and County of Denver District Court Nos. 14CV32213 &
14CV32268 Honorable Robert L. McGahey, Judge Honorable Karen
L. Brody, Judge.
Bendinelli Law Firm, P.C., Marco F. Bendinelli, Blaine L.
Milne, Westminster, Colorado, for Plaintiff-Appellee and
Alfrey Musat P.C., Michael L. Hutchinson, Carol L. Thomson,
Kathleen J. Johnson, Denver, Colorado, for
Defendant-Appellant and Cross-Appellee.
1 When a plaintiff sues a defendant in tort for damages
sustained due to the defendant's conduct, the collateral
source rule generally forbids admitting evidence of payments
for those damages made to the plaintiff by a collateral
source such as an insurance company. For instance, evidence
of the amount of the plaintiff's medical expenses paid by
an insurer is not admissible; instead, the plaintiff may
submit, as a measure of damages, evidence of a higher amount
of medical expenses billed by the medical provider.
2 But what if (1) the plaintiff was insured by workers'
compensation insurance, and by statute a medical provider
could not collect payment for medical expenses beyond those
paid by the workers' compensation insurer; and (2) the
defendant, before trial, extinguished the insurer's
subrogated interest in the amounts paid by paying off the
insurer's claim for those damages? We hold that the
collateral source rule applies all the same - evidence of the
amounts paid by the insurer is not admissible at trial, but
evidence of the amounts billed is admissible. At most, the
defendant, by virtue of its settlement of the insurer's
subrogated claim, may receive a post-trial setoff against
damages awarded to the plaintiff.
3 In this case, however, the damages awarded to plaintiff
William Scholle were reduced during trial through evidence of
the amounts his insurer paid to his medical providers
and reduced post-trial via a setoff in the amount of
defendant Delta Air Lines, Inc.'s settlement with the
insurer. As a result, Scholle ultimately recovered nothing in
economic damages. Because admitting evidence of the amounts
paid by the insurer was error, we reverse the judgment in
part and remand for a new trial, as limited by the following
discussion. I. Overview
4 This action arises from a luggage tug collision at Denver
International Airport. In 2012, Scholle, a United Airlines
employee, was driving a luggage tug in the course of his
employment. Scholle was stopped when Daniel Moody, a Delta
employee also driving a luggage tug, collided with Scholle.
Scholle sustained injuries and missed work.
5 United, a self-insured employer under Colorado's
workers' compensation system, paid for Scholle's
medical expenses and some of his lost wages. To the extent of
those payments, United was subrogated to Scholle's rights
to recover economic damages from Delta and Moody for causing
6 In 2014, United sued Delta and Moody to recover the amounts
United had paid to or on behalf of Scholle. Shortly
thereafter, Scholle also sued Delta and Moody to recover for
injuries related to the tug collision. The trial court
consolidated the actions.
7 Delta eventually settled United's claim by paying
United $328, 799.16, and the court dismissed United's
case with prejudice. Scholle's claims against Moody were
later dismissed with prejudice as well, leaving only Scholle
and Delta as parties. Delta admitted liability but disputed
Scholle's claimed damages; so the case went to trial on
8 In 2016, a jury returned a damages verdict for Scholle
totaling approximately $1.5 million. The court, however,
granted Delta's motion for a new trial due to misconduct
by Scholle's attorney.
9 The case went to trial again in 2017, this time without a
jury and before a new judge. The court considered evidence of
the amounts paid by United for Scholle's medical
treatment; the court excluded evidence of the higher amounts
billed by medical providers. The court awarded Scholle $259,
176, including $194, 426 in economic damages. The court later
entered a setoff order reducing Scholle's economic
damages award by the amount that Delta had already paid to
settle United's claim, effectively reducing the amount
owed to Scholle for economic damages to zero.
10 In case number 2018CA0049 (the merits appeal), each party
challenges various rulings related to the damages judgment.
In case number 2018CA0760 (the costs appeal), Scholle
contests a post-trial order denying him costs relating to two
expert witnesses struck by the trial court, a ruling at issue
in the merits appeal. We consolidated the appeals.
11 Regarding the merits appeal, we reverse the damages
judgment insofar as it relates to Scholle's past medical
expenses because the trial court misapplied the collateral
source rule. Because this evidentiary error affected only the
medical expenses portion of the damages award, we affirm the
judgment insofar as it pertains to (1) economic damages for
lost wages and (2) noneconomic damages.
