Frfar v. Wal-Mart Stores, Inc.

          City and County of Denver District Court No. 15CV31638 Honorable John W. Madden IV, Judge

          Burg Simpson Eldredge Hersh & Jardine, P.C., Nelson Boyle, Englewood, Colorado, for Plaintiff-Appellee

          Kutak Rock LLP, Mark C. Willis, Mia K. Della Cava, Denver, Colorado, for Defendants-Appellants

          Heideman Poor LLC, John F. Poor, Denver, Colorado, for Amicus Curiae Colorado Trial Lawyers Association

          Fox and Márquez ^[*] , JJ., concur

          JUDGMENT AFFIRMED

          JUDGE WEBB

          ¶ 1 This premises liability case presents a novel question in Colorado: whether the collateral source rule - codified in section 10-1-135(10)(a), C.R.S. 2017, and section 13-21-111.6, C.R.S. 2017 - applies to Medicare benefits. We conclude that it does.

         ¶ 2 Wal-Mart Stores, Inc., appeals the judgment entered on a jury verdict in favor of Robert P. Forfar III, for injuries he sustained when he slipped and fell at a Wal-Mart store. The judgment included $44, 000 in economic damages for the reasonable value of medical services that Mr. Forfar, a Medicare beneficiary, had received.

         ¶ 3 Before trial, Wal-Mart moved to exclude evidence of Mr. Forfar's medical expenses owed under agreements that he had entered into with his medical services providers. Wal-Mart argued that because these agreements were null and void under Medicare regulations, evidence of the reasonable value of those medical services should be "limited to the Medicare approved charges for the services."^[1] Mr. Forfar also moved in limine to exclude any evidence that he had received Medicare benefits, arguing that such benefits constituted a collateral source.

         ¶ 4 The trial court ruled that Wal-Mart could "not present evidence to the jury as to the amount of the Medicare limits." The court also ruled that Mr. Forfar "may not present evidence of private contracts between himself and any of the Third-Party Medical Providers." Still, it allowed him to "present evidence of the reasonable value of the medical services . . . and such value need not be based upon the Medicare limits." The trial proceeded according to this ruling, with Mr. Forfar seeking damages of $72, 636 as the reasonable value of the medical services.

         ¶ 5 After trial, Wal-Mart moved to reduce the damages under section 13-21-111.6. It argued that the economic damages awarded for Mr. Forfar's medical expenses "should be reduced to Medicare accepted rates." The trial court denied the motion, holding that Medicare benefits fall within the contract exception to the collateral source rule of section 13-21-111.6.

         ¶ 6 Wal-Mart challenges both of these rulings on appeal. We affirm.

         I. Background

         ¶ 7 In Colorado, the collateral source rule has both a pre-verdict evidentiary component and a post-verdict component. The evidentiary component is codified at section 10-1-135(10)(a). See Smith v. Jeppsen, 2012 CO 32, ¶ 19 (stating that section 10-1-135(10)(a) "unambiguously codifies" the common law collateral source rule). The post-verdict component is codified at section 13-21-111.6. Because this case involves both components, they require separate discussion.

         ¶ 8 Generally, under the collateral source rule, "compensation or indemnity received by an injured party from a collateral source, wholly independent of the wrongdoer and to which the wrongdoer has not contributed, will not diminish the damages otherwise recoverable [by the injured party] from the wrongdoer." Colo. Permanente Med. Grp., P.C. v. Evans, 926 P.2d 1218, 1230 (Colo. 1996) (quoting Kistler v. Halsey, 173 Colo. 540, 545, 481 P.2d 722, 724 (1971)).

         ¶ 9 Pre-verdict, this doctrine applies "to bar evidence of collateral source benefits because such evidence could lead the fact-finder to improperly reduce the plaintiff's damages award on the grounds that the plaintiff already recovered his loss from the collateral source." Wal-Mart Stores, Inc. v. Crossgrove, 2012 CO 31, ¶ 12. Section 10-1-135(10)(a) provides, "[t]he fact or amount of any collateral source payment or benefits shall not be admitted as evidence in any action against an alleged third-party tortfeasor."

