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Hall v. Granite State Insurance Co.

United States District Court, D. Colorado

April 3, 2019

ZEBEDEE HALL, Plaintiff,
v.
GRANITE STATE INSURANCE COMPANY, Defendant.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Scott T. Varholak United States Magistrate Judge.

         This matter comes before the Court on Plaintiff's Motion for Determination of Law (the “Motion”) [#30], which has been referred to this Court [#31]. This Court has carefully considered the Motion and related briefing, the entire case file, and the applicable case law, and has determined that oral argument would not materially assist in the disposition of the instant Motion. For the following reasons, this Court respectfully RECOMMENDS that the Motion be GRANTED and that the Court hold that the amounts paid by Plaintiff's workers' compensation insurance carrier, and the fact of those payments, are inadmissible, including for demonstrating the reasonable value of Plaintiff's medical care, or to reduce Plaintiff's damages.

         I. BACKGROUND[1]

         Plaintiff Zebedee Hall was involved in a three-vehicle collision in November 2015. [#3 at ¶ 5] An unidentified driver of an unknown vehicle (“Phantom Vehicle”) merged lanes, striking a second vehicle, causing the second vehicle to collide with Plaintiff's vehicle. [Id. at ¶¶ 6-10] The driver of the Phantom Vehicle fled the scene. [Id. at ¶ 11] The parties dispute the severity of Mr. Hall's physical injuries as a result of the collision, but he ultimately underwent a four-level cervical fusion surgery and other medical treatment. [Id. at ¶ 16; #40 at 3-4] Mr. Hall incurred over $184, 000 in medical expenses, some of which were covered and paid for by his workers' compensation carrier. [#3 at ¶ 17; see also #30 at 2; #40 at 5] The Denver County District Court determined that the driver of the Phantom Vehicle was negligent and 100% responsible for causing the collisions. [#3 at ¶ 20]

         At the time of the collision, Mr. Hall was driving a vehicle insured by Defendant Granite State Insurance Company (“Granite State”) for Uninsured Motorist (“UM”) Benefits under at least one insurance policy (the “Policy”). [Id. at ¶¶ 24-25] Mr. Hall alleges that Granite State has failed to tender any UM Benefits owed to him under the terms of the Policy. [Id. at ¶ 85] Mr. Hall filed the instant suit, alleging violations of Colorado law for Granite State's failure to provide UM Benefits, the unreasonable delay and denial of those benefits, and also asserting breach of contract and bad faith claims. [Id. at ¶¶ 91-109]

         As part of Mr. Hall's initial disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1), Mr. Hall provided medical bills, but has not disclosed the ledger or schedule of workers' compensation benefits paid on behalf of Mr. Hall for his medical treatment. [#30 at 2; #40 at 4-5] Mr. Hall filed the instant Motion in February 2019, requesting the Court to hold as a matter of law that amounts paid by Mr. Hall's worker's compensation insurance carrier are inadmissible under the collateral source rule. [#30] Granite State has filed a response [#40] and Mr. Hall has replied [#42].

         I. ANALYSIS

         In the instant Motion, Mr. Hall argues that any amounts covered by his Workers' Compensation Benefits for his medical treatment are a collateral source and cannot be used to determine the value of Mr. Hall's medical treatment. [#30] Granite State responds that Mr. Hall's measure of damages should be limited to amounts lawfully authorized and paid under the Colorado Workers' Compensation Act, because Mr. Hall cannot recover any amounts billed by medical providers over the limits set by that statute. [#40] For the following reasons, the Court agrees with Mr. Hall, and finds that the Workers' Compensation Act fee limits have no bearing on the reasonable value of Mr. Hall's medical services, and that Mr. Hall's workers' compensation coverage constitutes a contract that cannot be used to offset any damages owed to him.

         Under Colorado's 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.”[2] Forfar v. Wal-Mart Stores, Inc., No. 17CA0663, 2018 WL 4016570, at *2 (Colo.App. Aug. 23, 2018) (quoting Colo. Permanente Med. Grp., P.C. v. Evans, 926 P.2d 1218, 1230 (Colo. 1996)), cert. denied, 2019 WL 1236858 (Colo. Mar. 18, 2019); see also Colo. Rev. Stat. § 10-1-135(10)(a). Accordingly, evidence of “any collateral source payment or benefits” is inadmissible at trial “in any action against an alleged third-party tortfeasor.” Colo. Rev. Stat. § 10-1-135(10)(a). This is because “making the injured plaintiff whole is solely the tortfeasor's responsibility. Any third-party benefits . . . obtained by the injured plaintiff accrue solely to the plaintiff's benefit and are not deducted from the amount of the tortfeasor's liability.” Volunteers of Am. Colo. Branch v. Gardenswartz, 242 P.3d 1080, 1082-83 (Colo. 2010). Generally, “the correct measure of damages is the necessary and reasonable value of the [medical] services rendered, rather than the amount . . . paid for such services, ” though amounts paid can give “some evidence” of reasonable value. Kendall v. Hargrave, 349 P.2d 993, 994 (Colo. 1960). “Amounts paid” evidence, however, is inadmissible in a collateral source case, including for determining reasonable value of medical services, because of the “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.” Wal-Mart Stores, Inc. v. Crossgrove, 276 P.3d 562, 567 (Colo. 2012).

