VanLandschoot v. Walsh, C3-02-1278.
| Decision Date | 29 April 2003 |
| Docket Number | No. C3-02-1278.,C3-02-1278. |
| Citation | 660 N.W.2d 152 |
| Parties | Allen VanLANDSCHOOT, et al., Appellants, v. Brian WALSH, Respondent. |
| Court | Minnesota Court of Appeals |
Patrick M. Krueger, Virginia J. Knudson, Borden, Steinbauer & Krueger, P.A., Brainerd, MN, for appellants.
John H. Erickson, Erickson and Pearson Law Offices, Brainerd, MN, for respondent.
Considered and decided by TOUSSAINT, Chief Judge, HUDSON, Judge, and PORITSKY, Judge.
Appellants sued respondent for property damage to appellants' commercial building. After a bench trial to determine damages, the trial court ordered judgment. Respondent then brought a post-judgment motion to reduce the judgment by the amount of a payment that respondent's insurer had made to appellants' insurer. This payment was to reimburse appellants' insurer for a payment appellants' insurer had previously made to appellants. The district court granted the motion and reduced the amount of the judgment. On appeal, appellants argue that (1) respondents' motion to reduce the amount of the judgment was not timely, and (2) the collateral-source rule applied, and under that rule, the payment is not to reduce respondent's liability. Respondent, in his notice of review, challenges the district court's determination of damages. We affirm the district court in all respects. Specifically, we conclude that, in case of property damage, a payment by a tortfeasor's insurer directly or indirectly to the injured party serves to offset the tortfeasor's liability.
On June 7, 2000, a fire damaged a commercial building owned by appellants Allen and Laura VanLandschoot. The VanLandschoots filed the present action against respondent Brian Walsh, and the parties stipulated that Walsh, a welder, negligently started the fire and is liable for damage to the building.
The only issue before the district court in the bench trial was the amount of damages. After closing the record, the trial court issued its findings and order for judgment, concluding that the VanLandschoots sustained $68,000 in damages and could recover prejudgment interest, costs, and disbursements.
Both parties brought post-trial motions. The VanLandschoots moved to amend the findings. Walsh made several motions, including a motion to deduct from the judgment the amount that his insurer paid to VanLandschoots' insurer. In support of his motion, Walsh, for the first time in the proceeding, made the claim that his insurer paid $46,439.42 to the VanLandschoots' insurer and that this payment was reimbursement for a payment the VanLandschoots had received from their insurer.
The district court granted Walsh's motion to reduce the judgment by the amount of the payment made by his insurer but denied all other motions. In its memorandum, the court stated that Walsh's failure to present the evidence of payment at trial did not preclude him from asserting his claim after trial.
The VanLandschoots appeal from the order and amended judgment. Walsh filed a notice of review of the court's damages decision.
I. Did the district court properly grant a post-trial motion to reduce the damage award by the amount that the tortfeasor's insurer paid to the injured parties' insurer?
II. Was the district court's determination of damages manifestly and palpably contrary to the evidence?
The VanLandschoots contend that the post-trial court abused its discretion by reducing the judgment by the amount that Walsh's insurer paid to their insurer. When the underlying facts of a case are undisputed, an appellate court will review de novo the district court's application of the law. Dean v. Am. Family Mut. Ins. Co., 535 N.W.2d 342, 343 (Minn.1995).
At the outset, we note that the common-law collateral-source doctrine, which is under discussion in this case, is distinct from the collateral-source statute found at Minn.Stat. § 548.36 (2002). Duluth Steam Co-op. Ass'n v. Ringsred, 519 N.W.2d 215, 217 (Minn.App.1994)
. The statute only controls personal injury cases, while the common-law rule controls those cases involving property damage. Id.
The VanLandschoots first argue that because Walsh did not present evidence of payment as an affirmative defense during trial, the post-trial court improperly admitted evidence of such payment after the verdict. See Minn. R. Civ. P. 8.03 (). We disagree.
Although the collateral-source statute does not control in cases involving property damage, in that statute the legislature recognized the propriety of bringing motions for collateral-source reduction after the verdict. Minn.Stat. § 548.36, subd. 2 (2002); see Schmuckler v. Creurer, 585 N.W.2d 425, 428 (Minn.App.1998)
(post-trial collateral-source motion), review denied (Minn. Dec. 22, 1998).
