See All Posts

January 10, 2017

Collateral Source Rule Does Not Apply to Written Off LHWCA Medical Expenses

In the recent decision, Deperrodil v. Bozovic Marine, Inc., 842 F.2d 352 (5th Cir. 2016), the Fifth Circuit Court of Appeals held that the collateral source rule will not apply in awarding plaintiff with medical expenses that were billed but not actually paid. Deperrodil was injured when the captain of a crewbat negligently accelerated and descended into high waves, causing him to fall. Pursuant to the LHWCA, his employer’s workers compensation insurer paid for his medical expenses (his employer and the crewboat owner were different entities). Deperrodil’s medical providers billed around $186,000 for his medical care but only charged the workers comp carrier around $58,000 for the care, writing off the remainder of the bill. However, as part of its judgment - and citing the collateral source rule - the trial court awarded Deperrodil with the full amount of the billed medical expenses, even though only around 1/3 of those expenses were actually paid. Bozovic appealed.

The collateral source rule bars a tortfeasor from reducing his liability by the amount plaintiff recovers from independent sources. The rule asks whether the tortfeasor contributed to, or was otherwise responsible for a particular income source. If not, the income is considered independent of or collateral to the tortfeasor, and the plaintiff’s award will not be reduced by that amount.

The Fifth Circuit agreed the collateral source rule applied to Deperrodil’s award but found that a plaintiff could only recover the amount he, or his workers compensation insurer, actually paid to a medical provider. As there was no previous authority regarding how to apply the collateral source rule to written off LHWCA medical expenses, the court turned to its own case law regarding recovery amounts in maintenance and cure claims. In the 2012 decision Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373, 382 (5th Cir. 2012), the court held that injured seaman may only recover maintenance and cure for expenses “actually incurred,” either by an insurer at a discounted rate or by the seaman himself. The Deperrodil court determined that the benefits of maintenance and cure and those required by the LHWCA create similar obligations for marine employers and applying the reasoning in Manderson to Deperrodil’s claim made sense.

Going forward, the collateral source rule will not provide plaintiffs with the ability to recover medical expenses billed, but not paid.