Minnesota Supreme Court Determines that the Gap Between the Amount a Medical Provider Bills and the Amount An Insurer Pays to Satisfy the Bills is a Collateral Source and can be Deducted from Personal Injury Verdicts
By: Paul J. Rocheford
August 10, 2011
At long last, in Swanson v. Brewster, the Minnesota Supreme Court has concluded that the negotiated discount amounts - amounts a plaintiff is billed by a medical provider but does not pay because the plaintiff's insurance provider negotiates a discount on the plaintiff's behalf - are "collateral sources" for purposes of Minnesota's collateral source statute, Minn. Stat. §548.251 (2008). Thus, any amounts by which medical bills have been discounted/"written off" pursuant to an insurer's contract with a provider, can now be deducted from the medical special damages verdict.
For years, personal injury defendants, lawyers and insurers have argued to no avail that the negotiated discount amount is a windfall to the plaintiff and represents a double recovery. The Minnesota Supreme Court has now agreed and concluded that the windfall or gap between the amounts billed and the amounts paid by an insurer under a contract is a deductible collateral source.
In Swanson, the plaintiff was injured while on a motorcycle and sued the Brewsters as tortfeasors. Swanson had incurred $62,259.30 in medical bills with various providers. In discharge of those bills, Swanson paid $1,169.80 in co-payments and HealthPartners paid $17,643.76. The remaining amount, $43,445.74 was forgiven because of a negotiated discount in place between the medical providers and Swanson's insurer, HealthPartners. It was undisputed that due to the contract discount, the entire $62,259.30 in medical bills was completely discharged and Swanson would never be responsible for any of those bills.
The Brewsters' insurer, State Farm, proactively paid HealthPartners $10,500 to obtain an assignment of HealthPartners' subrogation rights. Thus, the subrogation exception to the collateral source rule would not apply to State Farm's claim to offset at least the amount that HealthPartners paid to satisfy the bills.
The jury awarded pain and suffering damages, past wage loss and all of the past medical expenses of $62,259.30. After the verdict, the defense moved for a collateral source offset. The defense asked the court to fully set off all of the past medical expenses awarded because no subrogation right had been asserted. The district court disagreed and found that only the $17,643.76 actually paid by HealthPartners was a collateral source. The defense took the case to the Court of Appeals which affirmed the limited collateral source offset. The Court of Appeals cited its previously published opinions in Foust v. McFarland, 698 NW2d 24 (Minn. App. 2005) and Tezak v. Bachke, 698 NW2d 37 (Minn. App. 2005). The Brewsters then appealed the matter to the Supreme Court.
In a very lengthy decision, the Supreme Court analyzed the common law collateral source rule and the intent behind Minnesota's collateral source statute. The Supreme Court concluded that the plain and ordinary meaning of the word "payments" in the collateral source statute is broader than simply money given in exchange for goods and services. The Court found that HealthPartners delivered something of value through its negotiated discount. The discount was made on the plaintiff's behalf because it relieved him of his obligation to pay the medical bills.
Going forward, in any personal injury case where there has been a negotiated discount by the insurer to pay medical providers' bills, the discounted amount is a collateral source which is subject to deduction under the collateral source statute. Note however that the collateral source statute also provides that the amount of the collateral source deduction is then reduced by the amount the plaintiff paid in premiums to obtain the insurance.
There was a vigorous dissent in Swanson written by Justice Meyer. Justice Meyer indicated that the term "payments" in the collateral source statute excluded the amount of a negotiated discount that no one has "paid." Justice Meyer said that the injured plaintiff, who procured the insurance coverage, should be entitled to the benefit of the discount, not the tortfeasor who caused the injury.
In its opinion, the Court also cited the fact that the purpose of the collateral source statute "is to prevent double recoveries by plaintiffs." It distinguished one of the goals of the No-Fault Act, to ensure that automobile accident victims are promptly compensated for their loss. Thus, it does not appear that the negotiated discount offset will apply to first-party PIP (no-fault) claims. It appears that the Court's reasoning is to enforce the purpose of the No-Fault Act, which is "to encourage appropriate medical and rehabilitation treatment of the automobile accident victim by ensuring prompt payment for such treatment." Therefore, a first-party no-fault carrier cannot wait for a health insurer to step in and pay the medical bills at a discount and then try to reap the benefit of that discount.
It has been a long battle for the defense in trying to get the appellate courts to recognize that awarding the negotiated discount windfall to the plaintiff represented a double recovery, but the Minnesota Supreme Court has finally decided the issue, and the negotiated discount amounts will serve as a collateral source offset. This will dramatically affect the value of significant medical care and treatment claims.
