Van Waters & Rogers, Inc. v. Keelan

• Decision Date: 23 November 1992
• Docket Number: No. 91SC549,91SC549
• Citation: 840 P.2d 1070
• Parties: VAN WATERS & ROGERS, INC., Petitioner, v. Patrick K. KEELAN and Bonnie Keelan, Respondents.
• Court: Colorado Supreme Court

Page 1070

840 P.2d 1070

VAN WATERS & ROGERS, INC., Petitioner, v. Patrick K. KEELAN and Bonnie Keelan, Respondents.

No. 91SC549.

Supreme Court of Colorado En Banc.

Nov. 23, 1992.

Parcel Mauro Hultin & Spaanstra, P.C., Edward W. Stern, James L. Harrison, Denver, for petitioner.

Feder, Morris, Tamblyn & Goldstein, P.C., Leonard M. Goldstein, Stephen B. Schuyler, Denver, for respondents.

McDermott, Hansen, Anderson & Reilly, William J. Hansen, Denver, for amicus curiae Colorado Trial Lawyers' Ass'n.

Justice LOHR delivered the Opinion of the Court.

This case arises from an accident in which plaintiff Patrick K. Keelan ¹ was injured when he was struck by a pallet jack that rolled off the back of a delivery truck. Patrick and Bonnie Keelan brought a negligence action in Denver District Court against Van Waters & Rogers, Inc. (Van Waters), the company that owned the jack. Van Waters conceded liability at trial, and the jury subsequently returned a verdict awarding Patrick Keelan $411,000 and Bonnie Keelan $10,000 in damages. Van Waters opposed the entry of judgment, contending that under section 13-21-111.6, 6A C.R.S. (1987), the verdict should be reduced by the amount that Patrick Keelan would receive in disability benefits pursuant to the State Fire and Police Pension Plan as set out in section 31-30-1007, 12B C.R.S. (1986 & 1992 Supp.).

The trial court rejected Van Waters' argument and entered a final judgment for $463,284.90, including costs and interest. The Colorado Court of Appeals affirmed the entry of judgment after it determined that Keelan's disability benefits resulted from a contract that was "entered into and paid for" by both Keelan and the State of Colorado on Keelan's behalf and, thus, were exempt from the setoff requirement in section 13-21-111.6. Keelan v. Van Waters & Rogers, Inc., 820 P.2d 1145 (Colo.App.1991). We granted certiorari to review the court of appeals' interpretation and application of section 13-21-111.6 and now affirm its judgment denying a setoff against the jury's verdict.

I

Since 1976, Patrick Keelan had worked as a firefighter for the City of Denver. He and his wife had also owned and operated a swimming pool maintenance business, part of which included ordering and supervising the delivery of swimming pool chemicals. Defendant Van Waters is a distributor of swimming pool chemicals. On April 30, 1987, a Van Waters employee delivered chemical supplies to a swimming pool construction site that Keelan was monitoring. As the supplies were being unloaded, a pallet jack weighing approximately 1,200 pounds rolled off the back of the delivery truck and struck Keelan on the head, shoulder, and foot. As a result of his injuries, Keelan was declared occupationally disabled by the Fire and Police Pension Association (FPPA) and began receiving disability payments from a pension fund that the State of Colorado had established for police officers and firefighters. See §§ 31-30-1001 to -1019, 12B C.R.S. (1986 & 1992 Supp.).

In April 1989, the Keelans instituted a negligence action against Van Waters ² in which Patrick Keelan sought damages for medical and therapy expenses, pain and suffering, and loss of his firefighter and swimming pool maintenance careers, and Bonnie Keelan sought damages for loss of consortium. Van Waters conceded its liability at trial and the jury returned a verdict awarding Patrick Keelan $411,000 and Bonnie Keelan $10,000 on their claims against Van Waters. Under section 13-21-111.6, 6A C.R.S. (1987), Van Waters moved that the trial court offset this award by $335,255.81, the then present value of Keelan's disability benefits. The trial court denied the motion after it determined that the disability payments resulted from a contract that was "entered into and paid for" by both Keelan and by the State's pension fund on Keelan's behalf and that they were therefore exempt from the setoff requirement of section 13-21-111.6. Consequently, the court entered judgment for the Keelans in the total amount of $463,284.90, including costs and interest.

The court of appeals agreed that Keelan's benefits were within the express exception to the setoff requirement of section 13-21-111.6 and therefore affirmed the trial court's judgment. Van Waters, 820 P.2d at 1149. The court of appeals specifically determined that Keelan had an employment contract with the City of Denver and that the disability benefits arose from this contract. Id. at 1148. Since it further determined that the benefit was paid for by Keelan, in that he gave consideration in the form of services to the fire department, the court concluded that the setoff under section 13-21-111.6 was correctly denied. Id. at 1149.