12 We affirm the order granting a new trial as well as
various pre-trial rulings addressing issues that are likely
to recur on remand. Because we remand for a new trial as to
past medical expenses, we decline to decide any post-trial
issues raised by the parties, including any claim raised in
the costs appeal.
Evidence of Medical Expenses Paid versus Billed
13 Scholle contends that the trial court erred by admitting
evidence of the amount of medical expenses paid by his
workers' compensation insurer (United), rather than the
amounts billed by his medical providers. He says that the
payments were collateral source benefits and, therefore, the
pre-verdict evidentiary component of the collateral source
rule prohibited their admission into evidence.
14 Delta responds that the trial court properly concluded
that the collateral source rule did not apply because
Delta's settlement with United meant that the insurance
payments no longer constituted payments from a collateral
source. Rather, Delta effectively became a source of those
payments. In other words, Delta says that, by extinguishing
United's interest in recouping the insurance payments,
Delta paid compensation for, or contributed to, the source of
those payments. Further, Delta argues that the court properly
excluded evidence of the amounts billed by Scholle's
medical providers because he was not liable for those
15 We agree with Scholle that the trial court misconstrued
Standard of Review
16 "We review a trial court's evidentiary rulings
for an abuse of discretion." Sunahara v. State Farm
Mut. Auto. Ins. Co., 2012 CO 30M, ¶ 12. A court
abuses its discretion if its decision is based on an
incorrect legal standard. Id. We review de novo
whether the court applied the correct legal standard.
Collateral Source Rule
17 Colorado's collateral source rule consists of two
components: (1) a post-verdict setoff rule, codified at
section 13-21-111.6, C.R.S 2018; and (2) a pre-verdict
evidentiary component, established by common law and codified
at section 10-1-135(10), C.R.S. 2018. Sunahara,
¶ 13. The first component requires a trial court to set
off tort verdicts by the amount of certain collateral source
payments received by the plaintiff unless the payments were
made because of a contract entered into and paid for on the
plaintiff's behalf. § 13-21-111.6.
18 The second component bars evidence of a plaintiff's
receipt or entitlement to benefits received from a collateral
source, most often an insurance company, "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, 20. "A plaintiff's
insurer is a collateral source because it is a third party
wholly independent of the tortfeasor to which the tortfeasor
has not contributed." Id. at ¶ 25.
19 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. Volunteers of Am.
Colo. Branch v. Gardenswartz, 242 P.3d 1080, 1083 (Colo.
2010). Our supreme court has explained that, 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." Id.
20 In 2010, the General Assembly codified the collateral
source rule's pre-verdict evidentiary component in
section 10-1-135(10)(a), which provides in pertinent part:
"The 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 . . . ."
See Smith v. Jeppsen, 2012 CO 32, ¶ 17. This
statute applies to "cases resulting in recoveries
occurring after August 11, 2010," and excludes evidence
of the amounts paid by a plaintiff's insurer for medical
expenses. Id. at ¶¶ 12, 20.
21 In addition, where a plaintiff's insurer has obliged a
medical provider to accept a discounted rate for services (or
a "write off" of a portion of the bill), the
reduced rate constitutes a benefit received from a collateral
source. Gardenswartz, 242 P.3d at 1085. Because the
plaintiff would have been responsible for the entire billed
amount if the plaintiff had not been insured, the discounts
"are as much of a benefit for which [the plaintiff] paid
consideration as are the actual cash payments by his health
insurance carrier to the health care providers."
Id. (citation omitted).
22 The collateral source rule thus prevents a tortfeasor from
standing in the plaintiff's shoes and enjoying the same
discounted medical rates as the plaintiff's insurance
company receives. Id. ("To hold otherwise
'is to allow the tortfeasor to receive a windfall in the
amount of the benefit conferred to the plaintiff from a
source collateral to the tortfeasor.'") (citation
omitted). As a result, a "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."
Arthur v. Catour, 803 N.E.2d 647, 651 (Ill.App.Ct.
2004), aff'd, 833 N.E.2d 847 (Ill. 2005),
quoted with approval in Gardenswartz, 942 P.3d at
1087; see Forfar v. Wal-Mart Stores, Inc., 2018 COA
125, ¶ 28.
