Swanson v. Brewster, No. A08-806.

CourtSupreme Court of Minnesota (US)
Citation784 N.W.2d 264
Docket NumberNo. A08-806.
PartiesDavid SWANSON, Respondent,v.Rebecca BREWSTER, et al., Appellants.
Decision Date30 June 2010

784 N.W.2d 264

David SWANSON, Respondent,
Rebecca BREWSTER, et al., Appellants.

No. A08-806.

Supreme Court of Minnesota.

June 30, 2010.

784 N.W.2d 265
Syllabus by the Court

Negotiated-discount amounts-amounts a plaintiff is billed by a medical provider but does not pay because the plaintiff's insurance provider negotiates a discount on the plaintiff's behalf-are “collateral sources” for purposes of the collateral-source statute, Minn.Stat. § 548.251 (2008).

Kay Nord Hunt, Reid R. Lindquist, Lommen, Abdo, Cole, King & Stageberg, P.A., Minneapolis, MN, for respondent.

Mark S. Genereux, Genereux Law Office, St. Paul, MN; and Wilbur W. Fluegel, Fluegel Law Office, Minneapolis, MN, for appellants.

William M. Hart, Meagher & Geer, PLLP, Minneapolis, MN, for amicus curiae Minnesota Defense Lawyers Association.
784 N.W.2d 266
Stephen P. Laitinen, Hilary J. Loynes, Larson • King, LLP, St. Paul, MN, for amici curiae Minnesota Joint Underwriting Association and Insurance Federation of Minnesota.

Paul D. Peterson, Harper & Peterson, PLLC, Woodbury, MN; and Craig O. Sieverding, Sarah E. Hudleston, Robins, Kaplan, Miller & Ciresi LLP, Minneapolis, MN, for amicus curiae Minnesota Association for Justice.

David Swanson sued Rebecca Brewster and Christopher Brewster to recover damages for personal injuries Swanson sustained after a motor vehicle owned by Christopher and driven by Rebecca collided with his motorcycle. A jury trial was held to determine the amount of Swanson's damages, and the jury awarded Swanson $62,259.30 in past medical expenses. In accordance with Minnesota's collateral-source statute, Minn.Stat. § 548.251 (2008),1 the Hennepin County District Court reduced Swanson's award, in part, by the amount Swanson's medical insurer, HealthPartners, paid to Swanson's medical providers. The Brewsters appealed the court's determination, arguing that Swanson's award also should have been reduced by the discount HealthPartners secured for Swanson through negotiation with Swanson's medical providers. The Brewsters asserted that the discount is a collateral source as defined by Minn.Stat. § 548.251 and therefore the court erred when it failed to deduct the negotiated-discount amount from Swanson's damage award. The court of appeals affirmed the district court's collateral-source determination. We conclude that the negotiated discount is a collateral source under Minn.Stat. § 548.251. We reverse and remand to the district court.

On October 18, 2005, a motor vehicle driven by appellant Rebecca Brewster and owned by her father, appellant Christopher Brewster, collided with a motorcycle driven by respondent David Swanson at the intersection of Summit Avenue and Snelling Avenue in Saint Paul, Minnesota. Swanson sustained injuries from the accident and primarily sought medical care at Regions Hospital.

Swanson had health insurance coverage through HealthPartners and Christopher Brewster had motor vehicle insurance through the State Farm Mutual Automobile Insurance Company (State Farm). HealthPartners acknowledged its coverage for Swanson and notified State Farm of HealthPartners' right to assert a subrogation claim on any award to Swanson.2 More specifically, HealthPartners claimed it had a right to “the reasonable value for any claims that have already been made or will in the future be made for medical and related services that have been provided to [Swanson].”

Swanson's Medical Bills and the Negotiated Discount

In seeking treatment for the injuries he sustained in the accident, Swanson incurred $62,259.30 in medical bills at Regions Hospital and other medical providers. In discharge of the obligation, Swanson paid $1,169.80 in copayments

784 N.W.2d 267
and HealthPartners paid $17,643.76. The remaining amount, $43,445.74, was forgiven because the medical providers apparently discounted their medical services for Swanson as an insured of HealthPartners. It is undisputed that because HealthPartners was able to negotiate a discount on Swanson's behalf, the entire $62,259.30 amount was discharged and Swanson will never be responsible for the amount by which Swanson's medical bills were discounted.3

In anticipation of future litigation, State Farm paid HealthPartners $10,500 for HealthPartners' subrogation rights against whoever may be liable for Swanson's injuries. HealthPartners released and assigned to State Farm and the Brewsters

all subrogation rights which Health Partners [sic] shall have against any person or organization legally liable for the bodily injuries, if any, of David M. Swanson, and ... the full benefit of any collateral source offset which may be available in future litigation. We [ (HealthPartners) ] also release any claim against David M. Swanson.

