Wills v. Foster

NO. 4-06-0674 Filed 4/18/07

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

SHEILA M. WILLS, PATRICK BROOKS, and ) Appeal from
JUNE WILLIAMS, ) Circuit Court of
Plaintiffs-Appellants, ) Sangamon County
v. ) No. 03L36
INMAN E. FOSTER, JR., and CHARLENE R. )
FOSTER, ) Honorable
Defendants-Appellees. ) Patrick W. Kelley,
) Judge Presiding.

JUSTICE APPLETON delivered the opinion of the court:

Plaintiff, Sheila M. Wills, seeks review of the trial

court's order reducing the jury's personal-injury award for

compensatory damages from $80,163.47 to $19,005.50. Plaintiff

claims the collateral-source rule applies and entitles her to the

recovery of the amount of medical expenses billed, not the amount

of medical expenses actually paid at a discounted rate. Defen-

dant Inman E. Foster, Jr., the tortfeasor, argues the collateral-

source rule does not apply to this case because the medical

expenses were paid through Medicare or Medicaid, which provides

health benefits to certain needy individuals. Plaintiff did not

incur liability for her medical expenses, did not bargain for her

coverage, and did not pay any premiums as part of a contractual

relationship. Therefore, defendant claims the governmental

medical benefits do not qualify as a "collateral source" under

the collateral-source rule. We affirm.
 I. BACKGROUND

On August 8, 2001, plaintiff and her two passengers,

coplaintiffs Patrick Brooks and June Williams, were injured in an

automobile accident. Defendant drove his vehicle, which was

allegedly owned by codefendant Charlene R. Foster, through a red

light and struck plaintiff's vehicle. (The allegations against

Charlene R. Foster were dismissed with prejudice, and Brooks and

Williams settled their claims prior to trial.) As a result of

the accident, plaintiff aggravated a preexisting condition, which

proximately caused the need to undergo a spinal-cord fusion.

Defendant's liability is not an issue on appeal.

Prior to trial, both parties filed respective motions

in limine concerning the amounts of plaintiff's medical bills

that would be presented to the jury. The amount of medical

expenses billed was $80,163.47; however, the amount actually paid

by Medicare and the medical-assistance program of the Illinois

Department of Healthcare and Family Services (DHFS or Medicaid)

on plaintiff's behalf was $19,005.50. Plaintiff sought to

introduce the evidence of her medical bills in the amount of

$80,163.47, while defendant sought to limit the evidence to the

medical bills that were actually paid in the amount of

$19,005.05. The trial court denied defendant's motion and

granted plaintiff's, allowing the jury to consider $80,163.47 as

the amount of plaintiff's medical expenses.

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 On March 20, 2006, the case proceeded to a jury trial

with Judge Patrick E. Kelley presiding. Defendant stipulated to

the admission of plaintiff's exhibit, which demonstrated medical

bills totalling $80,163.47. The jury entered a verdict for

plaintiff in that amount in medical expenses and $7,500 in pain

and suffering. On April 17, 2006, defendant filed a posttrial

motion, asking the trial court to reduce the amount of the jury's

award from $80,163.77 to $19,005.50. On July 14, 2006, the

court, Judge Leo Zappa presiding, allowed defendant's motion

reducing the jury's award as requested. The court's order

provided as follows: "In the event plaintiff's medical providers

seek to recover from plaintiff the difference between the amount

shown on the ledgers and the amount paid by the Illinois Depart-

ment of Public Aid or Medicare, plaintiff may within one year

from the date of this order petition the court for a revision of

this order. The jury's award of $7,500 for pain and suffering

remains in effect." On July 25, 2006, Judge Kelley entered an

identical order. This appeal followed.

II. ANALYSIS

In her appeal, plaintiff claims the trial court erred

in failing to apply the collateral-source rule, thereby reducing

her compensatory-damages award. In support of her claim, plain-

tiff likens herself to the plaintiff in Arthur v. Catour, 216

Ill. 2d 72, 833 N.E.2d 847 (2005). In response, defendant argues

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Arthur is distinguishable and the collateral-source rule does not

apply. Because the facts are uncontroverted and the issue before

this court is the trial court's application of the law to the

facts, our review is de novo. Arthur, 216 Ill. 2d at 78, 833

N.E.2d at 851.

