Supreme Court Starts September Arguments with Injured Worker Cases
Court considers workers’ comp questions on “phantom” costs, plaintiff standing

by Jessica Folker
The Ralph Carr Courthouse

The Colorado Supreme Court will resume oral arguments Sept. 22, starting with a pair of cases that raise questions about how much in damages an injured worker is entitled to from a third-party defendant when workers’ compensation covers the employee’s medical bills.

The cases revisit a familiar question: Can a judge or jury consider an injured party’s billed medical costs when awarding damages, even if the plaintiff’s insurer settled the bills for pennies on the dollar? The Supreme Court has already answered in the affirmative when it comes to private health insurance, according to plaintiffs’ attorneys, who are hoping for a similar ruling when it comes to workers’ compensation.

But defense lawyers, tort reform advocates and health care groups say awarding plaintiffs these “phantom” or “theoretical” charges is improperly punitive and contributes to rising medical and insurance costs.

In the first case to be heard this month, United Airlines employee William Scholle was driving a luggage tug at work when he was hit by a Delta Air Lines employee who was also driving a luggage tug. United paid Scholle’s medical expenses and some of his lost wages under workers’ compensation, and Delta later settled with United to cover the latter’s payout to its employee.

Scholle sued Delta over his injuries. The airline admitted liability, but the two disagree about how much in damages Delta should pay for his medical bills. Scholle argues the court should consider the full amount he was billed by his health care providers, rather than the lower amount paid by the workers’ compensation insurer, citing the state’s collateral source rule.

The rule bars evidence of a plaintiff’s payout from an insurer or other “collateral source” because it might lead a judge or jury to reduce the amount a plaintiff recovers in damages. According to the Colorado Court of Appeals, which ruled in favor of Scholle, the rule’s purpose is to prevent a tortfeasor from benefiting from a plaintiff’s insurance contract or other third-party benefits.

“If Scholle had not been insured, he would have been liable for all expenses normally billed. Delta may not step into his shoes to enjoy the benefit of the reduced rates occasioned by the insurance,” the Court of Appeals said in its decision in Scholle v. Delta.

However, Delta argues that Colorado’s workers’ compensation statute requires medical providers to follow a fixed fee schedule, and bills that exceed the fee schedule are “unlawful, void and unenforceable as debt” when charged in connection to workers’ compensation claims. As such, Delta claims, the Court of Appeals should not have considered Scholle’s full medical bills. “Illegal contracts are void and they are not evidence of anything,” the company said in its opening brief to the Colorado Supreme Court.

Delta also argues that, under state law, Scholle’s claim against the company has been “extinguished” because United already pursued and settled its subrogated interest against Delta.

“Scholle lacked standing to pursue any medical bills, whether at ‘billed’ or ‘paid’ amounts, because the legislature gave the right to pursue such damages to United, which exercised that right,” Delta states in its brief.

The second case scheduled for Sept. 22, Gill v. Swift Transportation, raises similar issues about whether plaintiff Joseph Gill has standing to seek damages for injuries that were already paid by a workers’ compensation insurer, which had settled its subrogation claim with the defendant, and whether Gill may present the billed amount as evidence. The case was previously in federal district court, which certified the questions to the Colorado Supreme Court.

Several organizations, including the Colorado Trial Lawyers Association, the Colorado Defense Lawyers Association, Coloradans Protecting Patient Access, the Colorado Civil Justice League and the American Tort Reform Association filed amicus briefs in the cases.

The CDLA, arguing in support of Delta, says that awarding damages based on the “unlawfully billed amounts” is a violation of Colorado’s laws on punitive damages, which are only permitted in cases of fraudulent, malicious or willful and wanton misconduct. “Damages based on void, unlawful invoices serve no compensatory purpose and could only have an impermissible punitive impact,” states the CDLA brief.

In its amicus brief supporting Delta, the CPPA argues that awarding “theoretical damages” for costs the plaintiff never actually incurred is not only punitive toward defendants but has a harmful effect on health care costs.

“In the healthcare context, as damages awards are permitted to expand to ever-increasingly large amounts, the premium costs of insurance (both for medical providers and for consumers) increases as well,” the CPPA states in its brief.

“Those increased premium costs eventually result in the increased cost of obtaining medical services — ultimately working to the disadvantage of Colorado citizens’ ability to obtain quality and affordable healthcare.”

Nelson Boyle, an attorney at Burg Simpson who worked on the CTLA’s briefs in support of Scholle and Gill, said the Supreme Court has already addressed the collateral source rule as it applies to private health insurance, and the Court of Appeals has weighed in on Medicare as a collateral source. The appellate courts found that payments by these third-party sources can’t be used to reduce the amount awarded to a plaintiff.

“People are never really made whole… when there’s an injury. And so the court has always said the windfall should go to the injured person and not to the person that injured them,” Boyle said, adding that if plaintiffs were only awarded the amount an insurer like Medicare pays, they would never be able to bring a lawsuit to recover costs in the first place.

“The workers’ compensation system is not there to frustrate or impede [the employee’s] ability to recover from a tortfeasor,” said Burg Simpson attorney Jessica Derakhshanian, who also worked on the CTLA amicus briefs.

“By limiting that recovery to just the workers’ compensation carrier’s subrogation interest, that’s exactly what the court would be doing,” she said. Derakhshanian added that the worker’s compensation subrogation rights statute creates two claims, one “owned” by the employee and one “owned” by the insurance carrier,

and each party can pursue his or her claim independently of the other.  So even where the workers’ compensation carrier settles its claim with the defendant, the plaintiff’s claim for damages survives.

According to Boyle, workers’ compensation is one of the only payment sources that remains contested with respect to the collateral source rule in Colorado. But he added lobbying groups have pushed to rewrite the laws on which the Supreme Court’s previous collateral source-related decisions were based.

“So there’s always the chance that, after this is settled, one side or the other goes to the legislature,” Boyle said. “And that would start the whole thing over.”

 

This article appears in the Sept. 14 issue of Law Week Colorado. To read other articles from that issue, order a copy onlineSubscribers can now access a digital PDF here.