23 In sum, the plaintiff "should be made whole by the
tortfeasor, not by a combination of compensation
from the tortfeasor and collateral sources. The wrongdoer
cannot reap the benefit of a contract for which the wrongdoer
paid no compensation." Gardenswartz, 942 P.3d
at 1083 (citation omitted).
Workers' Compensation Statute
24 Workers' compensation insurance carriers pay benefits
based on a statutory fee schedule. § 8-42-101(3)(a)(I),
C.R.S. 2018. The statute declares that "[i]t is
unlawful, void, and unenforceable as a debt" for any
person or medical provider to "contract with, bill, or
charge" any amount in excess of the relevant fee
schedule unless approved by the director of the division of
workers' compensation. Id. A covered employee is
not liable for benefits paid under the workers'
compensation statute, and a medical provider may not seek to
recover fees or costs from a covered employee once an
employer has admitted liability for the employee's
medical costs. § 8-42-101(4).
25 An injured employee, in addition to accepting workers'
compensation, may also pursue a remedy against a third-party
tortfeasor "to recover any damages in excess of the
compensation available" under the statute. §
8-41-203(1)(a), C.R.S. 2018.
26 With respect to workers' compensation paid, section
8-41-203(1)(b) provides as follows:
The payment of compensation pursuant to [the workers'
compensation statute] shall operate as and be an assignment
of the cause of action against such other person to . . . the
person, association, corporation, or insurance carrier liable
for the payment of such compensation. Said insurance carrier
shall not be entitled to recover any sum in excess of the
amount of compensation for which said carrier is liable under
said articles to the injured employee, but to that extent
said carrier shall be subrogated to the rights of the injured
employee against said third party causing the injury.
27 This provision creates two claims - "one
'owned' by the employee and one 'owned' by
the carrier." Sneath v. Express Messenger
Serv., 931 P.2d 565, 568 (Colo.App. 1996). "Each of
the parties may prosecute his or its own individual
claim" independently of the other. Id.; see
also § 8-41-203(1)(e)(II). The right of subrogation
created by section 8-41-203(1)(b) extends to all benefits
payable under the workers' compensation statute but does
not extend to moneys collected for noneconomic damages.
28 To reiterate, United, pursuant to section 8-41-203(1),
filed an action against Delta and Moody to recover as damages
the compensation United had paid to or on behalf of Scholle.
The trial court consolidated United's action with
Scholle's later-filed action against the same defendants.
Delta then settled United's damages claim for $328,
799.16, and the court dismissed United's complaint. After
Moody was dismissed, Scholle and Delta remained as the only
29 Before the first trial, Scholle filed three motions in
limine implicating the collateral source rule. In essence, he
argued that evidence of the workers' compensation
payments he received should not be admitted and that he
should be able to present evidence of the amounts billed by
his medical providers because those amounts were a truer
reflection of the reasonable cost of his medical services.
Delta responded that the workers' compensation benefits
were not payments from a collateral source because Delta had
contributed to the payments by settling United's
subrogation claim directly with United. Delta further argued
that evidence of amounts billed in excess of the amounts paid
should be excluded given that such amounts were void under
the workers' compensation statute.
30 The trial court agreed with Delta. The court distinguished
this case from a typical collateral source case on the ground
that "with respect to the workers' compensation
benefits received by Scholle as a result of the incident,
United's subrogation claim has been settled and paid by
Delta already." Given Delta's settlement, the court
concluded that "Delta is not seeking to reap the benefit
of a contract for which it paid nothing, nor is this a
situation in which Delta has done nothing to provide the
compensation . . . ." The court also ruled that, in
light of the workers' compensation statute, allowing
Scholle to introduce evidence of amounts billed in excess of
amounts paid by United "would constitute a windfall in
favor of Scholle to recover for medical expenses for which he
never incurred liability." For the same reason, the
court ruled that evidence of amounts billed was inadmissible
under CRE 401 and CRE 403.
31 Therefore, the court declined to apply the collateral
source rule and ordered that evidence of the amounts paid to
Scholle's medical providers would be admissible while
evidence of the full amounts billed would not. Before the
second trial, the second judge adopted this ruling over
Scholle's objection. The court admitted evidence of the
medical expenses paid by United but excluded evidence of the
amounts billed by the ...