In Arthur, our supreme court held that the injured

plaintiff could present to the jury the amount she was initially

billed for health-care services, rather than the amount that her

private insurance company actually paid to the health-care

providers. Arthur, 216 Ill. 2d at 83, 833 N.E.2d at 854.

Through her insurer's contractual agreements with the providers,

many of the charges for health-care services were discounted.

The health-care providers accepted the discounted amounts as

payment in full. The court held that the plaintiff could present

the amount billed, but she was required to establish that amount

as a reasonable charge for the services rendered. In turn, the

defendant could counter with any evidence that the amount was not

reasonable. Arthur, 216 Ill. 2d at 83, 833 N.E.2d at 854.

In its analysis, the supreme court described the

collateral-source rule as follows: "'[B]enefits received by the

injured party from a source wholly independent of, and collateral

to, the tortfeasor will not diminish damages otherwise recover-

able from the tortfeasor.'" Arthur, 216 Ill. 2d at 78, 833

N.E.2d at 851, quoting Wilson v. Hoffman Group, Inc., 131 Ill. 2d

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308, 320, 546 N.E.2d 524, 530 (1989). "The collateral[-]source

rule protects collateral payments made to or benefits conferred

on the plaintiff by denying the defendant any corresponding

offset or credit. Such collateral benefits do not reduce the

defendant's tort liability, even though they reduce the plain-

tiff's loss." Arthur, 216 Ill. 2d at 78, 833 N.E.2d at 851.

"The rule operates to prevent the jury from learning anything

about collateral income." Arthur, 216 Ill. 2d at 79, 833 N.E.2d

at 852.

"'The justification for [the collateral-source] rule is

that the wrongdoer should not benefit from the expenditures made

by the injured party or take advantage of contracts or other

relations that may exist between the injured party and third

persons.'" Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852, quoting

Wilson, 131 Ill. 2d at 320, 546 N.E.2d at 530. The Arthur court

noted that the application of the collateral-source rule does not

prevent the plaintiff from introducing as evidence the reasonable

cost of health care necessitated by the defendant's conduct.

Arthur, 216 Ill. 2d at 80, 833 N.E.2d at 852. The plaintiff was

liable for the resulting expenses upon receipt of those services.

The fact that the insurance provider and the health-care provider

agreed to satisfy plaintiff's obligation in full by paying a

lesser amount than that billed is not of consequence. That

payment arrangement was a result of a contractual arrangement

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between the insurer and the provider, a contractual arrangement

to which the plaintiff was not privy. Arthur, 216 Ill. 2d at 81,

833 N.E.2d at 853. The effect of that arrangement resulted in

the "plaintiff receiv[ing] the benefit of her bargain with her

insurance company--full coverage for incurred medical expenses."

Arthur, 216 Ill. 2d at 81, 833 N.E.2d at 853.

We must determine whether the court's analysis and

holding in Arthur apply equally to plaintiff's case when plain-

tiff was not required to bargain for her benefits but received

them free of charge from the government based on her status.

After carefully considering the reasoning and justification

behind the court's holding, we conclude that because the benefits

conferred upon plaintiff did not result from a bargained-for

exchange with a third party who provided the benefits, the

collateral-source rule does not apply.

The collateral-source rule is an exception to the

general rule of damages preventing a double recovery by an

injured party. See Muranyi v. Turn Verein Frisch-Auf, 308 Ill.

App. 3d 213, 215, 719 N.E.2d 366, 369 (1999). Typically, how-

ever, the collateral source will have a lien or subrogation right

that prevents a double recovery. The collateral-source rule

operates as both a rule of damages and a rule of evidence.

Arthur, 216 Ill. 2d at 79-80, 833 N.E.2d at 852. As to damages,

the rule prevents any reduction of a plaintiff's recovery due to

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amounts received from third parties, which are "collateral" from

the tortfeasor. Arthur, 216 Ill. 2d at 80, 833 N.E.2d at 852.

As a rule of evidence, it prevents juries from learning anything

about collateral income that could affect their assessment of

damages. Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852. The

rationale for the rule is that the defendant should not be

allowed to benefit from the plaintiff's foresight in acquiring

insurance. Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852.

Another purpose of the collateral-source rule is to

serve as a deterrent to a tortfeasor. Restatement (Second) of

Torts §901(c) (1979). The defendant should not benefit from his

wrongful act by being allowed to pay a lesser amount of damages

than he has caused. Logically, if such is allowed, the deterrent

effect will be diminished. In this vein, it follows that a

tortfeasor should not get a break if he harms a needy person

whose medical bills were paid by Medicaid.

