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Williams v. IQS Insurance Risk Retention

United States District Court, E.D. Louisiana

February 26, 2019

JUDY WILLIAMS, ET AL.
v.
IQS INSURANCE RISK RETENTION, ET AL.

         SECTION: "A" (5)

          ORDER AND REASONS REF: ALL ACTIONS

          JAY C. ZAINEY, UNITED STATES DISTRICT JUDGE.

         The following motion is before the Court: Motion in Limine (Rec. Doc. 86) filed by Plaintiffs, Judy Williams, Mary Wade, and Lucinda Thomas. Defendants Southern Refrigerated Transport, Inc., IQS Insurance Risk Retention Group, Inc., Eric Darnell Martin, and Zurich American Insurance Co., oppose the motion. The motion, noticed for submission on February 20, 2019, is before the Court on the briefs without oral argument.

         This suit arises out of personal injuries that Plaintiffs allegedly sustained in a car accident on June 6, 2017. Defendant Eric Martin was driving the other vehicle. On March 6, 2018, and June 5, 2018, Plaintiffs filed two petitions against Defendants in state court. Defendants removed both actions to this Court. All three plaintiffs underwent surgery before suit was filed.

A jury trial is scheduled to commence on June 3, 2019. (Rec. Doc. 36).
Plaintiffs now move in limine to exclude certain evidence at trial.

         I.

         Based on the questions asked by Defendants at the depositions of Plaintiffs' physicians, and based on the list of additional witnesses that Defendants seek to depose, Plaintiffs have concluded that Defendants may try introduce evidence at trial as to the external source that has funded Plaintiffs' medical treatment. Specifically, Plaintiffs' counsel contracted with a litigation funding company that engages medical providers to render services at pre-negotiated discount rates to litigants in personal injury lawsuits. Plaintiffs do not dispute that Defendants have the right to question whether the medical treatments were causally related to the accident at issue, or even medically necessary, but they contend that Defendants should not be able to reference the guarantee of the medical, how the medical has been or will be paid, or that any medical charges are not owed and due. Plaintiffs argue that the collateral source rule applies to preclude Defendants from making such arguments and introducing evidence related to these issues.

         Defendants agree that under Louisiana law Plaintiffs are entitled to recover medical expenses paid or guaranteed by collateral sources. (Rec. Doc. 99 at 1). Defendants argue, however, that the collateral source rule does not apply in this case because Plaintiffs have testified in their depositions that they do not know how their medical bills are being paid or funded and that they have not signed any guarantees in that regard. (Id. at 2). Defendants argue that Plaintiffs' counsel's payment or guarantee of payment to a third party for medical payments is not recoverable. Defendants analogize this case to Hoffman v. 21st Century North American Insurance Co., 209 So.3d 702 (La. 2015). Alternatively, Defendants argue that Plaintiffs' motion is premature because discovery is ongoing.

         In a diversity case state law governs whether and to what extent the collateral source rule applies. See Kadlec Med. Ctr. v. Lakeview Anesth. Assocs., 527 F.3d 412, 425-26 (5th Cir. 2008); Parker v. NGM Ins. Co., No. 15-2123, 2016 WL 2625875, at *1 (May 9, 2016) (Morgan, J). Under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), this Court first looks to the final decisions of the Louisiana Supreme Court in order to determine Louisiana law. Howe v. Scottsdale Ins. Co., 204 F.2d 624, 627 (5th Cir. 2000) (citing Labiche v. Legal Sec. Life Ins. Co., 31 F.3d 350, 351 (5th Cir. 1994)). If the Louisiana Supreme Court has not ruled on an issue then a federal court must make an “Erie guess” to determine “as best it can” what the Louisiana Supreme Court would decide. Id. (quoting Krieser v. Hobbs, 166 F.3d 736, 738 (5th Cir. 1999)). In making an Erie guess in the absence of a ruling from the state's highest court, a federal court may look to the decisions of intermediate appellate state courts for guidance. Id. (citing Matheny v. Glen Falls Ins. Co., 152 F.3d 348, 354 (5thCir. 1998)).

         The collateral source rule is a rule of evidence and damages. Bozeman v. State of La., 879 So.2d 692, 697 (La. 2004). Although in their motion Plaintiffs frame the issue as one of evidence alone, i.e., that Defendants should not be allowed to admit evidence of the funding arrangement that paid for their medicals, Defendants' opposition (and Plaintiffs' reply memorandum) makes clear that the parties are also disputing the quantum of special damages that will be recoverable in light of the third party funding arrangement used in this case.

