Plaintiff Can Recover Full, Undiscounted Medical Bills in Colorado

The Colorado Supreme Court has rejected a challenge to the collateral source rule and has ruled that a plaintiff may recover the full, not discounted, amount of medical bills in a personal injury case.

In Volunteers of America Colorado Branch v. GardenswartzCase No. 09SC20  (Col. Nov. 15, 2010) the court explained the purpose of the 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. See Quinones 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. See Van 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.”).

The defendant argued that discounted health care bills were not covered by the rule.  The court disagreed, saying


We recognize that there may be a disparity between the cost of medical services that are billed to a consumer and the amounts that are actually paid by insurance companies. It can be tempting to treat the discounted amounts as being a truer reflection of a plaintiff’s damages. However, the write offs reflect the negotiating power of Tucker’s insurer and its successful leverage in requiring providers to accept discounted reimbursement:

     Although “discounting” of medical bills is a common practice in modern       healthcare, it is a consequence of the power wielded by those entities, such as insurance companies, employers and governmental bodies, who pay the bills. While large “consumers” of healthcare such as insurance companies can negotiate favorable rates, those who are uninsured are often charged the full, undiscounted price. In other words, simply because medical bills are often discounted does not mean that the plaintiff is not obligated to pay the billed amount. Defendants may, if they choose, dispute the amount billed as unreasonable, but it does not become so merely because plaintiff’s insurance company was able to negotiate a lesser charge.

Arthur v. Catour,803 N.E.2d 647, 649 (Ill. App. Ct. 2004) (under the collateral source rule, the “plaintiff’s damages are not limited to the amount paid by her insurer, but may extend to the entire amount billed, provided those charges are reasonable expenses of necessary medical care”).

The court concluded as follows:


It is unjust to transfer the financial benefits of purchasing and maintaining health insurance to the tortfeasor, and the General Assembly’s contract exception avoids this result. See also Van Waters, 840 P.2d at 1078 (the legislative history “shows [] an intent not to deny a plaintiff compensation to which he is entitled by virtue of a contract that either he, or someone on his behalf, entered into and paid for with the expectation of receiving the consequent benefits at some point in the future”).

Our holding is consistent with the statutory contract clause and the rationale of the collateral source rule, which reject the notion that a tortfeasor may draw on sources wholly collateral to itself to reduce the compensation owed to the injured plaintiff. This result is also consistent with the principle that statutes in derogation of the common law are to be construed narrowly.

Here, the write offs that Tucker’s healthcare providers applied to his medical bills were a direct result of the benefits negotiated by his health insurance company, which is a source independent of the tortfeasor. See Hardi, 818 A.2d at 985. Therefore, VOA may not receive any consideration or benefit from the write off or discount provisions of Tucker’s health care contract.

A great opinion.