Recent Decisions COLLATERAL SOURCE RULE

Transcription

1 Illinois Association of Defense Trial Counsel Springfield, Illinois IDC Quarterly Volume 17, Number 3 ( ) Recent Decisions By: Stacy Dolan Fulco* Cremer, Kopon, Shaughnessy & Spina, LLC Chicago COLLATERAL SOURCE RULE Medicare Payments Excluded as Collateral Source In Wills v. Foster, 867 N.E.2d 1223 (4th Dist. 2007), the plaintiffs, Sheila M. Wills, Patrick Brooks, and June Williams, sued the defendants, Inman E. Foster, Jr. and Charlene R. Foster, for damages after the defendants drove through a red light and struck the plaintiff s vehicle. Wills, 867 N.E.2d at The claims against Charlene Foster were dismissed with prejudice. Prior to trial, the plaintiffs Brooks and Williams settled with Inman Foster. As a result of the incident, the remaining plaintiff, Sheila Wills, suffered an aggravation of a pre-existing injury, which required a spinal-cord fusion. Prior to trial, the court ruled on motions in limine to determine the amount of medical bills that the plaintiff could present to the jury. The plaintiff s medical bills totaled $80, However, the plaintiff was a Medicaid recipient and a recipient of aid from the Illinois Department of Health and Family Services (DHFS). As such, the amount of bills paid by Medicaid totaled only $19, The plaintiff requested that the court allow her to present the total bills to the jury rather than the amount paid. The trial court granted the plaintiff s motion in limine, allowing the full amount of the medical expenses billed to be presented to the jury. At the close of trial, the jury returned a verdict in favor of the plaintiff for the full amount of her medical expenses, plus $7,500 in pain and suffering. Id. at The defendant filed a post-trial motion requesting that the judge reduce the amount of the medical expense award to the $19, paid by Medicaid. The trial judge granted the defendant s motion but stated that if the Medicaid providers sought to recover the difference between the amount paid and the amount actually billed, then the plaintiff could petition the court for a revision of the order. Id. On appeal, the plaintiff argued that the trial court erred in reducing the damages award. Specifically, the plaintiff alleged that the court should have applied the collateral source rule to allow her to present the full amount billed for her treatment, citing Arthur v. Catour, 216 Ill. 2d 72, 833 N.E.2d 847 (2005). In Arthur, the Illinois Supreme Court held that a plaintiff was not limited to presenting the amount paid for medical treatment at trial, but could present the amount billed for medical treatment to the jury. Arthur, 216 Ill. 2d at 83. The defendant argued that Arthur was distinguishable and that the collateral source rule did not apply. Wills, 867 N.E.2d at The appellate court determined that the question of whether Medicaid or DHFS benefits were subject to the collateral source rule was a matter of first impression. Id. at The appellate court first considered the applicability of Arthur v. Catour. In Arthur, the Illinois Supreme Court explained that the collateral source rule prevented the introduction of collateral Page 1 of 7

2 payments made to the plaintiff as a result of contracts or other relations that existed between the plaintiff and a third-party. The rationale for excluding such payments is that a defendant should not benefit from measures taken by the plaintiff, such as procuring insurance, to reduce the defendant s liability for damages caused. Id. at , citing Arthur, 216 Ill. 2d at 79. The appellate court next discussed the purpose behind, and practical application of, the collateral source rule. Wills, 867 N.E.2d at The appellate court noted that the collateral source rule is an exception to the general rule preventing a double recovery to the injured party and it works in two ways. First, the collateral source rule prevents any reduction in the plaintiff s recovery based on collateral payments. Second, the rule excludes from presentation to the jury the amount of collateral, or third-party payments, that the injured party received. The appellate court noted that generally, the third-party (or collateral source), has a subrogation right that could be exercised to prevent the injured party from a double recovery. Id. The appellate court then analyzed whether Arthur applied to the facts in the plaintiff s case. Id. Initially, the appellate court distinguished Arthur from the plaintiff s case because the plaintiff did not bargain for her benefits but received them from the government for free based on her status. The appellate court also considered the applicability of the Illinois Supreme Court s decision in Peterson v. Lou Bachrodt Chevrolet Co., 76 Ill. 2d 353, 392 N.E.2d 1 (1979). The appellate court found the Peterson decision more factually similar to the plaintiff s case. Wills, 867 N.E.2d at In Peterson, the Illinois Supreme Court considered whether an injured