Moreover, even before the 1986 enactment of the collateral-source statute, the supreme court showed no apparent difficulty dealing with a collateral-source issue in a post-trial motion. Hueper v. Goodrich, 314 N.W.2d 828, 830 (Minn.1982). Other jurisdictions have explicitly held that such motions may properly be brought after the verdict. E.g., Fire & Cas. Ins. Co. of Conn. v. Sealey, 810 So.2d 988, 992 (Fla.Dist.Ct.App.2002)
(); Poteet v. Sauter, 136 Md.App. 383, 766 A.2d 150, 166 (2001) (); Hoffmann v. S.J. Hawk, Inc., 177 Misc.2d 305, 676 N.Y.S.2d 448, 450 (N.Y.Sup.Ct.1998) ().
Consequently, we conclude that the district court acted properly when it considered Walsh's request to reduce the judgment in a post-trial motion.
Initially, we note that although Walsh's insurer did not make a payment directly to the VanLandschoots, the payment was made to the VanLandschoots' insurer as a reimbursement for a payment that had previously been made to the VanLandschoots by their insurer. In effect, the VanLandschoots received payment from Walsh's insurer, and this case stands in the same posture as if the payment had gone directly to the VanLandschoots.
The VanLandschoots argue that the collateral-source rule should apply and the judgment should not be reduced by the amount that Walsh's insurer paid to their insurer. Under the collateral-source rule, "in general, * * * compensation received from a third party will not diminish recovery against a wrongdoer." Hubbard Broad., Inc. v. Loescher, 291 N.W.2d 216, 222 (Minn.1980). The rule is embodied in the Restatement (Second) of Torts, § 920A(2) (1979), which the Minnesota courts have expressly adopted. Hueper, 314 N.W.2d at 830 (Minn.1982); Ringsred, 519 N.W.2d at 217.
The collateral-source rule, however, applies only to a payment that comes from a source other than the tortfeasor or someone acting for the tortfeasor. Restatement (Second) of Torts § 920A(2) (1979). If the payment comes from the tortfeasor, or someone acting for the tortfeasor, the rule does not apply, and such payments will reduce the tortfeasor's liability.
A payment made by a tortfeasor or by a person acting for him to a person whom he has injured is credited against his tort liability, as are payments made by another who is, or believes he is, subject to the same tort liability.
Id. at § 920A(1) (emphasis added). In the present case, the payment to the VanLandschoots came, in effect, from Walsh's insurer, and the comment to the Restatement notes that such payments serve to reduce the tortfeasor's liability:
If a tort defendant makes a payment toward his tort liability, it of course has the effect of reducing that liability. This is also true of payments made under an insurance policy that is maintained by the defendant, whether made under a liability provision or without regard to liability * * *.
Id. at cmt. a (emphasis added).
As we have noted, the Minnesota courts have adopted the collateral-source rule, which is set out in subsection (2) of the Restatement § 920A. Ringsred, 519 N.W.2d at 217. We believe that it is equally appropriate to adopt the rule set out in subsection (1) of § 920A, which credits the tortfeasor for payments made by the tortfeasor's insurer. Sound reasons support the adoption of such a rule. First, the rule encourages potential tortfeasors to obtain liability insurance, which is actually to the benefit of injured parties, because it guarantees that judgments will be collectible, at least to the extent of the policy's limits. Second, not to adopt the rule would be to punish the prudent person who obtains liability insurance and pays for it, but is left exposed to the same liability as someone who does not have insurance. And finally, to leave the insured exposed to full liability would defeat the entire purpose of obtaining liability insurance. In this connection, although we assume that the tortfeasor's insurer would protect the tortfeasor by obtaining a full release upon payment, the present case illustrates that this does not always happen.
By the same token, most of the justifications for application of the collateral-source rule do not apply to cases such as the present case. The rationale for the collateral-source rule was succinctly set out by Justice Simonett in his dissent in Hueper:
(1) the injured party has paid for the collateral source benefit and deserves what he paid for; (2) a collateral source benefit is sometimes a gift intended by the donor to benefit the injured donee and not the tortfeasor; (3) only cumulation of collateral source benefits with amounts assessed the tortfeasor will fully compensate the injured person; (4) a tortfeasor deserves to be punished, a purpose which would be foiled if he were relieved from "total...
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