Although the Arthur court held that a plaintiff may

present evidence of prediscounted medical bills, it did so in the

context of a plaintiff with a contractual arrangement with a

private insurance company. The court did not reassess or even

discuss its previous decision in Peterson v. Lou Bachrodt Chevro-

let Co., 76 Ill. 2d 353, 363, 392 N.E.2d 1, 5 (1979), where the

court forbade recovery when the plaintiff had not incurred any

liability. In effect, the Arthur holding created what seemed to

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be a windfall in favor of the plaintiff. We discern that the

primary reason for such a holding was the existence of the

insurance contract. This would explain the justification for

allowing an apparent windfall for the plaintiff--a concept that

had been earlier rejected in Peterson. See Peterson, 76 Ill. 2d

at 363, 392 N.E.2d at 5-6. Perhaps the Arthur court presumed the

insurance company would enforce a subrogation lien.

Because the Arthur court did not specifically overrule

Peterson, we must continue to follow Peterson as it is the case

more factually similar to the case sub judice. In Peterson, the

plaintiffs sued an automobile dealer after the plaintiff's

daughter was killed and his son was injured in an accident,

allegedly caused by a defective braking system in a used car sold

by the dealer to a third party. The court addressed the issue of

whether the plaintiff could recover the value of free medical

services rendered by the Shriners' Hospital for Crippled Children

in performing surgery on the plaintiff's son's leg. Relying on

the court's decision in Jones & Adams Co. v. George, 227 Ill. 64,

69, 81 N.E. 4, 6 (1907), which held that a plaintiff could not

recover for the value of nursing services rendered by the plain-

tiff's family, the Peterson court held that "[a]n individual is

not entitled to recover for the value of services that he has

obtained without expense, obligation, or liabililty." Peterson,

76 Ill. 2d at 362, 392 N.E.2d at 5.

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 The court found that "the policy behind the collateral-

source rule simply is not applicable if the plaintiff has in-

curred no expense, obligation, or liability in obtaining the

services for which he seeks compensation." Peterson, 76 Ill. 2d

at 362, 392 N.E.2d at 5. The court noted that the justification

for the rule was the ideal that the "'wrongdoer should not

benefit from the expenditures made by the injured party in

procuring insurance coverage.'" (Emphasis in original.) Peter-

son, 76 Ill. 2d at 362-63, 392 N.E.2d at 5, quoting 22 Am. Jur.

2d Damages §210, at 293-94 (1965). Without an expenditure,

liability, or obligation on the plaintiff's part, application of

the rule was not justified. The court refused to apply the rule,

noting that the purpose of compensatory damages was to compen-

sate, not to punish the defendant or to create a windfall in the

plaintiff's favor. Peterson, 76 Ill. 2d at 363, 392 N.E.2d at 5.

Although this issue is a matter of first impression in

Illinois, other states have considered whether Medicare benefits

are an acceptable collateral source to come within the purview of

the rule. For example, Florida and Idaho have held that Medicare

benefits are not a collateral source and not recoverable because

the plaintiff never became liable and the federal government has

no right to reimbursement. See Cooperative Leasing, Inc. v.

Johnson, 872 So. 2d 956, 960 (Fla. Dist. App. 2004); Dyet v.

McKinley, 139 Idaho 526, 529, 81 P.3d 1236, 1239 (2003).

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 However, several states have held otherwise. South

Carolina, Mississippi, Wisconsin, North Carolina, and Hawaii, for

example, have held that Medicaid payments are subject to the

collateral-source rule. These courts have included gratuitous

services in the rule's protection, reasoning that tortfeasors

should be liable for the value of medical services, rather than

the cost. See Haselden v. Davis, 353 S.C. 481, 483, 579 S.E.2d

293, 294 (2003); Brandon HMA, Inc. v. Bradshaw, 809 So. 2d 611,

619 (Miss. 2001); Ellsworth v. Schelbrock, 235 Wis. 2d 678, 685,

611 N.W.2d 764, 767 (2000); Cates v. Wilson, 321 N.C. 1, 6, 361

S.E.2d 734, 738 (1987); Bynum v. Magno, 106 Haw. 81, 88, 101 P.3d

1149, 1156 (2004).