plaintiff could present the value of free medical expenses received. The Peterson court determined that an injured plaintiff could not recover the value of free medical services provided by a not-forprofit hospital. In refusing to allow recovery for the free medical services, the court implied that doing so would create a windfall for the plaintiff or punish the defendant. Id., citing Peterson, 76 Ill. 2d at 363. As such, the appellate court in Wills determined that the collateral source rule did not apply to the plaintiff s case because the benefits the plaintiff received through Medicaid were not the product of a bargained-for exchange with a third-party. Id. at The appellate court noted that courts in Florida and Idaho have held that Medicare benefits are not a collateral source, while courts in South Carolina, Mississippi, Wisconsin, North Carolina and Hawaii have reached contrary results. Id. at Applying the Illinois Supreme Court s decision in Peterson, the appellate court determined that Illinois meant to exclude Medicaid and Medicare payments as collateral sources because the individuals covered by these services had not bargained for the coverage. As such, the appellate court upheld the circuit court s reduction of the compensatory damages for medical expenses to $19,005.50, the amount paid by DHFS and Medicare. Id. at SPOLIATION OF EVIDENCE Adjustor Had Duty to Instruct Insured to Preserve Evidence In Jones v. O Brien Tire and Battery Service, 2007 WL , at *1 (5th Dist. June 4, 2007), the injured plaintiff, Thomas R. Jones, was killed on September 27, 1994, after his car was involved in an accident involving a truck driven by Dave Macios and owned by Sugarloaf Landscape. Macios was insured by Country Mutual Insurance. Jones, 2007 WL at *1. Approximately three weeks prior to the September 27, 1994 incident, Macios took the Sugarloaf truck to O Brien Tire and Battery Service for a tire inspection and service. On the day of the incident, the left outer wheel of Macios truck came loose from the truck and struck the plaintiff s car after the rear wheel assembly separated from the truck. This caused the plaintiff to collide with a tractor-trailer. As a result of his injuries from the collision, the plaintiff died. Id. Page 2 of 7

3 Sugarloaf reported the incident to its insurer, Country Mutual, which assigned an adjustor to the case. The adjustor assigned an accident reconstruction specialist to visit the Sugarloaf facility in early October 1994 and inspect the truck involved in the accident. At the inspection at the Sugarloaf facility, the Country Mutual accident reconstruction specialist told Macios to keep the wheels stored somewhere out of the weather. Id. Macios, however, stored the items in an open air barn. The Country Mutual adjustor alleged that he sent a letter to Macios on October 12, 1994, shortly after the accident reconstruction specialist s visit, asking Macios to retain the two wheels and label them as evidence, do not touch. Id. at *2. Macios claimed that he did not receive the letter from the adjustor. Beginning in October 1994, Country Mutual engaged in settlement discussions with the plaintiff s estate, which lasted for several months. During the settlement negotiations, Macios asked the adjustor on more than one occasion whether he could fix the truck involved in the accident, which would involve mounting a new wheel on the truck. Macios alleged the Country Mutual adjustor told him to wait to repair the truck. The adjustor denied telling Macios to wait to make the repairs. Id. Country Mutual s accident reconstruction specialist issued his report in early November Macios alleged that in December 1994, the Country Mutual adjustor told him he could have the truck repaired. The adjustor denied making such a statement. The truck was repaired by a new body shop, where it is believed that a body shop employee disposed of the outer wheel. Id. The plaintiff s estate filed suit against Macios and his insurer Country Mutual in February That case was settled in October 1995 for $475,000. County Mutual instructed Macios via letter in December 1995 that the case against him had been dismissed. In August 1996, the plaintiff s estate filed suit against O Brien Tire and its insurer Ohio Casualty. Id. at *3. A settlement in the amount of $1,450,000 was reached in October Shortly before the October 1998 settlement, Ohio Casualty and O Brien Tire filed a third-party complaint alleging negligent spoliation of evidence against Country Mutual and Macios. The trial court granted Macios motion to dismiss and County Mutual s motion for judgment on the pleadings with respect to the spoliation of evidence claims. Ohio Casualty and O Brien Tire appealed. Id. In June 2001, the appellate court reversed the circuit court s holding, finding that the third-party complaint stated a claim for negligent spoliation of evidence. Id. The negligent spoliation of evidence claim was tried in February At the