In other words, State Farm purchased and now owns any right HealthPartners had to recover any money paid by HealthPartners on Swanson's behalf if Swanson was successful in recovering against another party through a tort action. 4

Swanson commenced a tort action against Rebecca and Christopher Brewster for the personal injuries he sustained in the accident, alleging that Rebecca Brewster operated a motor vehicle negligently and that her negligence caused the accident and Swanson's injuries. The only issue to be decided at trial was the amount of Swanson's damages. On a special verdict form, the jury awarded Swanson $38,000 for past pain and suffering, $4,230 for past wage loss, $30,300 in future pain and suffering, and various amounts for specific past health care expenses that totaled $62,259.30. In all, the jury awarded $134,789.30 to Swanson.

After the district court received the jury's verdict, the Brewsters moved for a collateral-source determination under the collateral-source statute-Minn.Stat. § 548.251. Specifically, the Brewsters asked the court to reduce the damage award by contributions made by Swanson's health insurer, HealthPartners, including the negotiated discount HealthPartners secured from Swanson's medical providers. The court disagreed with the Brewsters' position and concluded that only the $17,643.76 paid by HealthPartners was a collateral source. In accordance with Minn.Stat. § 548.251, subd. 3, the court offset the $17,643.76 collateral-source amount by the amount Swanson paid in health insurance premiums during the two-year period leading up to the lawsuit-$4,570.64. See Minn.Stat. § 548.251, subds. 2, 3. As a result of this computation, Swanson's $134,789.30 verdict award was ultimately reduced by $13,073.12. The court also awarded Swanson costs and disbursements in the amount of $5,309.59 and preverdict

784 N.W.2d 268
interest in the amount of $7,496.32. The final judgment in Swanson's favor was $134,522.09 plus postverdict interest.

The Brewsters appealed the district court's order for judgment, arguing that the court erred by failing to classify the negotiated-discount amount as a collateral source and by failing to reduce Swanson's award by that amount. The Brewsters asserted that the court should have reduced Swanson's damage award by the entire amount of medical expenses billed ($62,259.30) less Swanson's health insurance premium payments ($4,570.64). The court of appeals affirmed the district court's collateral-source determination in an unpublished decision. Swanson v. Brewster, No. A08-806, 2009 WL 511747, at *1 (Minn.App. Mar. 3, 2009).

In its opinion, the court of appeals indicated that it was receptive to the Brewsters' argument, stating that the Brewsters' “assertion that the discharge of a debt may function in the same way as an actual expenditure of funds for purposes of the collateral source statute” was logical. Id. at *4. The court also acknowledged that failing to reduce damage awards by negotiated-discount amounts results in double recovery, undermining the purpose of the collateral-source statute. Id. But the court also noted that in two published opinions, it had held that negotiated-discount amounts are not collateral sources. Id. at *2-3 (discussing Foust v. McFarland, 698 N.W.2d 24 (Minn.App.2005), rev. denied (Minn. Aug. 16, 2005); Tezak v. Bachke, 698 N.W.2d 37 (Minn.App.2005), rev. denied (Minn. Aug. 24, 2005)). 5 The court then affirmed the district court's decision, relying on its prior published opinions. Id. at *4-5. The Brewsters appealed to our court and we granted review.


The only issue before us on appeal is whether a negotiated discount like the one HealthPartners negotiated with Swanson's medical providers is a collateral source under Minn.Stat. § 548.251 and should therefore be deducted from Swanson's damage award.

Common-Law Collateral-Source Rule

When an individual or entity other than a tortfeasor compensates a tort plaintiff for his or her injuries, the plaintiff has received a “collateral-source benefit.” Insurance coverage, job benefits, donations, and gratuitous services are examples of collateral-source benefits. See Hueper v. Goodrich, 314 N.W.2d 828, 830 (Minn.1982); Dan B. Dobbs, The Law of Torts 1058 (2000). Under common law, the collateral-source benefits a plaintiff receives have no impact on a tortfeasor's responsibility to pay damages to the plaintiff. The substantive component of the common-law collateral-source rule states, “[A] plaintiff may recover damages from a tortfeasor, although the plaintiff has received money or services in reparation of the injury from a source other than the tortfeasor. The benefit conferred on the injured person from the collateral source is not credited against the tortfeasor's liability....” Hueper, 314 N.W.2d at 830 (citation omitted) (holding that defendant had to pay the entire costs of plaintiff's medical expenses even though a hospital provided plaintiff's medical care free of charge); accord

784 N.W.2d 269
Restatement (Second) of Torts § 920A (1979).6 Accordingly, under the common-law collateral-source rule a tort plaintiff may receive more than the actual compensation amount-essentially a “double...

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