         After trial, however, the court must reduce a successful plaintiff's verdict by the amount the plaintiff has been compensated by a third party, i.e. by any collateral source, unless the third party payment was the result of a contract entered into and paid for by the plaintiff. Colo. Rev. Stat. § 13-21-111.6. Colorado courts have consistently found that various types of benefits programs, including Medicaid, Medicare, and Social Security, constitute contracts paid for by the plaintiff, and thus cannot offset any amounts owed to a plaintiff. Forfar, 2018 WL 4016570, at *6-*7 (collecting cases). The Colorado Court of Appeals has explicitly held that “workers' compensation benefits are received as a result of an employee's contract with its employer and therefore fall within” the contract exception. Adamscheck v. Am. Fam. Mut. Ins. Co., 818 F.3d 576, 584 (10th Cir. 2016) (citing Combined Commc'ns Corp., Inc. v. Pub. Serv. Co., 865 P.2d 893, 902 (Colo.App. 1993)) (rejecting argument that plaintiff's workers' compensation benefits could offset the underinsured motorist benefits owed to him).

         While Granite State ostensibly recognizes the foregoing authority, it nevertheless argues that the workers' compensation context is “fundamentally different, ” because of the statutorily-mandated fee schedule in the Colorado Workers' Compensation Act, which prohibits medical providers from billing beyond certain thresholds.[3] [#40 at 8]; see also Colo. Rev. Stat. § 8-42-101(3)(a)(I) (“It is unlawful, void, and unenforceable as debt for [providers] to contract with, bill, or charge any party for services, rendered in connection with injuries coming within the purview of this article or an applicable fee schedule, which are or may be in excess of said fee schedule.”). Because under the statute Mr. Hall would never be responsible for any amounts billed above the fee schedule, Granite State contends that the only relevant measure of damages is the “amount lawfully paid by [Mr.] Hall's workers' compensation insurance carrier.” [#40 at 6] A recent decision by the Colorado Court of Appeals on an identical issue, however, forecloses Granite State's argument.

         In Forfar v. Wal-Mart Stores, Inc., the Colorado Court of Appeals held that the reasonable value of plaintiff Mr. Forfar's medical care was not limited to the statutory Medicare limits, and that his damages could not be offset based on those limits. 2018 WL 4016570 at *4-*7. First, defendant Wal-Mart argued that the amounts paid by Mr. Forfar's Medicare were dispositive of the reasonable value of his medical services, since Mr. Forfar “never incurred liability for any greater amounts.” Id. at *4. The court disagreed, reiterating that amounts paid are inadmissible in collateral source cases. Id. The court explained that “the reasonable value of Mr. Forfar's medical services was not limited to amounts that Medicare paid his providers, even assuming that [those providers] could receive no more from Mr. Forfar or anyone who might be vicariously liable to them, ” and any windfall should benefit plaintiff, who was the one to procure the benefits. Id. at *5. The Court held that amounts paid by Medicare were inadmissible at trial. Id.

         Second, the court found that Medicare benefits fell within the contract exception such that Mr. Forfar's damages could not be reduced based on those benefits. Id. at *6. Like Granite State here, Wal-Mart argued that the contract exception should not apply to any of Mr. Forfar's medical bills that exceeded Medicare fee limits, because he was not liable for those charges. Id. at *7. The relevant Medicare statutory provisions impose a nearly identical limit on medical providers as the fee schedule in the Colorado Workers' Compensation Act. See 42 U.S.C. § 1395u(b)(18)(B) (noting that practitioners “may not bill (or collect any amount from) the individual . . . for any service described in subparagraph (A), ” and stating that “[n]o person is liable for payment of any amounts billed” for services exceeding the fee limits); see also Id. § 1395w-4(g)(1)(A)(ii). Wal-Mart claimed that “application of the collateral source rule effectively held Wal-Mart liable for ‘amounts billed' by Mr. Forfar's providers in excess of Medicare limits, which conflicts with the ‘no person is liable' language” of the Medicare statutes. 2018 WL 4016570 at *8.

         The Colorado Court of Appeals rejected Wal-Mart's argument. Citing to the Colorado Supreme Court, the court explained that payments by a plaintiff's insurer constitute a benefit paid under the contract exception, by discharging a plaintiff's obligations to his medical providers. Id. at *7 (citing Gardenswartz, 242 P.3d at 1086). If Mr. Forfar had not been Medicare eligible, he would have been liable above the Medicare limits. Id. The court reasoned that the Medicare statutes only limit liability “for amounts billed by practitioners, ” and Wal-Mart had not been billed for any of plaintiff's medical services. Id. at *8. Instead, “and consistent with the collateral source rule, the jury awarded Mr. Forfar the reasonable value of [the providers'] services. And it did so without having seen any of the providers' bills.” Id. At least one Colorado district court has found Forfar to be directly applicable to workers' compensation benefits, and Granite State admits that Forfar addresses “the exact issue raised” in Mr. Hall's Motion [#40 at 9]. See Warembourg v. Excel Elec. Inc., No. ...


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