close of trial, the jury awarded a verdict in favor of O Brien Tire and Ohio Casualty in the amount of $475,000. Country Mutual filed a motion for judgment notwithstanding the verdict and a new trial. The circuit court denied the motions. Id. Country Mutual appealed the trial court s denial of the motion for a judgment notwithstanding the verdict. Ohio Casualty and O Brien Tire also filed a cross-appeal. Id. at *12. The appellate court first outlined the elements that must be established in a negligent spoliation of evidence claim: (1) the party alleged to have been negligent had a duty to preserve the evidence, (2) the party breached that duty, (3) the breach proximately caused an injury, and (4) the party seeking compensation for negligent spoliation suffered actual damages as a result. Id. at *3, citing Boyd v. Travelers Ins. Co., 166 Ill. 2d 188, 652 N.E.2d 267 (1995). The appellate court analyzed the first element by discussing the Illinois Supreme Court s decisions in Boyd and Dardeen v. Kuehling, 213 Ill. 2d 329, 821 N.E.2d 227 (2004). In Boyd, the Illinois Supreme Court found that while there is generally no duty to preserve evidence, the duty may arise if there is a contract or another agreement between the parties, if a statute imposes the duty, or if another, special situation warrants the imposition of a duty to preserve the evidence. Jones, 2007 WL , at *3. When any of these circumstances exists, a party has a duty to preserve the evidence if a reasonable person in that party s position should have foreseen that the evidence would be material to the lawsuit. Id. at *4, citing Boyd, 166 Ill. 2d at 195. In Dardeen, the Illinois Supreme Court further explained that Boyd set forth a two prong test the plaintiff must meet. Id., citing Dardeen, 213 Ill. 2d at 336. First, the plaintiff must demonstrate the existence of one of the circumstances giving rise to the duty as outlined in Boyd. Second, the plaintiff Page 3 of 7

4 must show that the duty applies to the specific evidence at issue. Id. A plaintiff can establish that the duty applies to the specific evidence by showing that a reasonable person in the defendant s position would recognize that the evidence would be material to the litigation. The plaintiff must satisfy both prongs of the test in order to establish a duty to preserve evidence. Id. The Dardeen court determined that the insurance contract at issue did not give rise to a contractual duty on the part of the adjustor to preserve evidence and that the relationship between the adjustor and the insured did not create a special circumstance as contemplated by the court in Boyd. Id., citing Dardeen, 213 Ill. 2d at 337. Distinguishing Dardeen, the appellate court determined that County Mutual had enough control over the wheels in Macios possession to give rise to a duty under the first prong of Boyd. Id. at *5. Specifically, the appellate court noted that after County Mutual voluntarily chose to preserve the wheels for its use in the negotiations and potential litigation with the underlying plaintiff, that voluntary undertaking imposed a duty on County Mutual to continue to use reasonable care to preserve the same evidence for future potential litigants. Id. at *6. Regarding the second prong of Boyd, the appellate court found that a reasonable claims adjustor would have anticipated future litigation regarding the incident and that the wheels and tires would be critical evidence in any future claims regarding the incident. Id. at *7. The appellate court therefore determined that once Country Mutual undertook to preserve the wheels, it had a duty to exercise reasonable care to preserve the evidence for future litigation. Id. The appellate court then considered the circuit court s denial of Country Mutual s motion for a judgment notwithstanding the verdict. Country Mutual argued that Ohio Casualty and O Brien Tire failed to establish a breach of its duty to preserve evidence. Id. at *8. Country Mutual argued that the photographs taken by its accident reconstruction expert, coupled with its instructions to Macios to preserve the evidence, were a satisfaction of its duty to preserve the evidence. The appellate court disagreed. Id. at *9. As noted by the appellate court, Ohio Casualty and O Brien Tire presented evidence at trial, through their own expert, as to why the photographs taken by Country Mutual s reconstruction specialist were insufficiently detailed to allow him to reach a conclusion to a reasonable degree of scientific certainty as to the cause of the incident. Ohio Casualty and O Brien Tire s expert further testified that having access to the actual evidence would have been the best way to determine the cause of the incident. Id. at *8. Additionally, the Ohio Casualty and O Brien Tire s expert opined that the evidence should have been stored in an air-tight container rather than the open air barn. Id. at *9. Considering this testimony, the appellate court determined