                IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                                October 27, 2015 Session


                TERRY HOLLIDAY v. STATE OF TENNESSEE

                Appeal from the Tennessee Claims Commission
   No. T20101729 Nancy Miller-Herron, Commissioner, TN. Claims Commission
                              Western Division

                          ________________________________

              No. W2014-02188-COA-R3-CV – Filed December 16, 2015
                      _________________________________

This is an appeal by the State of Tennessee from the Tennessee Claims Commission’s award
of a judgment against it. While he was an inmate in the State’s custody, Plaintiff sustained
injuries when he fell out of a pickup truck that was being operated by a State employee.
Plaintiff filed a complaint with the Claims Commission in which he alleged that the State’s
negligence caused his injuries and sought damages for, among other things, the medical
expenses that were incurred as a result of the fall. The State argued that it should receive a
credit against any award of damages for the medical expenses Plaintiff incurred during his
incarceration because it paid those expenses through its contracts with two private medical
vendors. The Claims Commission disagreed and held that evidence of payments made by the
medical vendors for Plaintiff’s treatment was barred by the collateral source rule. The
Claims Commission awarded Plaintiff $125,000 in damages, which included damages for the
medical expenses that he allegedly incurred. On appeal, we conclude that because the State
was required by law to pay for all medical expenses Plaintiff incurred during his
incarceration, the Claims Commission erred in considering the cost of the medical services
provided to Plaintiff in calculating his damages. We therefore vacate the Claims
Commission’s award of damages and remand this matter for a new trial on the issue of
damages.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission Vacated
                                  and Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the Court, in which J. STEVEN STAFFORD,
P.J., W.S., and BRANDON O. GIBSON, J., joined.
Herbert H. Slatery, III, Attorney General and Reporter; Andrée S. Blumstein, Solicitor
General; and Eric A. Fuller, Assistant Attorney General, Nashville, Tennessee, for the
appellant, State of Tennessee.

Glenn K. Vines and Eric A. McEnerney, Memphis, Tennessee, for the appellee, Terry
Holliday.

                                                OPINION

                           I. BACKGROUND AND PROCEDURAL HISTORY

        On September 1, 2009, Terry Holliday, then an inmate in the custody of the State of
Tennessee Department of Correction (“TDOC”), was injured while assigned to a work detail
in Lauderdale County, Tennessee. Immediately prior to being injured, Holliday was riding
with other inmates in the bed of a pickup truck driven by a TDOC officer. As the officer
accelerated the truck to go up a hill, the truck hit a mound of dirt, and Holliday fell out of the
truck and was injured. He was transported by ambulance to a local hospital where tests
revealed that he had fractured multiple ribs. He was released from the hospital and returned
to the prison the same day but continued to experience severe pain in his chest in the days
that followed. On September 19, 2009, Holliday was taken back to the local hospital where
further testing revealed blood inside his lungs. He was immediately transported by
ambulance to a hospital in Nashville where he underwent surgery to remove several liters of
coagulated blood from his lungs. Holliday spent approximately two weeks recovering from
the surgery at the hospital in Nashville before being taken back to the prison. He was
released from TDOC custody in July 2010.

        On May 27, 2010, Holliday filed a notice of a claim for damages against the State of
Tennessee (“State”) with the Tennessee Division of Claims Administration. On August 25,
2010, the claim was transferred to the Tennessee Claims Commission (“Claims
Commission”) pursuant to Tennessee Code Annotated section 9-8-402(c).1 On August 30,
2010, Holliday filed a complaint with the Claims Commission in which he alleged that his
fall from the truck, and the injuries he suffered as a result, were caused by the TDOC
officer’s negligent operation of the truck. As an attachment to his complaint, Holliday
submitted a summary of the charges for the medical services he received in September 2009.
 The State filed an answer denying the material allegations of the complaint and asserting that
Holliday’s own negligence was the sole cause of his injuries.