         ¶ 10 Still, our supreme court has recognized some tension between "the pre-verdict evidentiary component of the collateral source rule that controls this case and the reasonable value rule." Crossgrove, ¶ 19. Specifically, "the correct measure of damages is the necessary and reasonable value of the [medical] services rendered." Kendall v. Hargrave, 142 Colo. 120, 123, 349 P.2d 993, 994 (1960). And to prove that value, the amount paid for medical services is "some evidence of their reasonable value." Id.

         ¶ 11 But what happens if evidence of the amount paid would disclose a collateral source, thus risking that the jury could improperly reduce the damages award for that reason?

         ¶ 12 In Crossgrove, ¶ 20, the supreme court resolved this tension by holding that "the pre-verdict evidentiary component of the collateral source rule prevails in collateral source cases to bar the admission of the amounts paid for medical services." It explained:

Admitting amounts paid evidence for any purpose, including the purpose of determining reasonable value, in a collateral source case carries with it an unjustifiable risk that the jury will infer the existence of a collateral source - most commonly an insurer - from the evidence, and thereby improperly diminish the plaintiff's damages award.

Id. Particularly relevant here, the court offered an example: "[T]he government sets the rates that providers who honor public insurance programs, like Medicare and Medicaid, must accept for certain services," which "are often significantly lower than those billed by the provider." Id. at ¶ 22.

         ¶ 13 As to the post-verdict component, start with the rule: section 13-21-111.6 "requires the trial court to reduce a successful plaintiff's verdict as a matter of law by the amount the plaintiff 'has been or will be wholly or partially indemnified or compensated for his loss by any other person, corporation, insurance company or fund in relation to the injury . . . sustained.'" Id. at ¶ 14 (quoting § 13-21-111.6). Then consider the exception: the statute preserves the common law post-verdict component of the collateral source doctrine "to a limited extent by prohibiting trial courts from reducing a plaintiff's verdict by the amount of indemnification or compensation that the plaintiff has received, or will receive in the future, from 'a benefit paid as a result of a contract entered into and paid for by or on behalf of the plaintiff.'" Id. at ¶ 15 (quoting § 13-21-111.6).

         ¶ 14 So, given all this, what more need be said? A lot, according to Wal-Mart, because the case involves Medicare - a context in which the collateral source rule has yet to be addressed by any Colorado court. After walking us through a labyrinth of federal statutes and regulations, Wal-Mart asserts the following:

• because Mr. Forfar's providers, who are covered by Part B of the Medicare program, failed to submit an affidavit opting out of Medicare, they cannot recover more than Medicare allows for their services, see 42 U.S.C. § 1395b-3 (2012); 42 U.S.C. § 1395u(b)(18)(B) (2012); 42 C.F.R. § 405.420 (2017);

• to the extent that the providers' private contracts with him provided otherwise, because those contracts did not comply with the disclosure requirements of Medicare, they are - as the trial court found - null and void, see 42 U.S.C. § 1395a(b)(2)(B)(i)-(v) (2012); 42 C.F.R. § 405.405(c) (2017); 42 C.F.R. § 405.415 (2017); 42 C.F.R. § 405.430(b)(1) (2017);

• "no person" can be liable above the Medicare limits for medical services provided to a Medicare beneficiary, see 42 U.S.C. § 1395u(b)(18)(B) ("No person is liable for payment of any amounts billed for such a service in violation of the previous sentence."); 42 U.S.C. § 1395w-4(g)(1)(A)(ii) (2012) ("No person is liable for payment of any amounts billed for the service in excess of such limiting charge."); and

• insofar as the collateral source rule or section 13-21-111.6 may provide for greater liability, they are preempted by Medicare.

         ¶ 15 For his part, Mr. Forfar agrees that he was covered by Medicare based on his Social Security Disability Insurance (SSDI) benefits. Even so, after taking his own exhaustive tour of both federal statutes and regulations, he responds that under Barnett v. American Family Mutual Insurance Co.,843 P.2d 1302 (Colo. 1993), Medicare is a collateral source, which triggers the ...