Volunteers of Am. Colo. Branch v. Gardenswartz

• Decision Date: 15 November 2010
• Citation: Volunteers of Am. Colo. Branch v. Gardenswartz, 242 P.3d 1080 (Colo. 2010)
• Docket Number: 09SC20
• Parties: VOLUNTEERS OF AMERICA COLORADO BRANCH, a Colorado non-profit corporation, and Volunteers of America Foundation-Colorado, a Colorado non-profit corporation, both d/b/a Volunteers of America, Petitioners v. Wayne GARDENSWARTZ and Zachary C. Tucker, as co-personal representatives of Richard B. Tucker, Respondents.
• Court: Colorado Supreme Court

242 P.3d 1080

VOLUNTEERS OF AMERICA COLORADO BRANCH, a Colorado non-profit corporation, and Volunteers of America Foundation-Colorado, a Colorado non-profit corporation, both d/b/a Volunteers of America, Petitioners

v.Wayne GARDENSWARTZ and Zachary C. Tucker, as co-personal representatives of Richard B. Tucker, Respondents.

No. 09SC20.

Supreme Court of Colorado, En Banc.

Nov. 15, 2010.

Hall & Evans, L.L.C., Peter Moyson, John T. Osgood, Denver, Colorado, Attorneys for Petitioners.

Darling Milligan Smith & Lesch, PC, Richard J. Lesch, Ryan D. Nelson, Denver, Colorado, Attorneys for Respondents.

Martin Conklin, P.C., John L. Conklin, J.R. Geraghty, Denver, Colorado, Attorneys for Amicus Curiae Kaiser Foundation Health Plan of Colorado.

Davis Graham & Stubbs, LLP, Dale Harris, Andrew Low, Denver, Colorado, Attorneys for Amicus Curiae Copic Insurance Company.

McDermott, Hansen & McLaughlin, LLP, William J. Hansen, Denver, Colorado, Attorney for Amicus Curiae Colorado Trial Lawyers Association.

Montgomery, Kolodny, Amatuzio & Dusabek, L.L.P., Todd Vriesman, Denver, Colorado, Murphy Decker Hensen & Cook-Olson, PC, C. Todd Drake, Littleton, Colorado, Harris, Karstaedt, Jamison & Powers, P.C., Heather A. Salg, Englewood, Colorado, Attorneys for Amicus Curiae Colorado Defense Lawyers Association.

Snell & Wilmer, L.L.P., Lee Mickus, Denver, Colorado, Attorney for Amicus Curiae Colorado Civil Justice League.

Chief Justice MULLARKEYdelivered the Opinion of the Court.

On certiorari review, we consider whether a successful tort plaintiff may recover damages for the full amount of medical expenses incurred, or may recover only the discounted amount paid by the third-party insurance company.We hold that under the collateral source rule, as codified by the contract clause of section 13-21-111.6, C.R.S. (2010), the plaintiff may recover in full.We therefore affirm the court of appeals.Tucker v. Volunteers of America Colo. Branch,211 P.3d 708, 713(Colo.App.2008).

I.Facts and Proceedings Below

The plaintiff, Richard B. Tucker,¹ was injured when he fell at an event sponsored by Volunteers of America Colorado Branch and Volunteers of America Foundation-Colorado (collectively "VOA").He was billed $74,242 for medical services as a result of his injuries.²

Prior to the accident, Tucker purchased a health insurance policy from Aetna, for which he regularly paid premiums.Aetna was able to satisfy Tucker's medical debts with a payment of $43,236, which reflected $31,006 in medical discounts that the company had negotiated with his healthcare providers.Aetna thereby indemnified Tucker for the medical expenses that he incurred as a result of the tort committed against him.Tucker's policy included a subrogation clause entitling Aetna "to repayment of the full cost of all benefits provided by HMO on behalf of the Member that are associated with the injuries ... for which another party is ... responsible."

Tucker brought a tort claim against VOA for his injury.The jury awarded Tucker $81,385 in economic losses and $60,000 in non-economic losses for a total of $141,385.Because Tucker was found to be 49% at fault, his total jury award would have been $72,106.However, the trial court determined that under section 13-21-111.6, the jury verdict should be reduced to reflect the healthcare discounts secured by Aetna.It applied a formula ³ to the economic losses component of the award and subtracted 80.8% of the healthcare write offs, a total of $34,935, from the total jury award of $141,385, leaving $106,450 in damages.Because Tucker was 49% at fault, the trial court further reduced Tucker's damages award to $54,290.

The court of appeals reversed, holding that the healthcare discounts fell under the contract exception of section 13-21-111.6 and therefore did not provide a proper basis for reducing the award.Tucker v. Volunteers of America Colo. Branch,211 P.3d 708, 713(Colo.App.2008).⁴

II.Collateral Source Rule

An understanding of the common law collateral source rule is essential in interpreting section 13-21-111.6, which codifies the collateral source rule.

