                         Supreme Court of Louisiana
FOR IMMEDIATE NEWS RELEASE                                         NEWS RELEASE #048


FROM: CLERK OF SUPREME COURT OF LOUISIANA



The Opinion handed down on the 2nd day of October, 2015, is as follows:



BY GUIDRY, J.:


2014-C -2279      EDDIE HOFFMAN v. 21ST CENTURY NORTH AMERICA INSURANCE COMPANY AND
                  CAROLYN ELZY (Parish of E. Baton Rouge)

                  For the reasons set forth above, we hold that an attorney-
                  negotiated medical discount or “write-off” is not a payment or
                  benefit that falls within the ambit of the collateral source
                  rule. Accordingly, we affirm the judgments of the lower courts.
                  AFFIRMED

                  CLARK, J., concurring.
10/02/15


                      SUPREME COURT OF LOUISIANA

                                 NO. 2014-C-2279

                               EDDIE HOFFMAN

                                     VERSUS

      21ST CENTURY NORTH AMERICA INSURANCE COMPANY
                     AND CAROLYN ELZY

        ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
          FIRST CIRCUIT, PARISH OF EAST BATON ROUGE



GUIDRY, Justice

      We are presented with a question of first impression as to whether a write-

off from a medical provider, negotiated by the plaintiff‟s attorney, may be

considered a collateral source from which the tortfeasor receives no set-off.

Applying Louisiana law and the principles set forth in our Civil Code, we find that

such a write-off does not fall within the scope of the collateral source rule. For the

reasons set forth below, we affirm the lower courts‟ rulings.


FACTS and PROCEDURAL HISTORY

      Eddie Hoffman was injured in October 2010, when his vehicle was rear-

ended by a vehicle driven by Carolyn Elzy. The accident occurred at or near the

intersection of Old Hammond Highway and Sharp Road in Baton Rouge,

Louisiana. Mr. Hoffman filed suit against Ms. Elzy and her insurer, 21 st Century

North America Insurance Company (“Century”), for damages allegedly resulting

from the accident.




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      A bench trial was conducted in September 2012 on the issue of liability and

damages. At trial, the only witnesses were Mr. Hoffman and Ms. Elzy. The

evidence introduced at trial consisted of Mr. Hoffman‟s medical records, the

deposition transcript of the responding law enforcement officer, photographs of

both vehicles involved, and Century‟s insurance policy. At the conclusion of trial,

the court ruled in favor of Mr. Hoffman as to the issue of liability. It found Ms.

Elzy one-hundred percent (100%) at fault for the accident. The trial court awarded

Mr. Hoffman $4,500.00 in general damages and $2,478.00 for special medical

expenses for a total award of $6,978.00.


      Mr. Hoffman appealed the verdict alleging inter alia that the award for

special damages was erroneous. With regard to special damages, Mr. Hoffman

asserted the trial court erred in awarding only $2,478.00 for past medical expenses

even though Mr. Hoffman had presented evidence of $4,528.00 in past medical

expenses. The appellate court affirmed the verdict of the trial court in all respects.

On rehearing, the appellate court affirmed its previous decision, reasoning the trial

court had been presented with two conflicting medical bills and its choice between

them was not manifestly erroneous.


      At issue before this court, therefore, is the award for past medical expenses

of $2,478.00, even though Mr. Hoffman submitted bills totaling $4,528.00.

Specifically, Mr. Hoffman argues the requested medical expenses included charges

for two MRIs, each for $1,500.00 (a total of $3,000.00). At trial, Mr. Hoffman

introduced a medical statement for $3,000.00 from the imaging center. However,

Mr. Hoffman was awarded a total of $950.00 ($475.00 for each MRI) based upon a

medical statement from the imaging center introduced by the defendant that

showed charges totaling $3,000.00, $950.00 in payments from the attorney, and a

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bill “ajust [sic]” in the amount of $2050.00. The itemized portion of the statement

indicated an “ATT W/O” of $1025.00 for each MRI. The trial court noted that

plaintiff‟s attorney had “an arrangement” with the medical provider. Mr. Hoffman

contends, under the collateral source rule, he is entitled to the total billed amount,

including the portion of the bill that was “adjusted,” or “written-off,” and his

recovery is not limited to merely the portion actually paid. We granted certiorari to

determine the res nova issue of whether the collateral source rule applies to the

“written-off” portion of a medical bill when the plaintiff‟s attorney negotiated the

discount.


