Product Liability Update
Collateral Source Rule Not Violated by References to Medical Insurance, Medicare and Social Security
In Stokes, the defendant was driving a pickup truck towing a horse trailer that was loaded with equipment when he rear-ended the plaintiff. The plaintiff sustained severe injuries in the accident, including a traumatic brain injury, and he and his wife later sued the defendant for negligence. The injured plaintiff sought $23.5 million for his own personal injuries, and his wife sought $4 million in connection with her claim for loss of consortium. Numerous pretrial motions were filed, including a motion in limine to preclude any reference during trial to medical insurance or collateral benefits, including any reference to the healthcare entity “Kaiser” or “Kaiser Permanente” for fear that a Southern California jury would equate medical treatment at Kaiser to the availability of insurance benefits. This motion was denied, and the parties proceeded to trial, with the defendant stipulating to liability but contesting causation and damages.
After the jury heard testimony from numerous experts witnesses on subjects like the reasonable cost of future medical care, the jury returned a damages award of approximately $610,000 – a fraction of the millions of dollars sought by the plaintiffs. The plaintiffs moved to vacate the award and for a new trial on several grounds, including that the defendant’s reference to Kaiser Permanente improperly biased the jury. The trial court denied the motion and the plaintiffs appealed.
On appeal, the plaintiffs argued that the trial court wrongly permitted the defendant to violate the collateral source rule on multiple occasions during trial by making repeat references to the plaintiff’s past treatment at Kaiser Permanente and Kaiser medical insurance, as well as references to Medicare and Social Security disability benefits in relation to future medical expenses. The plaintiffs argued that the mere references to these entities led the jury to infer that he had received collateral payments in the past or would receive collateral payments in the future, thereby prompting the jury to reduce any damages award he would receive.
The Court of Appeals held that these references did not violate the collateral source rule. Specifically, the court held that “most of these references to Kaiser and Medicare, as well as the single reference to Social Security, merely provided context and background information on [the plaintiff’s] past treatment at Kaiser and on some aspects of [the defendant’s] experts’ calculation of past and future reasonable medical expenses. They were helpful and even necessary to the jury’s understanding of the issues.” Id. at *9.
Further, the court concluded that the plaintiffs failed to demonstrate that “the court abused its discretion in admitting these references to assist the jury’s understanding of the facts.” Notably, the court acknowledged that the defendant’s expert’s testimony also relied on Medicare reimbursement rates to calculate the reasonable value of past services. Indeed, the expert “used the Medicare ‘allowable amount’ and 130 percent of the Medicare allowable amount” as methods of determining the reasonable value of healthcare services rendered. See Id. at *9 fn. 10.
While this case helps to clarify what does and does not violate the collateral source rule, it may prove impactful in more significant ways. In holding that references to Kaiser, Medicare, and Social Security did not violate the collateral source rule because the references provided background into the plaintiff’s past treatment and aspects of the defendant’s experts’ calculation of past and future reasonable medical expenses, the court implicitly endorsed defense billing experts’ and life care planners’ use of Medicare reimbursement rates as a measuring stick to determine the reasonable value of services rendered.
Because it can be difficult to calculate the reasonable cost of medical expenses, accepted use of Medicare reimbursement rates as the guiding value may lend some predictability to potential damages awards.