Under the common law collateral source rule, making the injured plaintiff whole is solely the tortfeasor's responsibility.Any third-party benefits or gifts obtained by the injured plaintiff accrue solely to the plaintiff's benefit and are not deducted from the amount of the tortfeasor's liability.These third-party sources are "collateral" and are irrelevant in fixing the amount of the tortfeasor's liability.

The rule therefore allows double recovery by a successful plaintiff."[C]ompensation or indemnity received by an injured party from a collateral source, wholly independent of the wrongdoer and to which [the wrongdoer] has not contributed, will not diminish the damages otherwise recoverable from the wrongdoer."Colo. Permanente Med. Grp., P.C. v. Evans,926 P.2d 1218, 1230(Colo.1996)(quotingKistler v. Halsey,173 Colo. 540, 545, 481 P.2d 722, 724(1971));see alsoCrossgrove v. Wal-Mart Stores,---P.3d ----, ---- - ----(Colo.App.2010)(selected for publication)(discussing common law origins of collateral source rule).

The rule's purpose is to prevent a tortfeasor from benefitting, in the form of reduced liability, from compensation in the form of money or services that the victim may receive from a third-party source.SeeQuinones v. Pa. Gen. Ins. Co.,804 F.2d 1167, 1171(10th Cir.1986)("The rule evolved around the commonsense notion that a tortfeasor ought not be excused because the victim was compensated by another source, often by insurance.").Accordingly, the rule is somewhat punitive in nature.It prohibits the wrong-doer from enjoying the benefits procured by the injured plaintiff.If either party is to receive a windfall, the rule awards it to the injured plaintiff who was wise enough or fortunate enough to secure compensation from an independent source, and not to the tortfeasor, who has done nothing to provide the compensation and seeks only to take advantage of third-party benefits obtained by the plaintiff.SeeVan Waters & Rogers, Inc. v. Keelan,840 P.2d 1070, 1074(Colo.1992)("To the extent that either party received a windfall, it was considered more just that the benefit be realized by the plaintiff in the form of double recovery rather than by the tortfeasor in the form of reduced liability.").

Double recovery is permitted to an injured plaintiff because the plaintiff"should be made whole by the tortfeasor, not by a combination of compensation from the tortfeasor and collateral sources.The wrongdoer cannot reap the benefit of a contract for which the wrongdoer paid no compensation."Acuar v. Letourneau,260 Va. 180, 531 S.E.2d 316, 323(2000)(emphasis added)(holding that, under the collateral source rule, tortfeasor may not reduce a plaintiff's award by the amounts written off by plaintiff's healthcare providers).

Under this rule, the benefits received by an injured plaintiff due to the plaintiff's third-party health insurance coverage are from a collateral source, and therefore are not to be considered in determining the amount of the plaintiff's recovery.

[I]t is the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor.If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance ... the law allows him to keep it for himself.If the benefit was a gift to the plaintiff from a third party or established for him by law, he should not be deprived of the advantage that it confers.

Restatement (Second) of Torts, § 920A, cmt.b (1979);seeVan Waters,840 P.2d at 1075(citing same).The plaintiff's health insurance benefits certainly are not to be credited to the tortfeasor in reducing the plaintiff's award.SeeDag E. Ytreberg, Collateral Source Rule: Injured Person's Hospitalization or Medical Insurance as Affecting Damages Recoverable, 77 A.L.R. Fed. 415(1977).

To ensure that a jury will not be misled by evidence regarding the benefits that a plaintiff received from sources collateral to the tortfeasor, such evidence is inadmissible at trial.Carr v. Boyd,123 Colo. 350, 356-57, 229 P.2d 659, 662-63(1951).It is also inadmissible in adjusting or reducing a plaintiff's damages award.SeeCrossgrove,--- P.3d at ---- - ----.Thus, the collateral source rule prohibits a jury or trial court from ever considering payments or compensationthat an injured plaintiff receives from his or her third-party insurance.

III.Section 13-21-111.6

In 1986 the General Assembly modified the common law collateral source rule to a limited extent by enacting section 13-21-111.6 as part of a package of tort reforms.Seech. 107, sec. 3,§ 13-21-111.6,1986 Colo. Sess. Laws 677, 679;see also, Van Waters,840 P.2d at 1077.

Section 13-21-111.6 has two contrasting clauses.The first clause partially negates the collateral source rule.It directs a trial court, following a damages verdict, to adjust the plaintiff's award by deducting compensation or benefits that the plaintiff received from collateral sources (i.e., sources other than the tortfeasor).The second clause, described as the "contract exception" or the "contract clause," retains the collateral source rule for certain benefits.SeeColo. Permanente Med. Grp.,926 P.2d at 1230.

The statute provides as follows:

In any action by any person or his legal representative 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, his estate, or his personal representative 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

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