To see more on the Swanson decision, please click here.
As always, we welcome you to contact any of the attorneys listed below at ACKS&P with any questions you have regarding the Swanson decision or any other claim matters.
Paul E.D. Darsow 612 375-5952 Blake W. Duerre 612 375-5932 Shayne M. Hamann 612 375-5996 Charles B. Harris 715 808-0513 Beth Jenson Prouty 612 375-5992 Kimberly L. Johnson 612 375-5941 Robert W. Kettering 612 375-5921 J. Kevin Kirchner 612 375-5913 Colby B. Lund 612 375-5914 William J. McNulty 612 375-5939 James F. Mewborn 612 375-5930 Lee A. Miller 612 375-5931 Paul J. Rocheford 612 375-5937 Curtis D. Ruwe 612 375-5940 Eugene C. Shermoen 612 375-5915 Ryan C. Sorge 612 375-5991 Jonathon M. Zentner 612 375-5904
ACKSP ATTORNEYS SHINE INSIDE THE COURTROOM AND WE ARE OFF TO A GREAT START IN 2011!
February 28, 2011
We are proud to report that we have obtained seven complete defense verdicts thus far in 2011, along with a complete dismissal for our client on a multi-million dollar injury claim. Collective hard work and long team hours logged by everyone at Arthur Chapman recently garnered these excellent results for our clients:
- Automobile - Gene Shermoen and team received a defense verdict on an injury claim in Washington County. In a strongly contested liability case, the jury determined Gene's client was not negligent and placed the entire fault on the other defendant. It was also a win for the defense on damages. The case involved a shoulder surgery (IME doctor admitted it was caused by accident) and the jury awarded only $2,275.20 for pain and suffering.
- Workers’ Compensation - James Pikala received a total defense verdict in a Mesothelioma case. The employee was a welder and machine operator who claimed that he was exposed to asbestos materials on a daily basis with our employer. The total damage exposure was approximately $400,000. Jim secured victory by arguing the employee’s exposure to asbestos in the Navy for three years was the only substantial contributing factor in his development of Mesothelioma.
- Construction Defect - Mike North and team secured a defense verdict for a window manufacturer in a tough construction case. The jury awarded the full cost to repair the home ($220,000), but determined that the window manufacturer was not responsible for the damage.
- Automobile - Lee Miller secured a complete defense verdict in an automobile accident jury trial. Plaintiff claimed an injury to the inner ear that he claimed ruined his "golden" years by causing significant ringing in the ears (tinnitus), loss of hearing and significant balance issues. The defense had offered $20,000 to settle the case and Plaintiff never came below $100,000. Jury found no tort threshold.
- Automobile - Gene Shermoen and team secured another victory for his clients this month, this time securing a complete defense verdict in an automobile accident jury trial in Wright County. The net result was that the Plaintiff owed the Defendant more in costs and disbursements than he recovered from the jury.
- Fire/Fraud - Mark Brown and team secured a defense verdict in a difficult civil arson trial. This case involved a plaintiff who alleged that the insurance company did not compensate him for two fires occurring in April 2007. Mark argued the Plaintiff was responsible for the fires. The jury agreed that the Plaintiff was responsible for the second of two fires and that he failed to cooperate with the terms and conditions of his insurance policy. The jury did not award Plaintiff any damages.
- Construction Injury - Mike Carr and Lee Miller received an order granting our client summary judgment in a multi-million dollar construction accident. Mike and Lee argued the claim was barred by the doctrine of common enterprise and argued that because the Plaintiff had accepted workers’ compensation benefits under these facts, he was not entitled to bring a claim against our client. The judge agreed and dismissed the case with prejudice.
- Workers’ Compensation – Noelle Schubert received a total defense verdict in a case involving alleged Gillette injuries to the cervical spine. The employee was a 49 year-old road construction supervisor who worked for his employer for over 30 years. He claimed that his heavy duty work activities were a substantial contributing factor to his neck condition, and need for cervical fusion surgery. The total accrued damage exposure was $100,000. Noelle secured victory by arguing that the employee’s neck condition was the result of a multilevel degenerative condition of the spine, and unrelated to his work activities. The Judge denied the employee’s claims in full.
Our great start in 2011 shows our clients trust ACKSP to deliver top-tier service for everything from the smallest claims to the largest, most complex disputes. Since the inception of the firm, we have worked hard to earn a reputation as astute, conscientious, responsible, and client-focused. With 48 attorneys, we offer big-firm knowledge and results with the agility and dedication of a smaller practice.