LAW

      Under the collateral source rule, a tortfeasor may not benefit, and an injured

plaintiff‟s tort recovery may not be reduced, because of monies received by the

plaintiff from sources independent of the tortfeasor‟s procuration or contribution.

Louisiana Dep’t of Transp. & Dev. v. Kansas City S. Ry. Co., 02-2349 p. 6 (La.

5/20/03), 846 So.2d 734, 739. Under this doctrine, any payments received by the

plaintiff from an independent source are not deducted from the award the injured

party would otherwise receive from the wrongdoer. Id. In short, the tortfeasor is

not allowed to benefit from the victim‟s foresight in purchasing insurance and

other benefits. Bozeman v. State, 03-1016 p. 9 (La. 7/2/04), 879 So.2d 692, 698.

      The collateral source rule can be traced back to its common law roots. The

Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152, 15 L.Ed. 68 (1854).

Two ships (the Propeller Monticello and Northwestern) were involved in a wreck,

causing the Northwestern to sink. The Northwestern, however, was insured and the

insurance paid for the loss of the ship and its cargo. The Supreme Court was

presented with the issue of whether the owner of the other ship was released from

                                          3
liability because of the insurance payment. The court held the “contract with the

insurer is in the nature of a wager between third parties, with which the trespasser

has no concern. The insurer does not stand in the relation of a joint trespasser, so

that satisfaction accepted from him shall be a release of others.” Id.

      Even though originating as a common law doctrine, the collateral source rule

has been recognized under the jurisprudence of this state. See Bozeman, pp. 8-11,

879 So.2d at 697-99. Though many other states have enacted legislation governing

the application of the collateral source rule within those jurisdictions, the rule has

not been altered statutorily in Louisiana. Kansas City. S. Ry., p. 7, 846 So.2d at

739. In Kansas City S. Ry., this court cited the Restatement (Second) of Torts §

920A (1979), which states:


      (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.

We have explained that the rule serves several public policy purposes. The most

oft-cited reason is that the tortfeasor should not gain an advantage from outside

benefits provided to the victim independently of any act of the tortfeasor. Kansas

City S. Ry., p. 7, 846 So.2d at 739. We have also recognized the collateral source

rule promotes tort deterrence and accident prevention. Id. Finally, absent such a

rule, the reasoning goes, victims would be dissuaded from purchasing insurance or

other forms of reimbursement available to them. Id.

      While the collateral source rule has been applied in a variety of

circumstances, it most typically has been applied in tort cases involving insurance

payments and other benefits. Bozeman, 03-1016, p. 9, 879 So.2d at 698. As we

explained in Bellard v. American Cent. Ins. Co, 07-1335, p. 19, 980 So.2d 654,
                                          4
668, the courts have struggled with the question of double recovery or windfall that

might arise as a consequence of the victim‟s receipt of an outside payment.

“Double recovery would be in the nature of exemplary or punitive damages, which

are not allowable under Louisiana law unless expressly provided by statute.”

Gagnard v. Baldridge, 612 So.2d 732, 736 (La. 1993). 1 The purpose of tort

damages, we noted in Bellard, is to make the victim whole, and such a purpose is

thwarted, and the law is violated, when the victim is allowed to recover the same

element of damages twice. Id. This court in Bozeman resolved the question to find

that no “windfall” or “double–dipping” will occur when “the injured party‟s

patrimony was diminished to the extent that he was forced to recover against

outside sources and the diminution of patrimony was additional damage suffered

by him.” Bellard, p. 19, 980 So.2d at 668 (quoting Bozeman, p. 10, 879 So.2d at

699)(emphasis in original).

