#24824-a-JKK
2009 SD 19
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
REYNALDO CRUZ, Plaintiff and Appellee,
v.
TERRANCE E. GROTH, Defendant and Appellant.
* * * *
APPEAL FROM THE CIRCUIT COURT
OF THE SIXTH JUDICIAL CIRCUIT
TRIPP COUNTY, SOUTH DAKOTA
* * * *
HONORABLE KATHLEEN F. TRANDAHL
Judge
* * * *
J. M. GROSSENBURG Attorney for plaintiff
Winner, South Dakota and appellee.
TIMOTHY A. CLAUSEN of
Klass Law Firm, LLP Attorneys for defendant
Sioux City, Iowa and appellant.
* * * *
CONSIDERED ON BRIEFS
AUGUST 26, 2008
OPINION FILED 03/18/09
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KONENKAMP, Justice
[¶1.] In this personal injury action, the defendant appeals a verdict for the
plaintiff on the ground that the trial court erred when it prohibited the defense from
using the plaintiff’s medical insurance coverage to rebut the plaintiff’s testimony
that he did not seek further medical care because he could not afford it. Defendant
argues for an exception to the collateral source rule when parties volunteer their
financial circumstances before the jury. Although an exception may be appropriate
in cases where collateral source evidence is offered on a substantial and relevant
issue, such as malingering, defendant’s offer of proof here was not sufficiently
compelling to conclude that the trial court abused its discretion in refusing to admit
the evidence.
I.
[¶2.] On September 26, 2005, Terrance Groth, while boating on Lake
Francis Case, collided with a boat owned by Gerald Bachman. Bachman and his
son-in-law, Reynaldo Cruz, were fishing while floating downstream. As a result of
the impact, Cruz was thrown to his back. He sought medical treatment the
following day, complaining of pain in his low back. An x-ray was taken, with
unremarkable results, and Dr. Henderson recommended that Cruz follow up if he
did not feel better. On November 2, 2005, Cruz sought care with Dr. Schramm,
complaining of low back and neck pain. A CT scan revealed no visible injuries.
Cruz was diagnosed with cervical and thoracic myalgia and arthralgia and was
given a prescription medication for pain.
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[¶3.] In June 2006, Cruz sued Groth to recover for personal injuries. Groth
answered admitting “that he was negligent and that his negligence was the
proximate cause of the boating accident at issue.” Groth denied that the accident
caused Cruz’s damages, however. Before trial, Cruz moved in limine to prevent
Groth from mentioning (1) any Med Pay available to Cruz from the insurance policy
owned by Bachman, and (2) whether Cruz was personally insured or had insurance
available after the accident. Groth argued that this insurance information should
be allowed to counter Cruz’s anticipated testimony that the reason he did not
continue to seek medical treatment despite his allegations of continued problems
was because he could not afford it. Cruz’s attorney responded that his client “didn’t
go to the doctor because the defendant’s insurance . . . wouldn’t pay for it.”
[¶4.] Groth made an offer of proof that if he were allowed to question Cruz
the evidence would show that Bachman had “medical pay insurance left on the
boat” that “would have paid at least for another 900 some dollars’ worth of
treatment,” and Cruz also “had health insurance through [his] employer . . . that
would have paid for any additional treatment as well.” Cruz’s attorney responded
that his client did have Med Pay of $920, but “there were periods of time where
[Cruz] did not, in the last 2 years, have health insurance available.” After
balancing the probative value of this evidence against its prejudicial impact, the
trial court granted Cruz’s motion in limine, preventing the mentioning of available
Med Pay or health insurance. The court reasoned that “if insurance is interjected
into this, that it will be unfairly prejudicial because it will take the jury away from
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looking at what they’re supposed to look at and solely look at the deal with
insurance.”