ARTHUR CHAPMAN NAMES KIM JOHNSON AND CURT RUWE AS NEW SHAREHOLDERS FOR 2011
January 1, 2011
Minneapolis, MN – January 1, 2011. Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is pleased to announce that Kimberly L. Johnson and Curtis D. Ruwe have been elected as shareholders. We congratulate them both and are excited to add their many talents to our team of shareholders.
Kimberly L. Johnson joined Arthur, Chapman, Kettering, Smetak & Pikala, P.A. as an associate in 2004. Kim has experience handling a wide variety of litigated cases but focuses much of her practice in the areas of construction, FELA, commercial litigation, personal and commercial automobile law and general litigation. She is the co-chair of the commercial transportation practice group. Prior to joining the firm, Kim practiced law for approximately five years in Denver, Colorado, and maintains her Colorado license. Kim is a graduate of the University of South Dakota School of Law and is a native of Little Falls, Minnesota.
Curtis D. Ruwe joined Arthur, Chapman, Kettering, Smetak & Pikala, P.A. in 2007 and is the co-chair of the insurance coverage practice group at Arthur Chapman. Curt has extensive experience in advising clients regarding commercial insurance coverage and the defense of insurance agents against professional liability claims. Curt’s coverage litigation experience includes arguing insurance coverage issues to appellate courts in several states and before the Minnesota Supreme Court. Curt is a graduate of the University of Nebraska and is a native of Hooper, Nebraska.
The law firm of Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is located in Minneapolis, MN and serves the litigation needs of businesses, the insurance industry, and self-insured entities. Since 1974, the firm has evolved from three attorneys to 48 attorneys. The attorneys at Arthur Chapman provide a full range of litigation services, including general and commercial litigation, products liability, automobile liability, workers’ compensation, subrogation, professional liability, insurance coverage, intellectual property, construction, liquor liability, employment law, trucking, railroad, and personal injury law.
SEVEN ATTORNEYS NAMED 2010 SUPER LAWYERS®
July 22, 2010
Seven attorneys from Arthur, Chapman, Kettering, Smetak & Pikala, P.A. have been selected as 2010 Minnesota Super Lawyers®. This annual list represents no more than 5 percent of the attorneys in Minnesota. Recognized are: Robert Kettering, Business Litigation, Colby Lund, Civil Litigation Defense, Ted Smetak, Insurance Coverage, Lindsay Arthur, Personal Injury Defense; Products, Lee Miller, Personal Injury Defense; General, Paul Rocheford, Civil Litigation Defense, and Sally Ferguson, Personal Injury Defense; Medical Malpractice.
Paul Rocheford was also selected in the annual "Top 100" list, which includes those who received the highest point totals in the Minnesota nomination, research and blue ribbon review process.
Sally Ferguson was also named in the "Top 50 Women" which is a listing of women lawyers who received the highest point totals in the 2010 Minnesota Super Lawyers® nomination, research, and blue ribbon review process.
Super Lawyers® is a listing of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. It is published as a special supplement in Twin Cities Business, Minneapolis/St. Paul Magazine, and Minnesota Super Lawyers.
Super Lawyers® selects attorneys using a rigorous, multiphase process. Peer nominations and evaluations are combined with third party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement and selections are then made on an annual, state-by-state basis. The objective is to create a credible, comprehensive and diverse listing of outstanding attorneys that can be used as a resource for attorneys and consumers searching for legal counsel.
JAMES MEWBORN AND LEE MILLER HONORED WITH AN EXCELLENCE IN DEFENSE AWARD BY CANADIAN PACIFIC CASUALTY CLAIMS
June 24, 2010
On June 24, 2010 Jim Mewborn and Lee Miller were honored with Canadian Pacific Casualty Claim's "Excellence in Defense Award" for their excellent work in achieving a favorable verdict in the Soo Line case they tried earlier this year.
Canadian Pacific Claims awards this honor to publicly acknowledge defense counsel who have achieved excellent results for them.
Congratulations to Lee and Jim for a job well done.
NEW ATTORNEYS
Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is pleased to announce that James J. Ranheim has joined our firm.
James recently joined Arthur Chapman with more than ten years of experience working with firms in Minnesota and North Dakota. James is an experienced trial lawyer primarily representing declarants, general contractors, and various subcontractors in multi-party construction defect and water intrusion litigation. To read more about James please click here.
Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is pleased to announce that Matthew C. Kopp has joined our firm.
Matthew Kopp joined Arthur Chapman as an associate and concentrates his practice exclusively in Workers’ Compensation. Prior to joining the firm, he practiced in the areas of personal injury, medical malpractice, products liability, and wrongful death. To read more about Matthew please click here.
Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is pleased to announce that William J. McNulty has joined the firm.