         In Bozeman, the issue before us was whether the collateral source rule

applies to medical expenses “written off” or contractually adjusted by healthcare

providers pursuant to the federal Medicaid program, under which no consideration

is provided by the recipient for the receipt of Medicaid benefits. Bellard, p. 20, 980

So.2d at 668-69. The Bozeman court held Medicaid recipients may not collect the

Medicaid “write-offs” as damages, because no consideration was given for the

benefit.      03-1016, p. 22, 879 So.2d at 705-06.            Ultimately, “in holding the

Medicaid recipient is unable to collect the Medicaid „write-off‟ as damages, [in

Bozeman] we rejected a traditional application of the collateral source rule in favor

1
    We explained in Mosing v Dumas, 02-0012, pp. 8-9 (La. 10/15/02), 830 So.2d 967, 973:

          “Exemplary damages in Louisiana reflect „a principle that has been borrowed
         from the common law, and, though tacitly and sometimes expressly recognized in
         our decisions, it is really an exotic in our system.‟ Dirmeyer v. O'Hern, 39
         La.Ann. 961, 964, 3 So. 132 (1887) (vacated on other grounds). Under Louisiana
         law, exemplary or other „penalty‟ damages are not allowable unless expressly
         authorized by statute. International Harvester Credit v. Seale, 518 So.2d 1039,
         1041 (La.1988).”
                                                5
of a rule more narrowly tailored to better conform with the compensatory goal of

tort recovery.” Id. That goal of Louisiana tort recovery is set forth in Louisiana

Civil Code article 2315: “Every act whatever of man that causes damage to another

obliges him by whose fault it happened to repair it.” Thus, in both Bozeman and

Bellard, we emphasized a fundamental consideration for application of the

collateral source rule, in addition to tort deterrence, is “whether the victim, by

having a collateral source available as a source of recovery, either paid for such

benefit or suffered some diminution in his or her patrimony because of the

availability of the benefit, such that no actual windfall or double recovery would

result from application of the rule.” Bellard, 07-1335, pp. 20-21, 980 So.2d at 669.

See also Cutsinger v. Redfern, 08-2607 (La. 5/22/09), 12 So.3d 945.

ANALYSIS

      With these principles in mind, we turn to the issue of whether a plaintiff can

invoke the collateral source rule to recover for medical expense write-offs

negotiated by his attorney, without having first diminished his patrimony; an issue

of first impression for this court. Here, the plaintiff contends his entire medical bill

totaling $3,000.00 is recoverable under the collateral source rule, rather than only

the amount actually paid and accepted by the provider. We disagree, as explained

below, because we find the collateral source rule does not apply to attorney-

negotiated write-offs or discounts for medical expenses obtained as a product of

the litigation process.

      On the record before us, there is no real dispute that Mr. Hoffman‟s attorney

negotiated the discount on the medical statement from the imaging center.

Although there is no specific evidence or testimony in the record regarding the

origin of the write-off, such as a contract or agreement, the notations on the

medical statement speak for themselves. Furthermore, the trial court noted on two
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occasions without objection that the plaintiff‟s attorney had an “arrangement” with

certain medical providers offering discounted medical services. Additionally, there

is no indication the plaintiff, Mr. Hoffman, incurred any expenses for this discount.

Indeed, he testified he was unaware of the write-off or whether he had paid or

given up anything in exchange for the write-off. Nevertheless, the plaintiff seeks to

extend the application of the collateral source rule beyond the typical situation

involving receipt of private insurance benefits to attorney-negotiated discounts of

medical bills under the theory that, pursuant to a contingency fee arrangement, the

plaintiff pays an attorney fee out of his recovery and this attorney fee effects a

diminution in the plaintiff‟s patrimony sufficient to support application of the

collateral source rule.

      We decline to extend the collateral source rule to attorney-negotiated

medical discounts obtained through the litigation process. We hold that such a

discount is not a payment or benefit that falls within the ambit of the collateral

source rule. First, allowing the plaintiff to recover an amount for which he has not

paid, and for which he has no obligation to pay, is at cross purposes with the basic

principles of tort recovery in our Civil Code. The wrongdoer is responsible only

for the damages he or she has caused. La. Civ. Code art. 2315. The plaintiff has

suffered no diminution of his patrimony to obtain the write-off, and, therefore, the

defendant in this case cannot be held responsible for any medical bills or services

the plaintiff did not actually incur and which the plaintiff need not repay. Because

the evidence before the trial court was that Mr. Hoffman paid $950.00 for the

MRIs, he is not entitled to recover any additional amount. Any recovery above

$950.00 for the MRIs would amount to a windfall and force the defendant to

compensate the plaintiff for medical expenses the plaintiff has neither incurred nor

is obligated to pay.

