Tezak v. Bachke, No. A04-2134.

• Court: Court of Appeals of Minnesota
• Citation: 698 N.W.2d 37
• Docket Number: No. A04-2134.
• Parties: Carla Diane TEZAK, as trustee for the heirs and next of kin of Martin Tezak, Respondent, v. Bruce BACHKE, et al., Appellants.
• Decision Date: 21 June 2005

698 N.W.2d 37

Carla Diane TEZAK, as trustee for the heirs and next of kin of Martin Tezak, Respondent, v. Bruce BACHKE, et al., Appellants.

No. A04-2134.

Court of Appeals of Minnesota.

June 21, 2005.

Timothy A. Little, Little & Tierney, P.A., Duluth, MN, for respondent.

John D. Kelly, Kenneth A. Kimber, Hanft Fride, P.A., Duluth, MN, for appellants.

Considered and decided by STONEBURNER, Presiding Judge, HUDSON, Judge, and DIETZEN, Judge.

OPINION

STONEBURNER, Judge.

Appellants, who are liable for a decedent's special damages arising out of an automobile accident, challenge the district court's summary judgment determination that respondent may recover, as special damages under Minn.Stat. § 573.02, subd. 2, the full amount of decedent's reasonable medical expenses related to the accident rather than the amount for which the decedent's health insurer settled the medical providers' claims for those expenses.

FACTS

The parties submitted this matter to the district court based on stipulated facts. Respondent is trustee for the heirs and next-of-kin of Martin Tezak. Tezak was injured when the automobile he was driving was struck by an automobile driven by appellant Jill Bachke. Appellant Bruce Bachke is the owner of the vehicle driven by Jill Bachke and he consented to Jill Bachke's use of the vehicle. Tezak was not negligent. The collision was caused, at least in part, by Jill Bachke's negligence. Tezak incurred medical expenses in excess of $100,000 related to the accident.¹ Tezak initiated a lawsuit against appellants but died of causes unrelated to the accident before that lawsuit was completed, and the lawsuit was dismissed. Tezak's health insurer settled all claims for medical expenses related to the accident for $32,000.

Respondent, as trustee for the heirs and next-of-kin of Tezak, purchased the health insurer's subrogation rights and initiated this action against appellants under Minn. Stat. § 573.02, subd. 2 (2004), for special damages, including the full amount of medical expenses billed to Tezak by medical providers. Appellants sought to limit respondent's claim for medical expenses to the $32,000 amount for which the medical bills were settled by Tezak's health insurer.

The district court determined that respondent may claim the full amount of expenses billed. Judgment was entered consistent with the parties' stipulation, in which respondent agreed to limit her claim to $100,000, and this appeal followed.

ISSUE

May the trustee for the heirs and next-of-kin of a person who is injured in an automobile accident and who dies of causes unrelated to the accident, after acquiring the subrogation rights of the decedent's health insurer, pursue a claim for the full amount of medical expenses incurred by the decedent as a result of the accident?

ANALYSIS

When a district court grants summary judgment based on the application of a statute to undisputed facts, the district court's decision is purely a legal conclusion reviewed de novo. Lefto v. Hoggsbreath Enters., Inc., 581 N.W.2d 855, 856 (Minn. 1998). The issue presented in this case is one of first impression in Minnesota.

Minn.Stat. § 573.02, subd. 2 (2004) provides:

When injury is caused to a person by the wrongful act or omission of any person... and the person thereafter dies from a cause unrelated to those injuries, the trustee ... may maintain an action for special damages arising out of such injury if the decedent might have maintained an action therefore had the decedent lived.

"`Special damages' are those damages to which an exact dollar amount can be assigned, such as medical expenses or lost wages to date of death." Deal v. North-wood Children's Home Soc'y., 608 N.W.2d 922, 925 n. 1 (Minn.App.2000), review denied (Minn. June 13, 2000).

Appellants rely on general principles governing compensatory damages to argue that respondent's claim should be limited to damages for which a person has actual losses. See, e.g., Phelps v. Commonwealth Land Title Ins. Co., 537 N.W.2d 271, 275 (Minn.1995)

(noting that compensatory damages are generally synonymous with actual damages, but damages may be multiplied when statute provides for multiplication of actual damages to arrive at compensatory damages). Appellants also rely on cases that hold that parties should not receive "double recovery" of damages. See, e.g., Imlay v. City of Lake Crystal, 453 N.W.2d 326, 332 (Minn.1990) (noting that stated purpose of collateral-sources statute, Minn.Stat. § 548.36, is to prevent double recoveries by plaintiffs, which is a legitimate purpose).

