Volunteers of America Colorado Branch v. Gardenswartz

Justice RICE

dissents.

In enacting section 18-21-111.6, C.R.S. (2010), the Colorado legislature sought to limit double recoveries for tort plaintiffs, abrogating the common law collateral source rule by requiring the setoff of most third-party recompense for tort injuries from damage awards against tortfeasors. Misconstru*1089ing the statute in unwarranted deference to the abrogated common law rule, the majority reconstitutes the same type of double recovery that the legislature intended the statute to prevent.

The contract exception of section 13-21-111.6 is not, as the majority holds, a whole-cloth codification of the common law collateral source rule. Rather, it is a narrow exception to the statute's general elimination of double recoveries by tort plaintiffs, exeluding from setoff a carefully cireumseribed class of benefits that are actually paid to a tort plaintiff pursuant to a contract negotiated on the plaintiff's behalf. Because the difference between the amount billed by healthcare providers for a plaintiffs treatment and the amount actually paid by the plaintiff's insurer is neither paid to the plaintiff nor negotiated on his behalf, the difference does not qualify for the contract exception and therefore should be set off from the plaintiff's award. Because the majority holds to the contrary in the face of the legislature's clear intent, the statute's plain language, and sound public policy, I dissent.

I. Section 13-21-111.6 and Legislative Intent

The majority rests its holding on the principle that "[sJtatutes in derogation of the common law must be strictly construed." Maj. op. at 1084 (citing Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070, 1076 (Colo.1992)). That maxim, however true, does not allow this Court to neglect its primary duty in interpreting a statute: to give effect to the intent of the General Assembly and the purpose of the statute's legislative scheme. See Van Waters, 840 P.2d at 1076. If the legislature clearly seeks to abrogate a common law rule via statute, this Court must give effect to that intent when interpreting the statute. See Pigford v. People, 197 Colo. 358, 360, 593 P.2d 354, 356 (1979).

The common law collateral source rule precluded trial courts from setting off from a tort plaintiff's recovery any recompense the plaintiff received for his injuries from collateral sources-that is, sources other than the tortfeasor. Van Waters, 840 P.2d at 1074. The plain language of the first clause of section 13-21-111.6 evinees the legislature's clear intent to abrogate the common law rule by requiring trial courts to set off such recompense:

[The court ... shall reduce the amount of [a tort award] by the amount by which [the tort victim] has been or will be wholly or partially indemnified or compensated for his loss by any other person, corporation, insurance company, or fund in relation to the injury, damage, or death sustained....

§ 13-21-111.6. Even after subjecting the statute to the same strict construction the majority demands here, this Court held in Van Waters that the legislature clearly intended section 13-21-111.6 to abrogate the common law rule and require the setoff of all collaterally sourced recompense not explicitly exempted by the second clause of the statute. 840 P.2d at 1076.

The second clause of section 18-21-111.6 exempts from setoff under the first clause a limited class of benefits actually paid to the plaintiff pursuant to a contract negotiated on his behalf:

[Elxcept that the verdiet shall not be reduced by the amount by which [the tort victim] has been or will be wholly or partially indemnified or compensated by a benefit paid as a result of a contract entered into and paid for by or on behalf of [the tort victim]. The court shall enter judgment on such reduced amount.

§ 18-21-111.6. Utilizing the same strict construction, this Court held in Van Waters that the legislature clearly intended the second clause to be an exception to the first clause, precluding setoff only of contractual benefits for which a plaintiff gives some form of consideration with the expectation of receiving future benefits. 840 P.2d at 1079.1

In short, the plain text of the statute, the legislative history, and this Court's holding in Van Waters all establish the first clause of *1090section 18-21-111.6 as an express abrogation of the common law collateral source rule and the second clause as a limited exception for benefits that are actually paid to the tort plaintiff pursuant to a contract negotiated and paid for by the plaintiff or on his behalf.

Casting aside this well-established foundation, the majority marginalizes section 13-21-111.6 in favor of the common law rule, deeming the second clause of the statute an effective codification of the common law rule and the first clause merely a "limited" modification thereof. Maj. op. at 1088-84. Even in the face of the legislature's express intent to abrogate the common law rule, the majority proclaims that, "[flor purposes of this case, the common law collateral source rule remains in full foree and effect." Maj. op. at 1084. On the foundation of that statement, the majority proceeds to rebuild the statute's limited contract exception into a vehicle for tort plaintiffs to recover nearly any theoretical damages that are mitigated by their insurance policies.

