The United States District Court for the Northern District of Indiana, in Maurer v. Iehl, 2008 U.S. Dist. LEXIS 69296 (N.D. Ind. Sept. 10, 2008), recently entered the fray in a heated debate about the admissibility of write-offs by insurers who pay an injured plaintiff’s medical bills.
The debate began in Indiana with the October 2007 decision of the Indiana Court of Appeals in Butler v. Ind. Dep't of Ins., 875 N.E.2d 235 (Ind. Ct. App. 2007). In Butler, the plaintiff, the estate of the deceased party, sued a medical provider pursuant to the Indiana Adult Wrongful Death Statute (I.C. § 34-23-1-2). Medicare and Medicaid had paid a portion of the decedent’s medical expenses, the total of which was approximately $410,000. About $288,000 was written off by the medical providers. The defendant attempted to introduce evidence of the write-offs at trial.
The Butler court held that the exclusionary rule found in the collateral source statute, I.C. § 34-44-1-2, did not apply since the write-offs were not “payments.” The court reasoned that an injured party should be compensated for medical expenses for which they are liable, but should not receive a windfall by recovering for amounts which did not represent an “actual pecuniary loss” to the plaintiff. Accordingly, evidence of the write-offs was held to be admissible. Thus, the plaintiff estate was not entitled to recover the 70% of the decedent’s medical bills which had been written off. Transfer was then granted by the Indiana Supreme Court on April 30, 2008.
After the Indiana Supreme Court granted transfer in the Butler case, another panel of the Indiana Court of Appeals, in Stanley v. Walker, 888 N.E.2d 222 (Ind. Ct. App. 2008), reached the opposite conclusion. In the Stanley case, the court of appeals determined that the write-offs constituted an insurance benefit for which the plaintiff had paid his premiums, apparently overlooking the fact that it is the insurer, not the insured, which receives this particular benefit. The court noted that the fact that medical bills are written off does not mean that the plaintiff is not obligated to pay the billed amount, a finding which is debatable. In any case, the Stanley court held that the collateral source rule does apply to write-offs and that evidence of insurance write-offs should be excluded from the calculation of the plaintiff’s damages. The Indiana Supreme Court granted transfer on September 30, 2008.
The Indiana Supreme Court has yet to release its opinion in either the Stanley or Butler cases. Of note, the Illinois Supreme Court, however, recently decided this issue in favor of plaintiffs in Wills v. Foster, 229 Ill. 2d 393 (Ill. 2008). Reversing both the trial and the lower appellate courts, the Illinois Supreme Court held that a plaintiff’s recovery is not limited to the amount actually paid by the medical insurer (in this case Medicare and Medicaid). The Wills court relied on its earlier decision in Arthur v. Catour, 216 Ill. 2d 72 ( Ill. 2005). [Editor’s note: A discussion of Illinois’ Wills and Arthur decisions appears in our July 2008 newsletter and is available at http://www.querrey.com/news-newsletterarticles-128.html.]
Most recently, on September 10, 2008, the United States District Court for the Northern District of Indiana, in Maurer v. Iehl, 2008 U.S. Dist. LEXIS 69296 (N.D. Ind. Sept. 10, 2008), joined the voices favoring the admission of evidence of insurer write-offs. The plaintiffs in Maurer filed a motion in limine to exclude the defendants from introducing evidence or referring to any write-offs or reductions of the plaintiff’s medical bills by Medicare or her private insurer. The plaintiff contended that the write-offs were inadmissible under the collateral source rule since the write-offs were an insurance benefit for which she paid her premiums. The plaintiffs also relied on an oral ruling in an earlier case. The defendants, in turn, relied on an earlier ruling from the Southern District of Indiana, in Brumfiel v. United States, 2005 U.S. Dist. LEXIS 43974 (S.D. Ind. Oct. 25, 2005).
The Maurer court reviewed the history and intent behind Indiana’s collateral source statute and its application by Indiana courts, including the Butler and Stanley decisions, and concluded that the insurance write-offs were not benefits for which the plaintiff paid. Accordingly, the plaintiff’s request to exclude evidence of the write-offs was denied. The court also noted that the plaintiff had failed to show that she was personally liable for the amounts which were written off or that they represented an actual pecuniary loss to her.
This issue will most likely be resolved when the Indiana Supreme Court releases its opinions on the Butler and Stanley transfers. A decision in favor of the defendants, following the Butler panel and the recent decision of Judge Springmann in the district court, will have a profound impact on tort recoveries in Indiana - especially in cases involving Medicare and Medicaid where write-offs tend to be significant. In the Butler case alone, approximately $288,000 and 70% of the plaintiff’s recovery was at issue.
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John Halstead, an associate in our Merrillville, Indiana office, concentrates his practice in civil litigation, title defense, and mechanics liens. Prior to joining Querrey & Harrow, John gained experience as a plaintiff's attorney in personal injury, contract, and estate law, which provides him a view of opposing perspectives in a lawsuit or in a contract dispute. John is a former law clerk to the Allen Superior Court and interned in the US District Court for the Southern District of Indiana. He was also the Director of the Indiana University Protective Order Project.