William McNulty joined Arthur Chapman as an associate and practices in the areas of insurance coverage, automobile, construction and general liability law. Will received his undergraduate degree from St. John's University with a double major in Spanish and Management. After college, he worked as a claim representative in the Twin Cities while going to law school part-time. Will started with Arthur Chapman as a law clerk in 2009. To read more about Will please click here.
Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is pleased to announce that Joel W. Zylstra has joined the firm.
Joel Zylstra joined Arthur Chapman as a senior associate and practices in the areas of general liability, business litigation, fraud, and construction law. His experience includes successful arguments before Minnesota District Courts, Federal Courts, and the Minnesota Court of Appeals. Prior to joining Arthur Chapman, Joel practiced in the areas of construction, fraud and general insurance defense litigation. Joel also clerked at the Minnesota Court of Appeals and Minnesota's Third Judicial District. To read more about Joel please click here.
Arthur, Chapman, Kettering, Smetak & Pikala, P.A. is pleased to announce that Chad J. Hintz has joined the firm.
Chad Hintz joined Arthur, Chapman, Kettering, Smetak & Pikala, P.A. as a senior associate and practices in the areas of professional liability, including medical and legal malpractice, and insurance law and appeals. He serves as co-chair of the firm's Professional Liability practice group. In addition to practicing law, Chad serves as an Adjunct Appellate Professor at William Mitchell, teaching appellate advocacy to second- and third-year law students. He is a current member of the Ramsey County Bar Association's Ethics Committee, investigating ethical complaints made against lawyers. He has presented seminars on topics ranging from litigation techniques to representing parties in professional liability claims. Chad has also published several articles in respected legal journals and has repeatedly been recognized as a "Rising Star" by Minnesota Law & Politics. To read more about Chad please click here.
FAVORABLE VERDICT IN SOO LINE CASE
February 2010
Jim Mewborn and Lee Miller tried a FELA case, Smith v. Soo Line Railroad, No. 27-CV-09-10443, in Hennepin County, on behalf of Soo Line Railroad.
The Plaintiff, Smith, a Soo Line Railroad employee, claimed that he was injured in May 2008 while inspecting culverts along the Mississippi River near Winona, Minnesota. Plaintiff was a B&B carpenter who claimed that while walking up a ballast embankment, he slipped and twisted his back. He claimed an injury to his left shoulder and back, and eventually had shoulder surgery. In September 2009, he was given permanent lifting and overhead work restrictions arising from his low back and shoulder injuries. He was diagnosed with a permanent back injury with nerve damage, a torn rotator cuff, and a torn labrum. Plaintiff had not worked since his shoulder surgery in April of 2009.
Plaintiff's theory of liability was that he was not properly trained to inspect culverts, that he had little experience walking on ballast, and that he was unfamiliar with the area where he fell. He argued that, although he had experience in cleaning and repairing culverts, he should have received specific culvert inspection training from Soo Line. Although he had been an employee for 10 years, plaintiff claimed that he never received such training.
Soo Line asserted that plaintiff's injury was unrelated to his qualifications to inspect culverts. Rather, the issue to be determined was whether he was trained to walk on ballast. A number of employees testified at trial about the GCOR and why plaintiff's incident squared with the Alert and Attentive standard. Employees also testified that walking on ballast is a daily occurrence and that an employee must make sure his footing is secure before taking the next step. There were several inconsistencies in the plaintiff's testimony throughout the case and through trial. While the court denied Soo Line's motion for summary judgment on preemption, it limited the plaintiff's evidence with regard to the ballast.
Soo Line called a former FRA regional director as its liability expert, who persuasively criticized plaintiff's expert's theories that culvert inspection could be accomplished with a boom truck and bucket, with a fall protection harness, by cutting steps into the embankment, or by using a boat along the river.
Plaintiff's last demand during trial was $400,000 and the last settlement offer was less than one-half that amount.. Plaintiff asked the jury for $700,000 - $800,000 in closing, and Soo Line argued damages of $4500. The jury attributed plaintiff with 90% fault and awarded $145,000 in damages. Based upon the jury's apportionment of fault, the damages award is reduced to $14,500, an amount which is exceeded by various liens and offsets.
KETTERING NAMED TO SUPER LAWYERS® - CORPORATE COUNSEL EDITION
Robert W. Kettering, Jr. was named in the March/April 2010 issue of Super Lawyers® - Corporate Counsel Edition, the magazine for and about corporate counsel. The lawyers chosen were selected to be included in Super Lawyers 2009 - 2010, and designated business litigation or international law as their primary area of practice. The Corporate Counsel Edition includes select lawyers from each of the 50 states.
For more information about Bob, click here to read his biography.