that Ohio Casualty and O Brien Tire presented sufficient evidence for the jury to conclude that the evidence was not sufficiently preserved by Country Mutual or Macios. Id. at *8. The appellate court also rejected Country Mutual s argument that it exercised reasonable care by instructing Macios not to throw away the wheels. The court determined that the adjustor s instruction to Macios to repair the vehicle in December 2004, without another specific instruction to preserve the evidence, could be found to be negligent. Further, the appellate court opined that its failure to give more specific instructions on how to store the wheels, and Country Mutual s failure to determine whether the items were being stored properly, could have allowed a jury to find that Country Mutual breached its duty to exercise reasonable care to preserve the wheels. Id. at *8-9. Next, the appellate court considered whether Ohio Casualty and O Brien Tire proved causation. The appellate court again determined the actions of Country Mutual s adjustor contributed to the ultimate loss of the evidence. Id. Country Mutual argued that Ohio Casualty and O Brien Tire had to establish that the loss of the evidence prevented them from providing any defense to the underlying lawsuit. The appellate court disagreed, noting that the party alleging spoliation has to establish that the loss of evidence made them unable to prove their case and that the loss of a critical piece of evidence, Page 4 of 7

5 even if there is other evidence available, could prevent a plaintiff from proving the underlying case. As such, the appellate court determined that Ohio Casualty and O Brien Tire satisfied the causation element. Id. at *10. The appellate court also considered whether the jury instruction given by the trial court was proper. Country Mutual alleged that whether there was a duty to preserve evidence was a question of fact for the jury. The appellate court found that there was sufficient evidence to find a duty based on the October 1994 letter from the Country Mutual adjustor to Macios instructing him to preserve the tires. Id. at *11. Next, Country Mutual argued that the trial court s directed verdict of sole proximate cause was in error. Ohio Casualty and O Brien Tire argued that only the first paragraph of IPI Civil No (2000) should be given. The first paragraph reads, in part: If you decide that the defendant was negligent and that its negligence was a proximate cause of injury to the plaintiff, it is not a defense that some third person who is not a party to the suit may also have been to blame. Id. at *12, citing IPI Civil (2000). Country Mutual argued that the second paragraph of IPI Civil should also be given. The second paragraph reads: However, if you decide that the sole proximate cause of injury to the plaintiff was the conduct of some person other than the defendant, then your verdict should be for the defendant. Id. Country Mutual argued that because the repair shop disposed of the wheel, Country Mutual was entitled to the second paragraph of the instruction because a jury could find that the repair shop s negligence was the sole proximate cause. The appellate court disagreed and upheld the trial court s directed verdict, finding the issue was whether Country Mutual and its adjustor were negligent in their directions to Macios to preserve the evidence and whether these instructions lead to the loss of the wheel, not the effect of the repair shop s actions. Id. at *12. The appellate court next considered the cross appeal of Ohio Casualty and O Brien Tire. The cross appeal raised several issues, including whether the trial court s jury instruction on damages was proper and whether the court abused its discretion when it denied their motion for leave to amend the complaint to add a willful and wanton spoliation of evidence count. Id. The trial court ordered the jury to determine what amount of damages would fairly compensate Ohio Casualty and O Brien Tire as a result of the spoliation of evidence claim. Id. On appeal, Ohio Casualty and O Brien Tire argued that the trial court should have fixed the amount of damages at the amount that they paid to settle the case with the injured plaintiffs. Id. The appellate court disagreed and upheld the trial court s decision to allow the jury to determine the appropriate amount of damages. Id. at *13. The appellate court noted only one case involving a spoliation of evidence claim asserted by a defendant. Id., citing Stinnes Corp. v. Kerr-McGee Coal Corp., 309 Ill. App. 3d 707, 722 N.E.2d 1167 (5th Dist. 1999). In cases where the underlying plaintiff alleged spoliation of evidence against the defendant, the appellate court cited several Illinois courts that determined the appropriate method for calculating damages is to take the amount recovered by the plaintiffs if they had prevailed at trial and multiply that amount by the probability of success at trial. Id. at *13. Thus, the appellate