[¶5.] In opening statements, Cruz’s attorney pled his client’s poverty: “The
reason [Cruz] didn’t seek medical treatment was he was worried about his medical
bills and — he’s living hand to mouth with house payments and he’s got four
children, two of them I believe in college now and the other two will be there very
soon.” During trial, counsel for Cruz asked him why he did not continue to seek
treatment if he was still in pain from the accident. Cruz responded, “I was just
trying to see if I could get over it. . . . I was still trying to get to work because I still
— I still didn’t want to miss any work. So I was trying to get myself to work, and I
was just trying to make the day, you know, without – without making my injuries
worse so – and hoping that it would just, you know, go away.” When asked why he
did not seek treatment after November 2, Cruz said, “Well, because I could not
afford to. You know, it’s – it’s costly, so that’s — you know, it’s not easy going to a
doctor who’s — without being able to afford to go. I just didn’t go.” On cross
examination, Groth’s attorney asked Cruz why he had not followed up with the two
physicians, Dr. Henderson and Dr. Schramm, who had treated him shortly after the
accident. Cruz responded, “Well, after noticing the – the cost, I mean, it – it kind of
scared me off.”
[¶6.] In closing argument, counsel for Cruz returned to the poverty theme:
What the defense did try to do was say “because [Cruz] did not
seek treatment consistently and frequently, therefore he must
not be hurt.” Now, [Cruz,] the day after the accident, did seek
treatment. He got some medication. He lasted 5 weeks and had
to seek treatment again, and then he lasted 6 months and he got
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another prescription over the telephone, all the time being
concerned about the cost and his ability to pay for medical bills.
***
And besides, he’s a tough guy, and he was willing to suck it up rather
than risk not being able to pay for it.
In Groth’s closing argument, defense counsel suggested malingering: despite all
Cruz’s complaints of continuing pain, he failed to return to his medical providers for
treatment.
We don’t have any follow-up, not then, not in November or
anytime in 2005, and not ever. Not to this day has he followed
up with any treating medical provider, not one. . . .
***
And what he testified to is the reason he didn’t follow up for
medical treatment was that he couldn’t afford it. He couldn’t
afford it. Mr. Cruz was fully employed full-time at the hospital
working around doctors and nurses every single day 5 days a
week 40 hours a week. His wife was a fully employed RN full-
time, was a medical provider working around doctors every day
of the week.
In rebuttal, Cruz’s attorney responded:
The reason he doesn’t go to the doctor all the time isn’t because
he can’t afford it. He’s a tough guy. He’s trying to live with his
condition. He’s not a crybaby.
[¶7.] The jury awarded Cruz $38,000. Groth appeals, asserting that the
court erred when it declined to recognize an exception to the collateral source rule to
allow proof that Cruz had personal insurance and Med Pay available despite the
fact that he claimed he could not seek medical care because he could not afford it.
II.
[¶8.] We begin our analysis with the long-standing axiom that a “court’s
evidentiary rulings are presumed correct and will not be reversed unless there is a
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clear abuse of discretion.” Jurgensen v. Smith, 2000 SD 73, ¶18, 611 NW2d 439,
442 (citations omitted). Certainly the trial court was mindful of our precedent. In
Jurgensen, we held that the mere reference to a plaintiff’s financial status during
trial was not enough to warrant a finding of abuse of discretion when the trial court
refused to admit collateral source evidence. Id. ¶19. According to Groth, however,
this case presents more than the mention of Cruz’s financial condition: Cruz was
allowed to leave the jury “with an unrebutted, misleading and frankly false
assertion as a fact.”
[¶9.] The collateral source rule functions both as a rule of evidence and as a
rule of damages. Papke v. Harbert, 2007 SD 87, ¶¶68, 69, 738 NW2d 510, 532. As
a rule of evidence, it prohibits a defendant from offering proof of a plaintiff’s
collateral source benefits, received independent of the tortfeasor, that compensate
the plaintiff, in whole or in part, for his or her injury. Id. ¶68 (citations omitted).