1
 “If the division fails to honor or deny the claim within the ninety-day settlement period, the division shall
automatically transfer the claim to the administrative clerk of the claims commission.” Tenn. Code Ann. § 9-8-
402(c) (2012).
                                                        2
       On October 3, 2013, attorneys for both parties met to take the deposition testimony of
Thomas Rawlinson, M.D. (“Dr. Rawlinson”). During the deposition, Dr. Rawlinson
reviewed documents related to the medical treatment that Holliday received as a result of the
fall. Holliday’s attorney submitted a summary of Holliday’s medical bills with supporting
invoices that reflected that Holliday incurred $30,922.58 in medical expenses in September
2009. Dr. Rawlinson reviewed the documents and testified that Holliday’s medical treatment
and expenses were caused by his fall from the truck and were reasonable and necessary.

        Following the deposition of Dr. Rawlinson, the State filed a motion in limine seeking
to exclude evidence of the $30,922.58 in medical expenses that Holliday incurred in
September 2009. In support of its motion, the State argued that Holliday was not entitled to
recover medical expenses he incurred while in TDOC custody because those expenses were
paid by the State through its contracts with two medical vendors—First Medical Management
(“FMM”) and Correctional Medical Services (“CMS”). The State asserted that the Claims
Commission should therefore exclude evidence of the medical expenses in calculating the
amount of Holliday’s damages. Alternatively, the State argued that if the Claims
Commission did not exclude evidence of the medical expenses, the State should receive a
credit equal to the amount of the medical expenses towards any award of damages Holliday
received.

       A trial of Holliday’s claim was held before the Claims Commission on April 17, 2014.
 At the outset, the Claims Commissioner stated that she would allow Holliday to make an
offer of proof regarding the medical expenses that he incurred in September 2009 but would
allow the parties to submit additional briefs on their admissibility post-trial.2 Holliday
introduced the deposition testimony of Dr. Rawlinson and a summary of the medical
expenses Holliday incurred in September 2009. The summary reflected that the total amount
of medical expenses Holliday incurred in September 2009, $30,922.58, was the sum of six
separate charges from medical providers for services ranging from transportation by
ambulance to surgery. Each of the charges reflected in the summary was supported by an
attached invoice from the medical provider. Several of the invoices reflected specific
payments that had been made by FMM or other unnamed insurance carriers.

      The Claims Commission also heard testimony from several witnesses, including
Holliday. During his testimony, Holliday stated that he did not have health insurance.


2
 Based on the hearing transcript, it appears that the Claims Commissioner decided not to make an immediate
ruling on the admissibility of evidence related to Holliday’s medical expenses because Holliday did not
respond to the State’s motion in limine until the day before trial.
                                                        3
Additionally, on cross-examination, Holliday testified that he had not received invoices for or
made payments on the medical expenses:

        Q. Okay. And I would like to talk about these medical bills you received. You
        testified you went to the hospital and an ambulance came and got you and
        things of that nature; correct?

        A. Yes, sir, that’s correct.

        Q. Okay. And did you actually receive bills while you were in prison for these
        medical visits?

        ....

        THE WITNESS: I was not given any bills.

        Q. So you haven’t been billed for any of those medical services?

        A. I haven’t been --

        ....

        Q. So you haven’t received any of the bills, just to clarify.

        A. I haven’t received any as of yet.

        Q. Okay. Have you personally had to pay any of these bills?

        A. Only what I’ve incurred since I’ve been out.

        Q. Okay. July of 2010 since; correct?

        A. Yes.

Lisa Parks, the TDOC’s Director of Budget and Fiscal Services, also testified at the trial.
Parks testified that the State meets its legal obligation3 to pay the medical expenses incurred
3
  Tennessee Code Annotated section 41-21-204(b) (2014) requires the State to provide medical treatment to
inmates in its custody. See also Bryson v. State, 793 S.W.2d 252, 254 (Tenn. 1990) (holding the State
responsible for medical expenses of an inmate injured in an automobile accident while on a three-day furlough
from prison).
                                                     4
by inmates in its custody through its contracts with FMM and CMS. She explained that,
pursuant to its contracts with the two medical vendors, the State pays a specified rate per day
for each inmate in its custody, and, in return, FMM and CMS pay medical providers directly
for inmate medical expenses up to $50,000. Accordingly, Parks testified that FMM and CMS
paid the medical expenses Holliday incurred in September 2009 on the State’s behalf.