II. The Contract Exception and Tucker's Insurance Policy

To accomplish this expansion of the statute's contract exception, the majority superimposes the legal framework of the common law collateral source rule over the contract exception, notwithstanding the contract exception's substantial facial limitations. The majority cites Van Waters for the proposition that "a tortfeasor [cannot] offset proceeds resulting from a plaintiff's purchase of insurance." Maj. op. at 1085. The majority then holds that the difference between the amount Tucker's healthcare providers billed him for his treatment and the amount Aetna actually paid to satisfy his lability to the providers constitutes a collateral source. Id. From that conclusion, the majority reasons that the difference necessarily satisfies the contract exception and therefore cannot be set off from Tucker's award. Id.

Contrary to the majority's holding, the contract exeeption does not give a tort plaintiff the ability to recover the amount of any theoretical liability to his healthcare providers that might have existed had he not carried health insurance. Instead, it merely exempts a limited set of collaterally sourced benefits from the general setoff requirements of section 18-21-111.6. Van Waters, $40 P.2d at 1075. In particular, the contract exception only applies to benefits that an insurer or other collateral source actually pays the plaintiff pursuant to a contract negotiated and paid into on his behalf Id. Here, Aetna never paid Tucker the difference between the amounts billed and paid, nor did Aetna negotiate that difference on Tucker's behalf. Accordingly, the difference does not qualify for the contract exception.

IH. - "Benefits Paid" Under the Contract Exception

The only benefit Aetna actually "paid" Tucker pursuant to his insurance policy was indemnification of his liability to his healthcare providers. The value of an indemnification of liability inherently cannot exceed the indemnified person's liability-in this case, Tucker's liability to the providers for his treatment. In other words, Aetna could not have indemnified Tucker for an amount greater than Tucker ever owed the providers. Therefore, the value of the benefit Act-na paid to Tucker was not, as the majority holds, the theoretical amount Tucker would have been liable for had he not carried insurance, but rather the amount Aetna owed the providers for Tucker's treatment under Aet-na's pre-negotiated pricing contracts with the providers.

As the majority concedes, section 10-16-705(8), C.R.S. (2010), requires insurers to indemnify insureds of liability to providers. Maj. op. at 1085. Because Tucker carried his insurance policy at all relevant times, he was never liable to his providers for the difference between the amounts billed and paid. Furthermore, as the majority also concedes, the providers, by entering into the pricing contracts with Aetna, waived the right to recover the difference from Tucker. Mg. op. at 1085.

Because Tucker was never liable to the providers for the difference between the amounts billed and paid, and because the providers had no right to recover the difference from him, the difference merely represented Tucker's theoretical liability had he *1091not carried insurance. Since Tucker carried insurance at all relevant times, the billed amount never reflected any actual liability of Tucker to his providers, and therefore was not a part of the benefit that Aetna "paid" Tucker by indemnifying him against lability.

Rather, the difference served only to give the jury a financial benchmark for the extent of Tucker's injuries without introducing prejudicial evidence that Tucker carried insurance. Because Tucker was never liable for the difference, the only logical valuation for Tucker's indemnification under his insurance policy is the amount that Aetna pre-negotiat-ed with providers for Tucker's treatments. Thus, the trial court properly set off the difference between the amounts billed and paid under section 18-21-111.6.

IV. Negotiation of Pricing Discounts

Compounding the error of the majority's holding that Aetna "paid" Tucker the difference between the amounts billed and paid is the fact that Aetna never negotiated the difference on Tucker's behalf, as is required for the difference to qualify for the contract exception. The majority insists that the contract between Tucker and Actrna-namely, Tucker's insurance policy-directly resulted in Aetna entering into discounted pricing contracts with Tucker's healthcare providers, leading to the difference in the amounts that Tucker's providers billed him and that Aetna actually paid. Maj. op. at 1086. The majority's account of the relationship between Tucker and Aetna, however, does not accord with the reality of relationships between insurers and insureds in Colorado.

Aetna's regulatory obligations under 3 Colo.Code Regs. § 702-4:4-7-1(12)(A) required it to enter into pricing contracts with the providers before selling insurance policies to Tucker or anyone else. While Aetna may have generally negotiated the contracts on behalf of its future insureds in the sense that it could not legally insure them without the contracts, Aetna could not have negotiated with the providers specifically on Tucker's behalf because it necessarily negotiated the pricing contracts before it had any relationship with Tucker.

The majority also asserts that discounted pricing contracts like those between Aetna and Tucker's providers "inure to the benefit of insured persons like Tucker by reducing the rate of health insurance premiums." Maj. op. at 1086. While it is possible that Aetna could have passed its savings from the discounted pricing contracts directly to Tucker in the form of lower premiums, it is equally possible that Aetna simply captured the savings in the form of lower costs, solely on its own behalf rather than Tucker's. The majority cites no evidence connecting Aetna's savings from its pricing contracts to the cost of Tucker's premiums.