As a rule of damages, it prohibits a defendant from reducing personal liability for
damages because of payments received by the plaintiff from independent sources.
Id. ¶69 (citations omitted). To date, we have unwaveringly applied this rule,
without recognizing any exceptions.
[¶10.] Rationales for upholding the rule are compelling: “a plaintiff’s
collateral source of income ‘cannot be inquired into as part of a defendant’s case,
because of the danger that the jury may be inclined to . . . reduce a damage award,
when it learns that plaintiff’s loss is entirely or partially covered.’” Jurgensen, 2000
SD 73, ¶17, 611 NW2d at 442 (quoting Moses v. Union Pacific R.R., 64 F3d 413, 416
(8thCir 1995)). As the United States Supreme Court recognized, “the likelihood of
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misuse by the jury clearly outweighs the value of this evidence. Insofar as the
evidence bears on the issue of malingering, there will generally be other evidence
having more probative value and involving less likelihood of prejudice than the
receipt of [collateral source benefits].” Eichel v. New York Cent. R.R. Co., 375 US
253, 255, 84 SCt 316, 317, 11 LEd2d 307 (1963) (Railroad Retirement Act disability
pension) (citation omitted). Moreover, tortfeasors should not be able to profit from
their wrongdoing by obtaining credit on damages against their victims’ independent
benefits.
[¶11.] Still, the rule should not constitute an absolute bar to the admission of
collateral source evidence. Most jurisdictions allow an exception to the general rule
of exclusion where the evidence is sought to prove malingering or some other
ground unrelated to reducing the defendant’s damages. In those instances, the
decision to allow the evidence is left to the sound discretion of the trial court. “Most
courts . . . have refused to adopt . . . an inflexible exclusionary rule and have instead
chosen to regard the admissibility of collateral source benefits evidence for the
purpose of establishing malingering, as being a matter at least to some extent
within the discretion of the trial judge.” William H. Danne, Jr., Admissibility of
Evidence that Injured Plaintiff Received Benefits from a Collateral Source, on Issue
of Malingering or Motivation to Extend Period of Disability, 47 ALR3d 234, 239-240
(1973) (updated 2008). Several appellate courts have sanctioned, in the trial court’s
discretion, admission of collateral source evidence in order to show malingering, if
there is corroborative evidence of malingering. Young v. Envtl. Air Prods., Inc., 665
P2d 88, 93-94 (ArizCtApp 1982); Hrnjak v. Graymar, Inc., 484 P2d 599, 605 (Cal
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1971); Gurliacci v. Mayer, 590 A2d 914, 929 (Conn 1991); Corsetti v. Stone Co., 483
NE2d 793, 803 (Mass 1985).
[¶12.] We remain skeptical of using collateral source evidence for
impeachment, even here where plaintiff’s counsel, armed with the court’s in limine
ruling, could argue free of contradiction that his client could not afford treatment
despite his complaints of continuing medical problems. Facile admittance of
collateral source material threatens to enfeeble the collateral source rule and render
it ineffectual. Allowing evidence that insurance was available to a plaintiff would
also create a trial within a trial. In this case, divulging Cruz’s medical coverage
raises questions such as: How does Med Pay work? Why did Cruz only have
insurance for six months? How much coverage did Cruz have on his personal
insurance? Did he have a deductible? If so, had he met it? What was Cruz’s co-
pay? Nonetheless, in conformity with the majority rule, we think that trial courts
may allow an exception to the general rule of exclusion where the evidence is sought
to prove malingering, when there is independent proof of such malingering.
[¶13.] If it is determined that the collateral source evidence is being offered
for a relevant purpose (malingering), rather than for a forbidden purpose
(mitigation of damages), the trial court must still determine whether, even though
relevant, the evidence should be excluded when “its probative value is substantially
outweighed by the danger of unfair prejudice, confusion of the issues, or misleading
the jury[.]” SDCL 19-12-3 (Rule 403). Here, the trial court performed the balancing
required under Rule 403 and concluded that the probative value was substantially
outweighed by the danger of unfair prejudice. Our task, accordingly, is simply to
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decide whether the trial court abused its discretion in refusing Groth’s offer of proof.