        Following the parties’ submission of post-trial briefs, the Claims Commission entered
its final order on July 11, 2014. As an initial matter, the Claims Commissioner ruled that the
collateral source rule barred the State from receiving any credit for payments made by FMM
or CMS:

              The Commission FINDS that FMM and CMS were collateral sources
       akin to insurance companies. As the State’s own witness noted, their names
       were even listed as the policy name on the medical invoices. Therefore, the
       fact that payments were made by FMM and/or CMS for Claimant’s medical
       treatment is not admissible and will not be considered by the Commission
       when assessing damages against the State.

            It should be noted that the State presented no evidence regarding the
       amount of credit due to the State for payments allegedly made to FMM and
       CMS on behalf of Claimant.

After reviewing the trial testimony and the deposition of Dr. Rawlinson, the Claims
Commission’s order stated:

             Based on Claimant’s pain and suffering, medical expenses, loss of
       enjoyment of life and all other damages, the Commission FINDS that
       Claimant sustained damages in the amount of one hundred twenty-five
       thousand dollars ($125,000).

              The Commission declines to find that Claimant was at fault. Claimant
       was assigned the task of picking okra in the field. To do that, he had to ride in
       the back of the white Dodge with the broken bench and rotten rail. There was
       no evidence whatsoever that he would have been free to decline.

              The Commission, therefore, FINDS that zero percent (0%) of the fault
       reasonably can be apportioned to the Claimant. The Commission further
       FINDS that one hundred percent (100%) of the fault reasonably can be
       apportioned to the State of Tennessee.

                                              5
Accordingly, the Claims Commission awarded Holliday a judgment against the State in the
amount of $125,000. Following the Claims Commission’s denial of the State’s motion to
alter or amend, the State filed a timely notice of appeal to this Court.

                                     ISSUE PRESENTED

       The State raises the following issue on appeal, slightly restated from its brief:

       1. Whether the Claims Commission erred in applying the collateral source rule
       to award damages related to Holliday’s medical expenses that had already been
       paid by the State.

                                   STANDARD OF REVIEW

       Appeals from a decision of the Claims Commission are governed by the same rules
applicable to appeals from trial court civil actions. Tenn. Code Ann. § 9-8-403(a)(1) (2012).
 Thus, when the Claims Commissioner acts as the finder of fact, our review of his or her
findings is de novo upon the record with a presumption of correctness unless the evidence
preponderates against the Commissioner’s findings. Tenn. R. App. P. 13(d); Usher v.
Charles Blalock & Sons, Inc., 339 S.W.3d 45, 58 (Tenn. Ct. App. 2010). Still, we review the
Claims Commissioner’s legal conclusions de novo with no presumption of correctness. Ray
Bell Const. Co., Inc. v. Tenn. Dep’t of Transp., 356 S.W.3d 384, 386 (Tenn. 2011).

                                          ANALYSIS

        As an initial matter, we note that, in his appellate brief, Holliday contends that the
State waived the affirmative defenses of payment, credit, set-off, or accord and satisfaction
by failing to raise them as an affirmative defense in its Answer as required by Rule 8.03 of
the Tennessee Rules of Civil Procedure. We note, however, that Holliday’s attorney did not
object to the issue at trial and, in fact, acknowledged that the State should receive credit for
payments it made directly to medical providers on Holliday’s behalf:

       [Holliday’s Attorney]: Well, I guess what we have from our perspective is I
       certainly agree that the State is entitled to a credit --

       THE COURT: Uh-huh.

       [Holliday’s Attorney]: -- for all amounts they paid if it was paid directly by the
       State of Tennessee.