In short, there is no direct link between Aetna's state-compelled, self-interested negotiation of discounted pricing contracts and Tucker himself. Astna did not negotiate on Tucker's behalf the difference between what Tucker's providers billed him and what Aet-na actually paid. That amount therefore does not qualify for the contract exception.

V. Public Policy

Finally, the majority implies that its holding comports with public policy, citing the common law's distaste for "shift[ing] the benefits of the plaintiff's insurance contract to the tortfeasor in the form of reduced liability when the tortfeasor paid nothing toward the health insurance benefits." Maj. op. at 1088. The majority contends that this concern was more important to the legislature than the concern of eliminating double recoveries, quoting Senator Meiklejohn's comment from the legislative history that "(there's something unfair about me getting killed and my wife suing somebody and collecting, [sic] my insurance pays off and that goes as a credit against the judgment." Id.

The majority, however, does not present Senator Meiklejohn's comments in their entirety, omitting in particular his subsequent comment:

I don't think a person ought to collect more than once ... for the hospitalization costs and things like that. The question really is who should pay that ... [. my insurance company pays my hospitalization as a result of an accident, shouldn't they be allowed to collect from the tortfeasor to *1092get their money back. That's the way I think it ought to really be.

Van Waters, 840 P.2d at 1078 (quoting Hearing, supra note 1) (emphasis added). Read as a whole, Senator Meiklejohn's comment did not express concern that a tortfeasor could unfairly incur less liability because a plaintiff carried insurance, but simply sought to ensure that tortfeasors, and not plaintiffs or their insurers, bear the actual cost of the plaintiffs' injuries.

The majority fails to acknowledge that Senator Meiklejohn's goal is met by the sub-rogation clauses included in most insurance policies, including Tucker's, entitling insurers to recover the cost of treatment from insureds injured by tortfeasors.2 Under the subrogation framework, an insurer pays for the plaintiff's medical treatment, the plaintiff collects the insurer's actual cost for the treatment from the tortfeasor under the contract exception of section 18-21-111.6, and the plaintiff reimburses the insurer for the actual cost of the treatment.3 In the end, the tort-feasor, and not the plaintiff or his insurer, bears the cost of the plaintiff's injuries, and no double recovery is necessary.

Although the majority claims it would be unfair for a tortfeasor to benefit from a plaintiffs purchase of insurance, maj. op. at 1087-88, the majority's insistence that a tort-feasor pay a plaintiff damages that neither the plaintiff nor his insurer ever actually incurred in treating the plaintiffs injuries arguably leads to a worse result. In light of the legislature's consideration of these countervailing concerns, this Court should defer to the legislature's overriding purpose in enacting section 18-21-111.6; to avoid double recoveries. See Van Waters, 840 P.2d at 1078.

VI. Conclusion

For the foregoing reasons, I believe that the majority's holding is not in accord with the legislature's intent in enacting section 13-21-111.6, the plain text of the statute, or sound public policy. The difference between the amount billed by healthcare providers for a tort plaintiff's treatment and the amount actually paid by the plaintiff's insurer does not qualify for the contract exception and therefore should be set off from the plaintiff's award. Therefore, I dissent.

I am authorized to state that Justice COATS and Justice EID join in this dissent.

. The legislature's goal in including the contract exception was simply to insure that benefits a tort plaintiff "pay[s] for one way or the other" are not offset from a judgment. Van Waters, 840 P.2d at 1078 (quoting Hearing on S.B. 67 Before the S. Bus. & Labor Comm., 55th Gen. Assemb. (Colo.1986) (statement of Sen. Meiklejohn) [hereinafter Hearing ]).

. The legislature recently clarified that an insurer cannot seek reimbursement from an insured under a subrogation clause until the insured is fully compensated out of the judgment for the tortfeasor's damages. See generally § 10-1-135, C.R.S. (2010). While section 10-1-135 prioritizes the interests of an insured over that of her insurer when collecting on a judgment from a tortfeasor, it does not affect the principle that a subrogated insured must reimburse the insurer for any doubly recovered treatment costs.

. Insureds cannot reasonably assume that they will both recover the cost of their treatment from the tortfeasor and be indemnified against liability for the treatment by their insurers. See Van Waters, 840 P.2d at 1081 (Rovira, C.J., specially concurring) (reasoning that "there properly may be a line drawn between insurance, for which there is subrogation or refund of benefits provisions, and benefits represented by ... disability pensions, for which there is no subrogation" and concluding that only the absence of subrogation renders it "proper to permit plaintiffs to benefit from their own prudence, rather than tortfea-sors").