That offer was that Cruz had a little over $900 in Med Pay coverage on the boat
insurance and medical coverage during the six months he worked at the hospital
after the accident. We think it significant that the two doctor visits that Cruz
attended, one on the day after the accident, the other on November 2, 2005, with
their attendant diagnostic tests, including a CT Scan, cost a total of $4,080. It may
not have been wholly unreasonable for Cruz to fear that an additional $920 in Med
Pay and personal insurance available for six months following the accident would
not have been sufficient for additional medical care. And certainly the trial court
was rightly concerned that the evidence of insurance in this case had a potential for
improperly influencing the jury in its determination of what damages were legally
caused by Groth’s negligence. Moreover, there was no corroborating evidence of
malingering. Considering the entirety of the record, we conclude that the trial court
acted within its discretion in declining to allow collateral source evidence that
threatened to turn the jury’s attention from the issue of damages to the more
perilous question of whether Cruz had adequate insurance to pay for his unsought
medical care.
[¶14.] Affirmed.
[¶15.] MEIERHENRY, Justice and SABERS, Retired Justice, concur.
[¶16.] GILBERTSON, Chief Justice and ZINTER, Justice, dissent.
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ZINTER, Justice (dissenting).
[¶17.] If there were ever a case where rebuttal evidence regarding the
availability of medical insurance coverage (not receipt of insurance benefits) was
necessary for a fair trial on a material issue raised by an opposing party, this was
the case. The severity of Cruz’s injuries and his complaints of ongoing pain were
the central issue of this case; and, Cruz’s trial strategy was to assert that despite
his claimed injury and pain, he did not seek medical treatment because he could not
afford it. As the Court concedes, Cruz utilized this trial strategy from opening
statement, to his testimony elicited by his own counsel, and through final
argument. See supra ¶¶5-6. To contradict this evidence, Groth’s offer of proof
reflected that there was approximately $900 in medical payment benefits available
and Cruz also had health insurance through his wife’s employment that would have
paid for treatment. Cruz’s attorney did not dispute the offer of proof. On the
contrary, he admitted $920 of medical pay would have been available. 1 See supra
¶4. The problem is that the circuit court precluded this rebuttal evidence by
granting a motion in limine before trial. Consequently, the circuit court ruled
before Cruz’s trial strategy had opened the door to the rebuttal evidence; and, as
this Court concedes, the result was that “plaintiff’s counsel, armed with the circuit
1. With respect to Cruz’s health insurance through his wife’s employment, Cruz
argued that this evidence could be confusing because of “subrogation issues.”
Groth responded that he only wished to disclose that health insurance
coverage would have been available for the claimed ongoing pain. Groth
clearly stated that he was not proposing to offer evidence of insurance
payments, and therefore, there would be no subrogation argument that could
have reduced Cruz’s damage claim for medical expenses that had been
incurred.
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court’s in limine ruling, could argue free of contradiction that his client could not
afford treatment despite his complaints of continuing medical problems.” Supra
¶12. Under these unique circumstances, I respectfully dissent.
[¶18.] In our last case involving the related issue of collateral source
payments, the opinions of the Court reflect that exclusion of collateral source
evidence may constitute an abuse of discretion when a plaintiff “open[s] the door. . .
to introduce evidence of collateral sources.” Jurgensen v. Smith, 2000 SD 73,
¶18, 611 NW2d 439, 442. Jurgensen was a split decision. Although the two lead
writers affirmed the exclusion of collateral source evidence, they did so only because
that plaintiff had merely offered general evidence of his “financial status [,which]
was . . . not enough to warrant a finding of abuse of discretion by the trial court.”