                                          7
      Second, we reject plaintiff‟s argument that consideration for the benefit is

given for attorney-negotiated medical discounts by virtue of the contractual

obligation of the plaintiff to pay attorney fees, albeit only in the event of a

recovery. This argument is based on the assumption that the payment of an

attorney‟s fee is additional damage suffered by the tort victim. However, “[i]t is

… well recognized in the jurisprudence of this state that as a general rule attorney

fees are not allowed except when authorized by statute or contract.” Killebrew v.

Abbott Laboratories, 359 So.2d 1275, 1278 (La. 1978). Because the tortfeasor is

not liable for, and the tort victim has no right to recover, attorney fees, the payment

of an attorney fee is not additional damage to the plaintiff‟s patrimony so as to

justify the “windfall” or “double recovery” represented by the attorney-negotiated

discount.

      Third, we adopt a bright-line rule that such attorney-negotiated discounts do

not fall within the ambit of the collateral source rule because to do otherwise

would invite a variety of evidentiary and ethical dilemmas for counsel.            For

example, an evidentiary hearing inquiring into the details of the attorney-client

relationship to uncover a “diminution in patrimony” resulting from the attorney-

negotiated medical discount might intrude upon the privilege surrounding the

employment contract and communications as to fee arrangements. See La. Code

Evid. Art. 506(B)(1). Additionally, a lawyer who negotiates a discount with a

medical provider and then attempts to recover the undiscounted full “cost” from

the defendant might run afoul of Rule 4.1 of the Rules of Professional Conduct,

entitled “Truthfulness in Statements to Others,” which provides in Subsection (a)

that a lawyer in the course of representing a client shall not knowingly make a false

statement of material fact to a third person.



                                           8
      While state courts differ in their interpretation of when the collateral source

rule applies, and many legislatures have adopted rules governing the application of

the doctrine, we have not discovered, nor have the parties pointed to, any other

jurisprudence that has directly addressed the issue of whether attorney-negotiated

“write-offs” are recoverable under the collateral source rule. However, at least one

court has thoroughly considered whether the collateral source rule applies to

discounted medical bills and has concluded that it does not. In Howell v. Hamilton

Meats & Provisions, Inc., 52 Cal.4th 541, 548-49, 129 Cal.Rptr.3d 325, 257 P.3d

1130 (2011), the court held the collateral source rule should not expand the scope

of economic damages to include expenses the plaintiff never incurred. There, the

plaintiff‟s health care providers, pursuant to an agreement with her insurer, waived

$94,894 of the plaintiff‟s $122,841 medical bill. As such, the Howell court

explained, the plaintiff did not incur, nor was she otherwise obligated to pay, the

full charges presented on the medical bill, and therefore the collateral source rule

did not apply. Id., 52 Cal.4th at 566, 129 Cal.Rptr.3d at 343, 257 P.3d at 1145 (“an

injured plaintiff whose medical expenses are paid through private insurance may

recover as economic damages no more than the amounts paid by the plaintiff or his

or her insurer for the medical services received or still owing at the time of trial”).

CONCLUSION

        In the present case, Mr. Hoffman did not incur any additional expense in

order to receive the attorney-negotiated “write-off,” nor has he suffered any

diminution in his patrimony. Therefore, he cannot receive the advantage of the

collateral source rule. Bozeman, supra. Additionally, allowing the plaintiff to

recover expenses he has not actually incurred himself, and for which he has no

obligation to pay, is contrary to Louisiana Civil Code article 2315. Because Mr.

Hoffman did not actually incur the “written-off” portion of the charges, the

                                           9
collateral source rule does not apply. We thus find the appellate court did not err in

determining that Mr. Hoffman was entitled to reimbursement of $950.00, the

actual amount paid to and accepted by the medical provider, as opposed to the

initial charged amount of $3,000.00.

DECREE

      For the reasons set forth above, we hold that an attorney-negotiated medical

discount or “write-off” is not a payment or benefit that falls within the ambit of the

collateral source rule. Accordingly, we affirm the judgments of the lower courts.

AFFIRMED




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10/02/15

                    SUPREME COURT OF LOUISIANA

                               NO. 2014-C-2279

                              EDDIE HOFFMAN

                                   VERSUS

     21ST CENTURY NORTH AMERICA INSURANCE COMPANY
                    AND CAROLYN ELZY

       ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
         FIRST CIRCUIT, PARISH OF EAST BATON ROUGE



CLARK, J., concurring

     Based on the bare-bones record before us, I concur in the result.




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