Van Waters seeks reversal of that decision, contending that the court of appeals misinterpreted section 13-21-111.6 and erred in holding that Keelan's disability benefits were exempt from the statute's setoff requirement. We disagree with Van Waters' argument. We hold that the court of appeals properly construed and applied section 13-21-111.6, and therefore affirm its judgment.

II

A critical factor in determining the impact of section 13-21-111.6 on the jury's award is the nature of the pension plan from which Keelan's disability benefits derive. We therefore review those aspects of the State's pension system that are relevant to our decision.

At the time Keelan began working with the Denver Fire Department in 1976, the firefighter pension system was governed by sections 31-30-501 to -523, 12B C.R.S. (1986 & 1992 Supp.). Under these statutes, a local "firemen's pension fund" was established in each city that had a paid fire department and a population of over one hundred thousand people. § 31-30-501. This pension system provided for both regular retirement and disability retirement benefits, §§ 31-30-508; -511, and was funded by several sources, including assessments that were deducted from the salaries of fire department employees. §§ 31-30-503; -504.

In 1979, the Colorado General Assembly created a new pension system called the State Fire and Police Pension Plan (the Plan). Ch. 316, sec. 1, §§ 31-30-1001 to -1016, 1979 Colo.Sess.Laws 1189-1203. This was a legislative response to a concern that the previous system was actuarially unsound and in need of additional funding to cover accrued liabilities and ongoing service costs. See Peterson v. Fire & Police Pension Ass'n, 759 P.2d 720, 722-23 (Colo.1988), and City of Colorado Springs v. State, 626 P.2d 1122, 1124-25 (Colo.1981), for a review of the statutory history and financial studies leading up to this legislation. The Plan was designed to cover, with limited exceptions, all full-time police officers and firefighters in the state of Colorado who were hired after April 7, 1978. § 31-30-1003(6). Employers had the option of electing affiliation with the new plan. § 31-30-1003(3)(a). In the event that an employer made such an election, the assets of the former local pension system were transferred to the Plan's statewide fund. § 31-30-1003(3)(c). Thereafter, any benefits due to an employee under the former system became payable by the FPPA. Id. Employees who were hired before April 7, 1978, and who worked for an affiliating employer could continue with their existing coverage or could switch to the Plan's coverage. § 31-30-1003(3)(b). If they chose to switch, however, they waived their rights to receive benefits from their local system. ³ Id.

The Plan is administered by the FPPA's nine-member governing board, which is appointed by the governor and confirmed by the senate. § 31-30-1004(2). The Plan provides normal retirement benefits for members who satisfy specific age and service requirements, disability benefits for those who are unable to work because of disabilities, and survivor benefits for spouses and dependent children of deceased members. §§ 31-30-1006 to -08. Funding for these benefits, which comes from various sources including employer contributions, member contributions, moneys from fire and police benefit plans, and State contributions, is distributed into various accounts of a statewide fund. § 31-30-1012(1). Pursuant to section 31-30-1013, members contribute a percentage of their salaries to the Fund's retirement account. Pursuant to section 31-30-1014, the State makes annual contributions that are deposited into an account to fund death and disability benefits. ⁴ These contributions are presently scheduled to cease in 1996, § 31-30-1014(2)(c), 12B C.R.S. (1992 Supp.), at which time the death and disability benefits are to be funded through local revenue sources.

III

Section 13-21-111.6, 6A C.R.S. (1987), provides that a plaintiff's damage award shall be reduced by amounts by which the plaintiff is compensated for a loss from a collateral source. Central to this case is the one exception to this general rule contained in the second clause of the statute. Section 13-21-111.6 states:

In any action by any person ... to recover damages for a tort resulting in death or injury to person or property, the court, after the finder of fact has returned its verdict stating the amount of damages to be awarded, shall reduce the amount of the verdict by the amount by which such person ... has been or will be wholly or partially indemnified or compensated for his loss by any other person, corporation, insurance company, or fund in relation to the injury, damage, or death sustained; except that the verdict shall not be reduced by the amount by which such person ... has been or will be wholly or partially indemnified or compensated by a benefit paid as a result of a contract entered into and paid for by or on behalf of such person. The court shall enter judgment on such reduced amount.

§ 13-21-111.6, 6A C.R.S. (1986) (emphasis added).

This statute was enacted in 1986. Ch. 107, sec. 3, § 13-21-111.6, 1986 Colo.Sess.Laws 677, 679. Prior to that time, the common law did not require setoffs against damage awards. Rather, plaintiffs...