Id. ¶19, 611 NW2d at 442. In a special concurrence, then Chief Justice Miller
explained: “Because [the plaintiff’s] testimony was not shown to be false or
misleading, no exception to the collateral source rule was warranted or worthy of
consideration.” Id. ¶36, 611 NW2d at 444 (Miller, C.J., concurring specially). The
two dissenting Justices would have allowed the evidence because they believed the
plaintiff had presented misleading financial evidence. Id. ¶¶37, 44, 611 NW2d at
444, 447 (Amundson, J., dissenting). Thus, this Court recognized the exception to
the collateral source rule in Jurgensen. The disagreement was limited to whether
the door had been sufficiently opened by the plaintiff’s mere reference to his
financial condition.
[¶19.] In this case, there is no dispute that Cruz went well beyond a mere
reference to his financial condition. After obtaining the in limine ruling, Cruz
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affirmatively argued and offered proof that although he claimed his injuries were
severe and his pain was ongoing, his failure to seek the associated, necessary
medical treatment was justified because he could not afford it. This made Cruz’s
justification claim a material issue that the jury had to resolve. Indeed, the circuit
court permitted written juror questions, and following Cruz’s testimony, one juror
asked the court to inquire of Cruz whether his wife’s job “provided medical benefits?
If so, why didn’t he get help if he had pain?” Pursuant to its in limine ruling, the
court did not allow the question. And ultimately, because of the court’s rulings,
Cruz was permitted to affirmatively interject inability to pay as a justification for
conduct that was inconsistent with his claimed injury and pain without ever being
cross-examined on the asserted justification.
[¶20.] Therefore, unlike Jurgensen, Cruz clearly opened the door by making
his financial ability to obtain treatment a central issue in his case. Furthermore, as
previously noted, Cruz’s counsel admitted Groth’s offer of proof regarding the
availability of medical payment benefits. Therefore, at least with respect to medical
payments coverage, the proffered rebuttal evidence directly refuted a material issue
that Cruz himself had raised, and there was no danger of a mini-trial on the side
issue of coverage. 2 Nevertheless, the Court does not find Groth’s offer of proof
2. For this reason, this Court’s litany of hypothetical insurance questions, see
supra ¶12, does not justify exclusion of the medical payment evidence. None
of this Court’s hypothetical questions pertaining to medical payments
coverage were raised at trial.
With respect to health insurance, Cruz only indicated that there were periods
of time coverage was not in effect. It would not have been a confusing or
complicated matter for Cruz, if he really claimed no health insurance
(continued . . .)
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“sufficiently compelling” to allow Groth to rebut Cruz’s claimed financial inability to
obtain medical treatment. See supra ¶1. Under these circumstances, what more
“sufficiently compelling” offer of proof would this Court require? Considering Cruz’s
trial strategy of using argument and testimony alleging inability to pay for
necessary treatment as a justification for conduct that was inconsistent with his
claimed injury and pain, and considering Groth’s uncontested offer of proof, the
rebuttal evidence was necessary for a fair trial. As the Minnesota Supreme Court
explained in adopting the exception to the collateral source rule:
[W]hen a plaintiff, through either the use of misleading
statements or outright false statements, falsely conveys to the
jury that he or she is destitute or in dire financial straits, the
admission of evidence of collateral source payments received by
the plaintiff is permitted. We note that when a party “offers
evidence that certain conditions exist, he cannot complain that
the court permits his evidence to be rebutted.”
Kroning v. State Farm Auto. Ins. Co., 567 NW2d 42, 46 (Minn 1997) (citations
omitted).
[¶21.] The Third Circuit Court of Appeals considered a remarkably similar
case in which a plaintiff affirmatively claimed financial inability to obtain medical
treatment for his claimed injuries. In Gladden v. P. Henderson & Co., 385 F2d 480,
482 (3rdCir 1967), the plaintiff volunteered testimony on direct examination that he
did not return to his doctor because “my bills got behind and when I went back to
work, that was one of the main reasons I went back to work, was to try to catch my
__________________
(. . . continued)
coverage during certain periods, to simply tell the jury when he had no
coverage through his wife’s employment.
