John N. Kenney v. Samuel C. Liston
233 W. Va. 620, 2014 WL 2565563, 760 S.E.2d 434 (2014)
Rule of Law:
The collateral source rule prevents a tortfeasor from reducing damages by payments or benefits received by the injured party from independent third-party sources, including discounted or 'written-off' medical expenses, thereby entitling the plaintiff to recover the full reasonable value of medical services, not merely the amounts actually paid or incurred.
Facts:
- On April 6, 2010, John N. Kenney, after consuming a number of alcoholic beverages, slammed his car into the rear end of a vehicle in which Samuel C. Liston was a passenger, with the force of impact breaking Liston's seat.
- An hour after the collision, Kenney's blood alcohol content was measured at .328, over four times the legal limit.
- Kenney later pleaded no contest to first-offense driving under the influence.
- Samuel C. Liston suffered serious, permanent, painful injuries to his spine as a result of the collision.
- Liston incurred medical bills in excess of $70,000 for the necessary and reasonable medical services he received.
- Liston's medical providers discounted, reduced, or "wrote off" portions of these medical bills due to agreements between the providers and Liston's health insurance carrier, Blue Cross/Blue Shield.
Procedural Posture:
- Samuel C. Liston filed a lawsuit against John N. Kenney in the Circuit Court of Monongalia County, West Virginia, for his injuries.
- Kenney admitted he was solely liable for the collision, and the case was bifurcated into a first phase for compensatory damages and a second phase for punitive damages.
- Prior to trial, Kenney filed a motion in limine to limit Liston's recoverable medical damages to the amounts actually paid, excluding the discounted or written-off portions.
- The Circuit Court of Monongalia County denied Kenney's motion in limine, ruling that the discounts/write-offs were protected by the collateral source rule.
- A jury in the first phase awarded Liston $325,272.92 in compensatory damages, including $74,061.00 for past medical expenses.
- During the punitive damages phase, Kenney's counsel argued that Kenney was impoverished and unable to pay; Liston's counsel then elicited testimony from Kenney about his liability insurance and the possibility of additional coverage for an excess verdict under Shamblin v. Nationwide Mutual Insurance Company.
- The Circuit Court of Monongalia County instructed the jury that additional liability insurance "may or may not" be available to pay the verdict.
- The jury returned a punitive damage verdict against Kenney for $300,000.00.
- The Circuit Court of Monongalia County entered a judgment order on the jury's verdict and later denied Kenney's motion for a new trial.
- Kenney appealed the judgment order and the denial of his motion for a new trial to the Supreme Court of Appeals of West Virginia.
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Issue:
Does the collateral source rule apply to medical expenses that are discounted or "written off" by healthcare providers due to agreements with a plaintiff's health insurance, allowing the plaintiff to recover the full billed amount, and did the trial court err by permitting evidence and instruction on potential excess liability insurance coverage for punitive damages after the defendant introduced evidence of financial inability to pay?
Opinions:
Majority - Justice KETCHUM
Yes, the collateral source rule permits a plaintiff to recover the full reasonable value of medical services, including amounts discounted or written off by providers due to agreements with the plaintiff's health insurance, and the trial court did not err in allowing evidence and instruction on potential excess liability insurance coverage for punitive damages. The Court affirmed the long-standing collateral source rule, which prevents tortfeasors from reducing damage awards by payments or benefits received by the injured party from independent sources. This rule acts as both a rule of evidence, precluding introduction of collateral benefits, and a rule of damages, preventing offset of judgment. The Court explicitly extended the collateral source rule to cover discounted or "written off" portions of medical bills, reasoning that these amounts constitute either a benefit of the plaintiff's bargain with their health insurer or a gratuitous benefit from the medical provider. To rule otherwise would grant a windfall to the tortfeasor. The plaintiff is entitled to recover the "reasonable value" of medical services, not merely the amounts actually paid or incurred. In the punitive damages phase, the Court found that defense counsel "opened the door" to the issue of Kenney's financial status and available insurance coverage by arguing his impoverishment and then presenting limited policy limits. This justified the trial court's decision to allow questions and provide an instruction regarding the potential availability of additional "excess" coverage under the Shamblin doctrine, which holds insurers potentially liable beyond policy limits for bad faith failure to settle.
Dissenting - Justice LOUGHRY
No, the collateral source rule should not permit a plaintiff to recover for medical expenses that were discounted or "written off" by medical providers because these amounts do not represent an actual loss to the plaintiff. Justice Loughry argued that the fundamental goal of tort law is "reasonable compensation for losses," and write-offs are not an actual loss since no one ever pays them. The collateral source rule, she contended, protects "payments" from other sources, and a write-off is not a payment. She rejected the majority's reasoning that write-offs are a benefit of the insurance bargain or a gratuitous service, asserting that medical providers agree to discounted rates for commercial reasons, not as a gift or compensation for injury. Furthermore, she stated that modern medical billing is often "insincere" and inflated, making the full billed amount an unreasonable measure of value. Allowing recovery of these fictitious amounts, she concluded, unjustly inflates damages and would inevitably lead to higher insurance premiums for the public.
Concurring - Justice BENJAMIN
Yes, the majority opinion correctly applies the collateral source rule, which already dictates that an injured plaintiff is entitled to recover the "reasonable value" of medical expenses, not merely the actual amounts paid, making the new syllabus points largely unnecessary. Justice Benjamin agreed with the majority's decision to affirm the application of the collateral source rule but believed the majority's formulation of new syllabus points was superfluous. He cited established West Virginia precedent, such as Long v. City of Weirton and Jordan v. Bero, which already hold that damages for medical expenses are based on their "reasonable value" rather than actual expenditures. This existing jurisprudence, he argued, sufficiently covers the principle that evidence of amounts actually paid or payable (including discounts and write-offs) is inadmissible, thus supporting the outcome without needing to re-articulate the rule extensively.
Analysis:
This case significantly reinforces and clarifies the application of West Virginia's collateral source rule, explicitly extending its protection to medical expense "write-offs" and discounts negotiated by health insurance providers. It solidifies the principle that a tortfeasor should not benefit from any third-party arrangement that reduces a plaintiff's out-of-pocket costs, emphasizing that the "windfall" should go to the injured party, not the wrongdoer. This decision could lead to higher compensatory damage awards for medical expenses in personal injury cases where insured plaintiffs benefit from provider discounts, placing a greater financial burden on negligent defendants and their insurers. Furthermore, the ruling on punitive damages provides important guidance on the "opening the door" doctrine, allowing plaintiffs to introduce evidence of an insurer's potential bad-faith liability for excess verdicts when a defendant attempts to mislead the jury about their financial capacity.