                                               6
        THE COURT: Right.

Thus, even if we accept that the State should have raised the credit issue as an affirmative
defense, the theory was tried by the express or implied consent of the parties as contemplated
by Rule 15.02 of the Tennessee Rules of Civil Procedure.4 We therefore reject Holliday’s
assertion that the State waived the argument by failing to raise it in its Answer.

       The State contends that the Claims Commission erred in holding that evidence of
payments made by FMM and CMS for Holliday’s treatment was barred by the collateral
source rule. Tennessee has adopted the collateral source rule as it is set forth in Restatement
(Second) of Torts section 920A. Fye v. Kennedy, 991 S.W.2d 754, 763 (Tenn. Ct. App.
1998) (“The subject before us is addressed in [Restatement (Second) of Torts section 920A],
which we adopt.”). That section provides:

        § 920A Effect of Payments Made to Injured Party

        (1) A payment made by a tortfeasor or by a person acting for him to a person
        whom he has injured is credited against his tort liability, as are payments made
        by another who is, or believes he is, subject to the same tort liability.

        (2) Payments made to or benefits conferred on the injured party from other
        sources are not credited against the tortfeasor’s liability, although they cover
        all or a part of the harm for which the tortfeasor is liable.

Restatement (Second) of Torts § 920A (1977). Additionally, comment a to Section 920A
provides:

        a. Payments by or for defendant. If a tort defendant makes a payment toward
        his tort liability, it of course has the effect of reducing that liability. This is
        also true of payments made under an insurance policy that is maintained by the
        defendant, whether made under a liability provision or without regard to
        liability, as under a medical-payments clause. . . . The rule applies to benefits
        other than cash payments.

Restatement (Second) of Torts § 920A cmt. a. Thus, the collateral source rule provides that
when a plaintiff receives a payment or benefit from a collateral source, other than payments
made by or for the defendant, evidence of the payment or benefit is not admissible and does

4
  “When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the pleadings.” Tenn. R. Civ. P. 15.02.
                                                         7
not reduce or mitigate the defendant’s liability. Fye, 991 S.W.2d at 763 (quoting Donnell v.
Donnell, 415 S.W.2d 127, 134 (Tenn. 1967)). In several past cases, Tennessee courts have
recognized that defendants should receive credit for payments towards a plaintiff’s medical
expenses made on their behalf prior to trial.

        In Byrd v. Stuart, 450 S.W.2d 11 (Tenn. 1969), the plaintiffs and defendant were in an
automobile accident in which the plaintiffs were injured. Id. at 12. Following the accident,
the defendant’s insurance carrier, acting as the defendant’s agent, paid the plaintiffs $1,040
for which the plaintiffs executed an agreement titled “Receipt for Expenses Advanced.” Id.
In pertinent part, the agreement stated that, “[t]his amount is to be credited to any final
settlement or to the amount payable under our policy for any judgment which you may obtain
as a result of your accident.” Id. Later, the plaintiffs filed a lawsuit and received a jury
verdict against the defendant. Id. The defendant sought a credit against the jury’s verdict for
the amount of the advanced payment, but the trial court refused. Id. at 13. Thereafter, the
defendant filed a separate lawsuit seeking an injunction to prevent the plaintiffs from
enforcing the full amount of their judgment. Id. The trial court dismissed the defendant’s
claim. Id. On appeal, the Tennessee Supreme Court set aside the trial court’s ruling and
stated that, under the circumstances, it would “manifestly be an injustice” to allow the
plaintiffs to recover the full amount of the jury’s verdict. Id.

        This Court faced similar factual circumstances in Howard v. Abernathy, 751 S.W.2d
432 (Tenn. Ct. App. 1988). Like Byrd, the case involved an automobile accident between the
plaintiff and the defendant. Id. at 433. Following the accident, the defendant’s insurance
carrier paid $1,407 to plaintiff to cover his medical expenses. Id. Later, the plaintiff filed a
lawsuit, and evidence of his medical expenses was presented to the jury. Id. The jury was
not informed that the defendant’s insurer had already paid the expenses and returned a
verdict in favor of the plaintiff for $7,500. Id. The defendant filed a motion seeking a credit
against the jury’s verdict for the amount of the advanced payment, but the trial court refused.
 Id. The defendant appealed, and this Court reversed. Id. at 436. The Court acknowledged
that, unlike the plaintiff in Byrd, the plaintiff in Howard did not expressly agree that the
advance payment he received from the defendant’s insurance carrier would be credited
against any judgment. Id. at 434. Nevertheless, the court determined that the circumstances
implied such an agreement. Id. In holding that the defendant was entitled to a credit, the
court stated that, “[t]he humanitarian practice of making advance payments to or for injured
parties is to be commended and encouraged.” Id. at 435.

