Recovery of Medical Expenses by Insured Medical Malpractice Victims

• Publication year: 2004
• Pages: 113

33 Colo.Law. 113 Colorado Lawyer 2004.

2004, July, Pg. 113. Recovery of Medical Expenses by Insured Medical Malpractice Victims

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113

Vol. 33, No. 7, Pg. 113

The Colorado Lawyer
July 2004
Vol. 33, No. 7 [Page 113]

Specialty Law Columns
Tort and Insurance Law Reporter
Recovery of Medical Expenses by Insured Medical Malpractice Victims
by Anthony Viorst

This column provides information concerning current tort law issues and insurance issues addressed by practitioners representing either plaintiffs or defendants in tort cases In addition, it addresses issues of insurance coverage regulation, and bad faith

Column Editor:

William P. Godsman of the Law Office of William Godsman, Denver - (303) 455-6900, wgodsman@qwest.net

About The Author:

This month's article was written by Anthony Viorst, Denver, an associate with Lapin and Associates, P.C. - (303) 320-4162, viorst@lawlapin.com.

This article discusses whether a medical malpractice victim is entitled to be compensated by a defendant doctor for causally-related medical expenses that were paid by an insurance company or government program, such as Medicare.

Medical expenses in medical malpractice cases often can reach six or seven figures. Thus, an important issue is whether an insured victim of medical malpractice may recover medical expenses paid by a third party. Such recovery may depend on whether the third party has filed notice of its subrogated claim. Further, in situations where medical expenses are paid by a government program, such as Medicare, recovery may depend on whether the insured has paid "premiums" to the government in the form of taxes or labor. However, Colorado law is not definitive as to these issues.

This article examines the statutory collateral source rule and statutory right of subrogation in medical malpractice cases. It addresses conflicts between the statutes and reviews relevant case law. It also discusses the issues in the context of private insurance and Medicare and addresses additional related arguments, including "real party in interest" and "actual damages." Finally, it provides guidance regarding the admissibility of evidence of third-party payments, as well as practice pointers for lawyers who handle medical malpractice cases.

Statutory Collateral Source Rule

Prior to 1986, Colorado applied the common law collateral source rule.1 Under this rule, compensation that a tort victim receives from a source unrelated to the tortfeasor will not reduce the damages recoverable from the tortfeasor.2 The purpose of the common law collateral source rule was to prevent the wrongdoer from receiving reduced liability merely because the injured party had been indemnified by an outside, independent source.3 It was considered fairer that any windfall should be realized by the plaintiff in the form of double recovery rather than by the tortfeasor in the form of reduced liability.4

In 1986, the Colorado General Assembly enacted CRS § 13-21-111.6,5 which served to limit application of the common law collateral source rule. This statute applies to medical malpractice actions, as well as other types of personal injury cases, in which a plaintiff is successful. Pursuant to CRS § 13-21-111.6, for a tort that results in death or injury, the court must reduce the amount of the verdict by the amount for which such person is "wholly or partially indemnified or compensated . . . in relation to the injury, damage, or death sustained." However, there is an important exception:

[T]he verdict shall not be reduced by the amount by which such person . . . has been or will be wholly or partially indemnified or compensated by a benefit paid as a result of a contract entered into and paid for by or on behalf of such person.6 (Emphasis added.)

Thus, CRS § 13-21-111.6 significantly narrows the scope of the common-law collateral source rule, so that it applies only to payments made under the terms of a "contract" entered into by or on behalf of the injured victim. Other statutes were later enacted to address a third party's right of subrogation.

Statutory Right of
Subrogation

In 1988, the Colorado General Assembly enacted the Health Care Availability Act ("HCAA").7 According to the legislative declaration, the purpose of the HCAA is to ensure the continued availability of health care in Colorado by containing costs of malpractice insurance for medical care institutions and licensed medical care professionals.8

The HCAA, at CRS § 13-64-402, requires that within sixty days of filing a complaint, a plaintiff in a medical malpractice action must provide written notice of the action to any third party that has paid any portion of the plaintiff's medical bills.9 A sample notice to the third party is provided in the Appendix to this article.

CRS § 13-64-402 also states that any third party receiving such notice from a medical-malpractice plaintiff then has ninety days to file with the court a formal notice of its subrogated claim. Otherwise, the third party will waive its "right of subrogation as to such action."10 By the explicit statutory language of CRS § 13-64-402, a third-party payor that fails to file a written notice of its subrogated claim within ninety days loses its right of subrogation for that action.11 The breadth of this statute, and its interplay with the collateral source rule, is a matter of ongoing debate within the medical malpractice bar.

Conflicts Between
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