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bills up and support my family.” The Third Circuit held that the defendant was not
required to leave this testimony unchallenged: “The barriers which have been
created against the admission of otherwise relevant evidence because of its
prejudicial effect do not extend to the affirmative volunteering by a plaintiff of
testimony which breaks into this restrictive area.” Id. at 483-84. The court noted:
“To have forbidden such cross-examination would have conferred on plaintiff the
unparalleled right to give testimony on direct examination with immunity from
inquiry on cross-examination.” Id. at 483. As the Supreme Court of Missouri noted
in a similar case, when a plaintiff injects his financial condition in connection with
failure to obtain treatment, the opposing party is entitled to show that other
financial assistance was available. Moore v. Missouri Pac. R.R. Co, 825 SW2d 839,
843 (Mo 1992). “[I]t is the raising of plaintiff’s financial condition with the jury that
permits the opposing party to attack his claims of financial distress by showing that
other financial assistance was available.” Id.
[¶22.] By his trial strategy, Cruz could not have made a clearer case for
admission of Groth’s rebuttal evidence. This was not a case where malingering was
raised as a defense pretext to admit evidence of insurance. This was a case in
which Cruz affirmatively asserted his financial inability to pay as an argument to
justify his failure to seek treatment and bolster his claims of injury and pain.
Therefore, notwithstanding this Court’s facial recognition of an “exception to the
general rule of exclusion where the evidence is sought to prove malingering,” supra
¶11, the result of today’s decision is that the recognized exception may never be
utilized in this jurisdiction. After all, as previously noted, there was no dispute or
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asserted potential confusion over the availability of medical payment benefits, and
this Court concedes that this case involves a situation in which “plaintiff’s counsel,
armed with the circuit court’s in limine ruling, could argue free of contradiction that
his client could not afford treatment despite his complaints of continuing medical
problems.” Supra ¶12. If rebuttal evidence of available insurance coverage is not
admissible in such a case involving a plaintiff's affirmative attempt to bolster his
own claim, then no case can satisfy this Court’s standard.
[¶23.] I acknowledge our abuse of discretion standard of review, but as
previously noted: “The barriers which have been created against the admission of
otherwise relevant evidence because of its prejudicial effect do not extend to the
affirmative volunteering by a plaintiff of testimony which breaks into this
restrictive area.” Gladden, 385 F2d at 483-84. Furthermore, although the
collateral source rule is well-established and we remain skeptical of exceptions, the
circuit court’s refusal to reconsider its ruling in limine impermissibly allowed
simultaneous use of the collateral source rule as both a sword and a shield:
[T]he collateral benefit rule cannot be made a springboard from
which a plaintiff may go forward with affirmative evidence that
he [acted in any way inconsistent with his claim that] he was
still ailing, because of financial need and then seek immunity
from cross-examination regarding it. The boundary of silence
was crossed when plaintiff affirmatively presented on direct
examination the reason why he had [acted inconsistently] and
had not again visited his physician.
Id. at 484. The circuit court’s rulings reflect that although it considered the reasons
for the general rule of exclusion, it did not consider the rules for application of the
exception.
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[¶24.] Although trial courts do not abuse their discretion when merely
allowing or disallowing questionable evidence, an abuse of discretion occurs in
misapplication of the rules. Kaiser v. Univ. Physicians Clinic, 2006 SD 95, ¶29, 724
NW2d 186, 194. I would hold that the circuit court misapplied the collateral source
rule when, after granting a routine motion in limine, the court failed to consider and
apply the recognized exception in such a clear case. I would reverse and remand for
a new trial.
[¶25.] GILBERTSON, Chief Justice, joins this dissent.
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