No Minnesota cases have addressed the issue of whether a trustee may recover from the person who caused the accident, as special damages under Minn.Stat. § 573.02, subd. 2, the full amount of medical expenses incurred as a result of the accident when medical providers have settled for less than the full amount. But in a case involving a claim for economic-loss benefits under Minn.Stat. § 65B.46, subd. 1 (2000), which provides for basic economic-loss benefits for persons who suffer loss from an injury arising out of the maintenance or use of a motor vehicle, the supreme court declined to allow a tortfeasor to benefit from a settlement agreement between an injured party's health insurer and medical providers and allowed full recovery of medical expenses incurred. Stout v. AMCO Ins. Co., 645 N.W.2d 108 (Minn.2002).

The decision in Stout is based primarily on an analysis of the language of the No Fault Act. The Act makes economic-loss benefits payable on a monthly basis as the loss accrues and provides that loss accrues as medical expense is incurred. Minn. Stat. § 65B.54, subd. 1 (2004). The supreme court held that "[a] reduction in the amount billed, whether obtained pursuant to a settlement agreement or a health insurer's fee schedule, does not modify the amount of medical expense incurred." Stout, 645 N.W.2d at 113. Stout relied on the reasoning in Collins v. Farmers Ins. Exch., 271 Minn. 239, 135 N.W.2d 503 (1965). Id. at 112-13. In that case, Collins, the insured, sued an insurance company to recover medical expenses under an automobile policy that provided $5,000 worth of coverage for "reasonable [medical] expenses actually incurred." Collins, 271 Minn. at 240-41, 135 N.W.2d at 504-05. Collins was billed in excess of $5,000 by medical providers but was able to settle the provider's claims for $2,250. Id. at 241, 135 N.W.2d at 505. The insurer claimed that the expense Collins incurred was the amount Collins paid pursuant to the settlement, but the supreme court stated that the definition of "incur" is "`to become liable for' as distinguished from actually `pay for.'" Id. at 244, 135 N.W.2d at 507. The holding in Collins is that the insured became liable for, and therefore incurred, the amount originally billed, and not the amount Collins paid as a result of a collateral transaction. Id.

The supreme court in Stout noted that under case law in Minnesota, "if there is to be a windfall either to an insurer or to an insured, the windfall should go to the insured" because it is more just "`that the insured who has paid a premium should get all he paid for rather than that the insurer should escape liability for that for which it collected a premium.'" 645 N.W.2d at 114 (quoting Van Tassel v. Horace Mann Ins. Co., 296 Minn. 181, 187, 207 N.W.2d 348, 352 (1973)). Recognizing that Stout, the insured, had not paid a premium for the coverage provided, the supreme court nonetheless concluded that it was more just that any windfall should go to Stout rather than the insurer of the vehicle that struck him. Id. at 114-15. Although Stout and Collins are distinguishable from the case before us, which does not involve the construction of the No Fault Act or an insurance policy, the cases are instructive.

In this case, we must determine whether the amount of medical expenses recoverable as special damages under Minn.Stat. § 573.02, subd. 2, is the reasonable amount billed by the providers or the amount by which those bills were settled by a health insurer prior to initiation of the action under Minn.Stat. § 573.02, subd. 2. We conclude that resolution of this issue turns on whether the collateral-source statute or the common-law collateral-source rule applies to the difference between the amount billed and the amount for which the bills were settled.

We first note that the collateral-source statute applies to the $32,000 for which the health insurer settled the medical provider's claims. Minn.Stat. § 548.36, subd. 1 (2004) (defining collateral source as "payments related to the injury ... in question made to the plaintiff, or on the plaintiff's behalf up to the date of the verdict."). Under the collateral-source statute, however, the parties agree that the $32,000 paid by the health insurer will not be set off from any recovery by respondent because respondent obtained the health insurer's subrogation rights.² Respondent's right to recover the $32,000 is not disputed. The issue is whether respondent can recover the $68,000 gap between what the medical providers billed decedent³ and the $32,000 paid by decedent's health insurer to settle the medical providers' bills.⁴

We next conclude that the collateral-source statute does not apply to the $68,000, because the gap between the bills and the settlement was not a payment made to anyone and therefore is not a collateral source as defined by the statute. Minn.Stat. § 548.36, subd. 1; Smith v. Am. States Ins. Co., 586 N.W.2d 784, 786 (Minn.App.1998), review denied (Minn. Feb. 18, 1999) (holding that payments not yet received due to insurer's denial of coverage or discontinuation of payments based on insured's failure to show continued entitlement to benefits are not collateral sources under statutory definition because they have not been paid). Although the collateral-source statute abrogated the common-law collateral-source rule in some situations, when benefits are not subject...