         The Court begins with the damages aspect of the collateral source issue raised in this case. All three Plaintiffs underwent surgery. It is the Court's understanding that the physicians' bills have been satisfied so that the treating doctors are owed no additional money from Plaintiffs, their attorney, or any other source. It is also the Court's understanding that the medical bills were not paid by Defendants. Assuming that Defendants are at fault for causing the accident, and that Plaintiffs establish that the medical treatment was necessary and causally related to the accident for which Defendants' are at fault, the collateral source rule prohibits Defendants from reducing their liability based on the medical funding that Plaintiffs obtained independently of and without contribution from Defendants. See La. Dept. Transp. & Dev. V. Kan. City So. Ry., 846 So.2d 734, 739 (La. 2003) (citing Bryant v. New Orleans Pub. Serv., Inc., 406 So.2d 767, 768 (La.App. 4thCir. 1981)). In other words, if found legally responsible for Plaintiffs' injuries, Defendants cannot be “exonerated from paying the full consequences of [their] act” simply because Plaintiffs' hired an attorney who contracted with an entity for provision of medical services. Id. at 740. The major policy reason for applying the collateral source rule to damages has been and continues to be tort deterrence. Bozeman, 879 So.2d at 700. Allowing Defendants to avoid paying for medical treatment necessitated by their fault based on the funding scheme employed would render the goal of tort deterrence nugatory. Pretermitting for the moment consideration of any discounts, at least as to the amounts that were actually paid to the physicians for treatment, the collateral source rule applies will full force to those amounts regardless of the funding structure employed.[1] Therefore, Plaintiffs may recover those amounts as special damages in this lawsuit even if they never agreed to be personally liable for the charges.[2] Furthermore, evidence as to the collateral source that paid the charges is inadmissible because from an evidentiary standpoint, the collateral source rule bars the introduction of evidence that a plaintiff has received benefits or payments from a collateral source independent of the tortfeasor's procuration or contribution. Patterson v. State Farm Mut. Auto. Ins. Co., 244 So.3d 800 (La.App. 2nd Cir. 2017) (citing Bozeman, 879 So.2d at 700).

         The real point of contention insofar as the damages aspect of the collateral source rule is concerned is whether Plaintiffs can recover the difference between what the treating physicians billed for their services and the amounts that the physicians accepted as full payment for their services to Plaintiffs. Plaintiffs' medical bills were paid by a financing company that has contracts with medical providers who treat personal injury plaintiffs. Plaintiffs' counsel contracted with the financing company, which has been promised payment of the provider's “full billed rate.” (Rec. Doc. 99-5, Exhibit E). The provider, on the other hand, is paid 40 percent of the “full billed charges.” (Rec. Doc. 99-6, Exhibit F). So for example, if the physician's full billed rate for treatment was $100, 000, he received at most $40, 000 in full satisfaction of his bill, and the remaining $60, 000 (hereinafter referred to as “the Difference”) is owed by Plaintiffs' counsel to the finance company. Significantly, Plaintiffs themselves were not parties to any of these agreements, [3] and while they would have presumably agreed vis à vis their attorney that the Difference must come out of their recovery as a cost of the litigation, no suggestion has been made that Plaintiffs themselves agreed to be responsible to anyone for any medical bills or for the Difference should their recovery at trial fall short.

         The Court has reviewed the gamut of collateral source decisions from the Louisiana Supreme Court and from the courts of appeal in this state, and this Court's Erie determination is that under Louisiana law Plaintiffs cannot recover the Difference as an element of special damages. To be sure, in Louisiana write-offs and discounts that are akin to the Difference in this case may be recoverable and subject to the collateral source rule even if they constitute a “windfall” to the plaintiff. See, e.g., Patterson v. State Farm Mut. Auto. Ins. Co., 244 So.3d 800 (La.App. 2nd Cir. 2017) (holding that the collateral source rule applies to write-offs that medical providers negotiated with the plaintiff's health insurer); Lockett v. UV Ins. Risk Retention Grp., Inc., 180 So.3d 557 (La.App. 5th Cir. 2015) (holding that the collateral source rule applies to the write-off where the plaintiff herself negotiated the medical discount with the provider); Johnson v. Neill Corp., No. 15-430, 2015 WL 9464625 (La.App. 1st Cir. 2015) (unpublished) (holding that the collateral source rule applies in cases where medical discounts are granted as a professional courtesy). But the common thread that runs through all of these decisions is that in order to recover the undiscounted or full billed ...


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