The “Collateral Source Rule” is under attack in Tennessee. If (or when) it is abrogated by the Tennessee Supreme Court or the Legislature, our job of making our clients whole will become infinitely harder. When that day comes we may need to look to our neighbor, Alabama, for guidance.
The Alabama State Legislature abolished the Common Law Collateral Source Rule 30 years ago. Insurance defense attorneys in Alabama may ask juries to reduce compensatory damages awards “on account of a plaintiff’s receipt of third-party payments of medical and hospital expenses.” Crocker v. Grammer, 87 So. 3d 1190, 1193 (Ala. Civ. App. 2011).
The Tennessee Supreme Court heard Jean Deadmon v. Debbie Steelman, et al, on April 5th, and will soon rule on whether “reasonable medical expenses” are actually the amount accepted by a medical provider as payment in full. If the Court does not modify Collateral Source in that case, then the Legislature will likely take it up next term. While this is worrisome for trial lawyers, a recent case out of Alabama gives some reason to be optimistic. The Alabama Court of Civil Appeals ruled in Magrinat v. Maddox that damages cannot be reduced by any collateral payments by third parties when the Plaintiff remains liable for the entire debt.
In Magrinat the Plaintiff needed a surgery, but did not have health insurance. A company called OrthoUSA purchased the Plaintiff’s medical debt from the surgeon which allowed the Plaintiff to receive the treatment he needed. The surgeon testified that his charges were reasonable and necessary, and that he would not have been able to do the surgery if not for the payment, albeit reduced, from OrthoUSA. The surgeon “wrote off” the rest of the debt. On its face this appears no different than when a health insurer pays a medical bill. The difference, though, is that the Plaintiff remained liable for the full reasonable and necessary medical expenses. He just owed them to OrthoUSA rather than the surgeon. The Court ruled that Plaintiff’s damages could not be reduced to the amount paid by OrthoUSA since he still owed the surgeon’s total charges. Magrinat v. Maddox, No. 2150357 (Ala. Civ. App. 2016).
We’ve all had uninsured clients who needed treatment, and we’re all familiar with companies like OrthoUSA/Injury Finance/Marrick. This may be our saving grace when Collateral Source goes away in Tennessee. It may become a necessity as health insurers may deny coverage for treatment in negligence claims when they are no longer as likely to be subrogated. Keep this in mind as we wait on the ruling from the Tennessee Supreme Court. Stay tuned!