On May 9, the Louisiana Supreme Court issued an important opinion restricting application of the collateral source rule in personal injury lawsuits. This case will impact workers’ compensation subrogation recoveries in Louisiana by reducing the overall pool of money subject to subrogation.

James Busenlener

In Simmons v. Cornerstone Investments, the court held that in third-party tort cases the collateral source rule is inapplicable to medical expenses charged above the amount actually paid by a workers’ compensation insurer, pursuant to the workers’ compensation medical fee schedule.

Kerry Simmons was injured on the job and received workers’ compensation benefits, including disability and medical expenses. Invoices from health care providers totaled $24,435, but the charges were reduced, to $18,435, in accordance with the Louisiana Workers’ Compensation Act Medical Reimbursement Schedule, resulting in a write-off of $6,000.

In Simmons’ tort suit against the third-party building owner and its insurer, the defendants filed a motion in limine to exclude any evidence of medical expenses written off by the worker’s compensation insurer. The trial court granted the defendants’ motion and ruled that the only evidence to be presented to the jury was that of amounts actually paid under the fee schedule.

The court of appeal denied the plaintiff’s writ. The Louisiana Supreme Court granted the writ to determine the applicability of the collateral source rule to the medical write-off. It determined the collateral source rule did not apply when a plaintiff had paid no consideration for the benefits.

The court found the written off amount under the state Workers’ Compensation Act was a “phantom charge that [p]laintiff has not ever paid nor one he will ever be obligated to pay.” With this reasoning, the court concluded that there was no basis to differentiate the written off amount created by a reduced reimbursement fee under workers’ compensation and those of a Medicaid program or an attorney-negotiated medical discount.

While acknowledging the importance of tort deterrence in the tort system, the court found that “there is no true deterrent effect to allowing [p]laintiff to recover expenses over and above what was actually paid,” and noted that a ruling allowing plaintiff to recover such a windfall would amount to an unauthorized award of punitive damages.

Personal injury plaintiffs and their counsel in Louisiana had long been able to maximize their damages by claiming the exorbitant medical costs charged by medical providers. As a result of the Louisiana Supreme Court’s ruling, judicial awards and settlement value will decrease, which in turn will decrease the pot of money subject to workers’ compensation subrogation.

On the other hand, this ruling brings Louisiana in line with other states, including neighboring Texas.

James Busenlener is a partner with the Matthiesen, Wickert & Lehrer law firm in Hartford, Wisconsin. This blog post is reprinted with permission.