See id. Additionally, reasonableness of medical...