       It is clear in this case that FMM and CMS acted as insurance carriers for the State and
paid Holliday’s medical expenses on behalf of the State in a manner analogous with the
advanced payments made by the defendants’ insurance carriers in Byrd and Howard. Indeed,
the fact that FMM and CMS acted as insurance carriers for the State is undisputed in this
                                               8
case. In his appellate brief, Holliday concedes that FMM and CMS acted as insurance
carriers for the State but, based on that fact, argues that FMM and CMS were collateral
sources and that evidence of their payments for Holliday’s medical expenses should be
excluded. Holliday relies on this Court’s opinion in Cherry v. McCullough, No. 02A01-
9201-CV-00005, 1992 WL 379074 (Tenn. Ct. App. Dec. 21, 2012), in support of his
argument. His reliance on that case is misplaced, however, because the advance payments to
the plaintiff in that case were made by the plaintiff’s employer’s insurance carrier, not by the
defendant or any party acting on its behalf. Id. at *5-6. Simply put, Holliday’s argument
overlooks the distinction between payments made by the plaintiff’s insurer and payments
made by the defendant’s insurer. Because FMM and CMS acted as insurance carriers for the
State and paid Holliday’s medical expenses on the State’s behalf, the State should not be
liable for those expenses.

        Despite its similarities, however, there is one notable aspect of this case that makes it
distinguishable from Byrd and Howard. Unlike the defendants in those cases, the defendant
here was not engaging in the humanitarian practice of making advance payments to the
plaintiff, but was legally obligated to pay the full amount of the plaintiff’s medical expenses
while the plaintiff was in the State’s custody. See Tenn. Code Ann. § 41-21-204(b). Because
the State was required by law to pay the full amount of the medical expenses that Holliday
incurred during his incarceration, we conclude the Claims Commission should not have
considered evidence of the medical expenses in calculating the amount of Holliday’s
damages award.5 While we do not hold that evidence of the medical expenses Holliday
incurred during his incarceration was not admissible for any purpose, we conclude that, given
the unique circumstances of this case, such evidence was not admissible for proving the
amount of the medical expenses as a measure of damages.

        Though the Claims Commission’s order states that part of its $125,000 award is
intended to compensate Holliday for medical expenses, it does not specify the dollar amount
assigned to each measure of damages and, in particular, what portion of the total award is
attributable to the medical expenses the plaintiff incurred during incarceration. Because we
cannot speculate as to what portion of the Claims Commission’s award was erroneously
awarded, we must vacate the entire award of the Claims Commission and remand this matter
for a new trial on the issue of damages. On remand, we instruct the Claims Commission not
to award plaintiff damages for medical expenses incurred during his incarceration.



5
  This should not be construed as limiting consideration of plaintiff’s medical expenses that arose out of this
injury and were incurred subsequent to his release from the State’s custody in July 2010. Clearly, any medical
expenses incurred by the plaintiff, arising out of this injury, post incarceration may be considered as part of his
damages.
                                                          9
                                       CONCLUSION

       In light of the foregoing, we vacate the Claims Commission’s award and remand this
matter for a new trial on the issue of damages. In calculating the amount of its award on
remand, the Claims Commission should not award damages for the cost of the medical
services provided to Holliday during his incarceration. The costs of this appeal are taxed to
the Appellee, Terry Holliday, for which execution may issue if necessary.


                                                  _________________________________
                                                  ARNOLD B. GOLDIN, JUDGE




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