Collateral Sources / Should the Information be Produced in Discovery?

Defendants frequently propound an Interrogatory requesting collateral source information. Such an Interrogatory may request information regarding plaintiff’s health insurance, workers compensation benefits, and sick leave or other continuance of pay benefits.

Supreme Court Rule 4:1 (b) (1) provides that “Unless otherwise limited by order of the Court….Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to a claim or defense of the party seeking discovery….It is not ground for objection that the information sought will be inadmissible at trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. See also: FRCP 26(b)(1)(contains language similar to 4:1(b)(1)).

Virginia law prohibits the introduction of collateral sources for payment of medical expenses. Burks v Webb, 199 Va 296, 99 SE 2d 629 (1957); Walthew v Davis, 201 Va 557, 111 SE 2d 784 (1960). The collateral source rule is founded on the principle that it is better the plaintiff receive a windfall in the form of double recovery for his bills, than the defendant escape, in whole or in part, liability for his wrongdoing. Schlickling v Aspinall, 235 Va 472, 368 SE 2d 172 (1988).

Likewise, collateral sources for loss of income are inadmissible and shall not diminish provable damages for loss of income. Va. Code Section 8.01-35.

Yet, until recently, circuit court judges sometimes allowed evidence of health insurance payments to be considered on two grounds. The first ground was based on the argument that any amounts written off by the health insurer and accepted by the plaintiff’s medical provider could not be claimed as damages as the plaintiff was not liable for the amount of the “write off”. This argument was rejected by the Supreme Court in Acuar v Letourneau, 260 Va. 180, 531 SE 2d 316 (2000), holding the defendant may not benefit from plaintiff’s contractual arrangement with his health insurer and medical providers. The second ground was based on the argument that the defendant should be entitled to argue to a jury that the amounts actually paid by health insurers constitute evidence of the “reasonable value of the services.” This was an attempt to reduce plaintiff’s claimed medical expenses to the amounts paid by the health carrier and accepted by the provider. This argument was also rejected by the Supreme Court in Radvany v Davis, 262 Va. 308, 551 S.E. 2d 347 (Sept. 14, 2001), which held such “negotiated amounts” are not evidence of whether the medical bills are reasonable, and do not reflect the prevailing cost of those services to other patients. This decision should finally end the debate over the relevance and admissibility of health insurance payments in personal injury cases.

Note that, even though collateral sources are inadmissible at trial, they are relevant to determining the amount medical benefits available under an insured’s medical payments coverage. First party medical payments coverage compensates an insured for medical expenses resulting from an auto accident or use of an automobile. Medical payments coverage is “no-fault” coverage. If the insured has medical payments coverage, the benefit is available to the insured regardless of whether the insured caused the accident or was injured due to the negligence of someone else. However, an insured can only collect medical payments coverage for amounts “incurred” by the insured, which means that when the insured has health insurance which pays the medical bills, the amount “incurred” by the insured is equal to the amount actually paid by the health insurer. Va. Code Section 38.2-2201A(3); State Farm v. Bowers, 255 Va 581, 500 SE2d 212 (1998); Acuar v Letourneau, 260 Va. 180, 531 SE 2d 316 (2000)(distinguishing Bowers, which involved the interpretation of an insurance contract, from Virginia’s tort law and the application of the collateral source rule in a third party liability suit.

It would now appear indisputable that health insurance benefits, continuance of pay benefits and workers compensation pay are all inadmissible. However, defendants may claim the requested collateral source information, although inadmissible, is reasonably calculated to lead to the discovery of admissible evidence. A plausible argument could me made that such information could lead to discovery of plaintiff’s prior health problems and other injuries. A narrowly drafted Interrogatory, which requests only information about prior injuries or relevant health problems, will usually survive an objection. Untested by court decision however, is an Interrogatory which requests Plaintiff’s health insurance information, to be followed by a subpoena duces tecum to the health insurer or employer for plaintiff’s file. A defendant could argue the Interrogatory is proper on the grounds the file might contain evidence of prior injuries or health problems relevant to a defense of the damages claim. While plausibly calculated to lead to the discovery of admissible evidence, such an Interrogatory may be objectionable as over- broad, and after consideration of the importance of the issues at stake, the burden on the plaintiff outweighs any benefit. Rule 4:1(b)(1)(a)(i-iii) and FRCP 26(b)(2)(i-iii). As a practice tip, it could be argued such sweeping discovery constitutes an invasion of plaintiff’s privacy. If a subpoena duces tecum is filed, the plaintiff may move for a protective order on the grounds justice requires protection from annoyance, embarrassment, oppression or undue burden. Rule 4:1(c) and FRCP 26(C).

Any objections to Interrogatories must be filed within 21 days after service of the interrogatories, unless the Interrogatories were filed with the motion for judgment or bill of complaint, in which case the objections shall be filed within 28 after service. Rule 4:9(d). The comparable federal rule requires objections to filed within 15 days after service of the discovery, unless the discovery was filed with the summons and complaint, in which case objections shall be filed within 30 days after service. See: FRCP 33(b)(3-4), modified by Local Rule of Practice for the Eastern District 26(C).