court upheld the trial court s instruction as to the amount of damages. Id. The appellate court also considered whether the trial court abused its discretion in refusing to allow Ohio Casualty and O Brien Tire to amend their complaint to add a count for willful and wanton spoliation of evidence. Id. at *14. The appellate court first noted that amendments to pleadings were permitted at any time before a final judgment on just and reasonable terms. Id., citing 735 ILCS 5/2-616(a) (West 2002). However, it is not clear whether Illinois courts recognize a cause of action for willful and wanton spoliation of evidence. Id., citing Boyd, 166 Ill. 2d at 201. The appellate court therefore found that the trial court was within its discretion to deny such a request. Id. at *14. VOLUNTARY DISMISSALS Page 5 of 7

6 Mailbox Rule Does Not Apply to Re-filed Complaints In Wilson v. Brant, 2007 WL (1st Dist. May 18, 2007), the plaintiff, Terrance Wilson, filed his original complaint on June 4, 2002 against defendants Robert Brant and Star Transportation, alleging injuries sustained in a car accident. The plaintiff s original complaint was filed in a timely fashion. During discovery, the plaintiff s counsel withdrew from the case. The plaintiff obtained a voluntary dismissal on December 7, 2004 pursuant to section Wilson, 2007 WL at *1, citing 735 ILCS 5/ (West 2004). The plaintiff obtained new counsel after the case was voluntarily dismissed and on December 7, 2005, attempted to re-file his complaint pursuant to 735 ILCS 5/ The plaintiff sent a new complaint, notice of filing and proof of service to the Cook County Circuit Clerk and the defendants via regular mail. The clerk of the circuit court stamped the documents on December 20, Id. The defendants filed a motion to dismiss alleging that the plaintiff had not re-filed within the time period provided in 735 ILCS 5/2-619(a)(4). Id., citing 735 ILCS 2-619(a)(4) (West 2004). The circuit court granted the defendants motion, and denied the plaintiff s subsequent motion to reconsider. Id. On appeal, the plaintiff argued that the trend in Illinois was to consider the mailing date to be the date of filing and this trend should also be applied to re-filings after voluntary dismissals. The plaintiff argued that re-filing a complaint differs from filing a complaint, citing Illinois Supreme Court Rules 12 and 373 in support of his position. The defendants argued that re-filing after a voluntary dismissal is akin to filing a new case, and therefore it should not be considered filed until the clerk stamps it. Id. The appellate court first noted that the plaintiff had one year, or until December 7, 2005, to re-file his complaint after voluntarily dismissing the action. Id. at *2, citing 735 ILCS 5/2-1009(a) (West 2004), 735 ILCS 5/ (West 1994). The appellate court distinguished the cases discussing the mailbox rule cited by the plaintiff and argued that those cases involved documents filed after an action had already been commenced. Id. The plaintiff next argued that a re-filed complaint was unlike a new complaint and should not be subject to the same constraints. The appellate court noted that two Illinois appellate courts have refused to apply the mailbox rule to new actions. Id. at *3, citing Kelly v. Mazzie, 207 Ill. App. 3d 251, 500 N.E.2d 692 (2nd Dist. 1986), and Wilkins v. Dellenback, 149 Ill. App. 3d 549, 565 N.E.2d 719 (2nd Dist. 1990). In both cases, the appellate court held that the date the complaint is stamped by the clerk is the date that it is considered filed. Id. at *3. Further, the appellate court cited the specific language of 735 ILCS 5/13-217, which states that a plaintiff may commence a new action within one year (emphasis in original). Id. at *5., citing 735 ILCS 5/ (West 1994). The appellate court also found that Supreme Court Rules 12 and 373 did not help the plaintiff. Id. at *5. The appellate court noted that Rule 12 does not refer specifically to the filing of complaints, but deals generally with the service of papers that may be accomplished by mail. Id. The appellate court also examined Rule 373 and found it was limited to the filing of papers with a reviewing court, not the circuit court. The appellate court further noted that Rule 373 does not discuss the filing of complaints by mail. As such, the appellate court affirmed the trial court s dismissal of the plaintiff s re-filed complaint pursuant to section of the Code of Civil Procedure. Id. at *6. About the Author Stacy Dolan Fulco is a partner at the Chicago law firm of Cremer, Kopon, Shaughnessy & Spina, LLC. She practices primarily in the areas of premises liability, products liability and wrongful death defense. She received her undergraduate degree at Illinois State University and her J.D./M.B.A. degree from DePaul University. She is a member of the IDC. Page 6 of 7

7 * The author acknowledges the assistance of Katherine K. Haussermann in the preparation of this article. Page 7 of 7