With our supreme court's decision in Peterson, it

appears Illinois has aligned itself with the former set of cases

and intends to exclude Medicaid and Medicare payments as "collat-

eral sources" within the meaning of the rule. Akin to the

plaintiff in Peterson, those individuals, like plaintiff here,

covered by Medicaid or Medicare do not make "expenditures" and

have not bargained for their coverage. A covered plaintiff's

liability is nonexistent as well because by accepting payments

from DHFS, Medicare, or Medicaid, health-care providers have

agreed such payments constitute full satisfaction of their fees.

See 305 ILCS 5/11-13 (West 2004); 89 Ill. Adm. Code §140.12(i),

as amended by 24 Ill. Reg. 18320 (eff. December 1, 2000). We

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therefore hold that plaintiff is precluded from recovering the

billed amounts and is limited to recovery of those amounts paid

by DHFS and Medicare.

We affirm the trial court's order reducing plaintiff's

compensatory damages for medical expenses to $19,005.50, reflect-

ing the amount paid by DHFS and Medicare to the health-care

providers on plaintiff's behalf.

Affirmed.

TURNER, J., concurs.

COOK, J., dissents.

JUSTICE COOK, dissenting:

I respectfully dissent and would reverse.

I disagree that Peterson prohibits application of the

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collateral-source rule when the plaintiff's medical expenses were

paid through Medicare or Medicaid. Peterson addressed whether a

plaintiff could recover the value of medical services provided

gratuitously by a philanthropic third party. In this case, the

government paid the plaintiff's medical expenses because the

plaintiff presumably could not afford private insurance. Consid-

ering the drastic changes in the health-insurance industry since

Peterson was decided in 1979, this court should not extend the

reasoning of the more than 25-year-old case.

Rising health-insurance costs have forced more people

to rely on the government to cover health expenses. The outcome

of the majority's decision is Medicare and Medicaid recipients,

who lack the funds to acquire insurance, are placed at a disad-

vantage from those who are financially able to secure insurance.

A plaintiff who can afford private insurance is unquestionably

allowed a double recovery and may even receive more than what his

insurance provider actually paid. See Arthur, 216 Ill. 2d 72,

833 N.E.2d 847. Further, our decision provides a benefit to the

wrongdoer who injures an aid recipient because a tortfeasor who

happens to injure such a plaintiff does not have to pay for the

injuries that he caused.

The majority finds that Arthur should not apply in this

case. In Arthur, our supreme court focused on whether the

plaintiff could establish the reasonable charge for services

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rendered even if that meant recovering more than her insurer

actually paid. The court in Arthur noted that part of the

justification for the collateral-source rule is that the "'wrong-

doer should not *** take advantage of contracts or other rela-

tions that may exist between the injured party and third per-

sons.'" Arthur, 216 Ill. 2d at 79, 833 N.E.2d at 852, quoting

Wilson, 131 Ill. 2d at 320, 546 N.E.2d at 530. The majority's

decision allows the tortfeasor to take advantage of the relation

between the aid recipient and the government simply because the

injured recipient cannot afford to acquire or bargain for insur-

ance. A tortfeasor would be required to pay an injured plain-

tiff's medical expenses if that plaintiff is obliged to pay all

of his expenses on his own. The tortfeasor should not be excused

from paying simply because the government pays the needy plain-

tiff's medical expenses. When a windfall is inevitable, should

the wrongdoer or the innocent and needy plaintiff receive that

windfall?

Because Arthur did not specifically overrule Peterson,

the majority finds that we must continue to follow Peterson. In

Peterson, though, the court addressed a case where an outside

source generously agreed to provide medical service without cost.

A Medicare or Medicaid recipient is not the lucky receiver of the

generosity of some benevolent third party, but rather a needy

person who did not have the ability or resources to acquire

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private insurance. When our supreme court in Peterson decided to

exclude gratuities from the operation of the collateral-source

rule, Illinois became one of only a few jurisdictions to apply

such a limit. See Arthur, 216 Ill. 2d at 91, 833 N.E.2d at 858-

59 (McMorrow, C.J., dissenting). While Arthur did not reassess

its decision in Peterson, the court refused to further limit the

operation of the collateral-source rule, suggesting the court's

movement away from extending the limit any further beyond the

exclusion of gratuities. This court should not now extend

Peterson to further limit the collateral-source rule to exclude

Medicaid and Medicare recipients.

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