LEGAL TRENDS

Reduction of Medical Expense Damage Award

By Chris C. Miller

The San Antonio Court of Appeals reversed a trial court’s ruling and ordered reduction of a jury award for past medical expenses to the amount actually paid by the plaintiff’s insurance company, excluding any charges that had been “written off” by the provider, in Mills v. Fletcher, ___ S.W.3d____, 2007 WL 1423883 (Tex. App.--San Antonio, May 16, 2007). This is the first opinion from a Texas court of appeals interpreting Tex. Civ. Prac. & Rem. Code 41.0105, passed by the legislature as part of the larger tort reform legislation, House Bill 4, in 2003.

The case involved a personal injury claim by Kevin Fletcher against Alisa Mills, where the jury awarded Fletcher $1,551.00 in past medical expenses. On appeal, Mills argued that the figure should have been reduced by the trial court, because Fletcher’s medical providers had accepted lesser amounts for their services from Fletcher’s health insurer, thereby “writing off” the remaining balance due. As part of her bill of exceptions, Mills introduced two of Fletcher’s medical bills that reflected an amount paid by the insurer, an amount “written off” by the provider, and a resulting balance due of zero ($0.00).

The San Antonio Court of Appeals held that the amount of past medical expenses should have been reduced to the figure actually paid by Fletcher’s insurer, pursuant to the new requirements of CPRC §41.0105. The section, titled “Evidence Relating to Amount of Economic Damages,” was passed as part of the sweeping tort reform provisions enacted by the legislature as House Bill 4. It states that “recovery of medical or healthcare expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.”

The issue on appeal and resolved by the opinion, involved the definition of the word “incurred” (which appears twice in the statute). Specifically, the issue presented was whether medical expenses which are written off by a provider are ever “actually incurred” for purposes of the statute. Mills relied on common dictionary definitions of the word--which defined it as when a person makes himself liable to pay a debt. The language of the statute limits recovery of “incurred” expenses to those “actually incurred.” It was necessarily intended to limit recoverable expenses to some amount less than that which was charged. Mills, therefore, argued that because Fletcher was no longer liable for the amount “written off,” this lesser figure should be what is “actually incurred,” for purposes of limiting his recovery and not the $1,551.00 charged. The Court accepted this definition and this argument, and ordered the trial court to reduce the award accordingly.

In a footnote, the Court acknowledged that its ruling was in direct violation of the collateral source rule, since it necessarily required evidence of insurance and other forms of recovery that reduced a plaintiff’s expenses to the benefit of a defendant’s amount of liability. The Court explained only that the legislature had the power to abrogate this longstanding legal doctrine, and, by the plain language of the statute, had done just that. The Court dismissed outright the legislative history relating to House Bill 4, and the legislature’s deletion or revision of previous versions of Sec. 41.0501, because the legislature found them to violate the collateral source rule. Fletcher had argued this history was evidence of the legislature’s intent that the statute not violate the rule and should prevent the Court from holding otherwise. But the Court was adamant that the language in the section was clear and unambiguous; therefore, it was not required to even consider legislative history and intent.

Justice Stone, in a dissenting opinion, noted that the majority’s opinion flew in the face of longstanding precedent that medical expenses are “incurred” at the time services are rendered. Further, she noted that the opinion creates significant timing issues which are not addressed by the language of the statute. “At what point does the court decide the bills have been incurred?” What if the bills are not written off until after a verdict? What if they are never written off in a patient’s account as a zero balance, but the provider testifies that he does not anticipate pursuing payment? What if a dispute arises between the insurer and provider over coverage and bills that would normally be written off are not? What if services are provided and charged to an uninsured patient, so that they are never written off, but the provider is not considering the patient liable for those amounts? Are such expenses “actually incurred” under the majority’s view?

Such questions were dismissed by the majority in its discussion of the constitutionality of §41.0501. After previously acknowledging that its interpretation of the provision violated the collateral source rule, a rule grounded on the notion that a defendant should not be allowed to benefit from a reasonable plaintiff’s contracting for insurance coverage, the Court instead concluded that its interpretation of the statute furthered the legislature’s purpose “to develop a statutory scheme that would allow neither the injured plaintiff nor the responsible defendant to benefit from the medical provider’s write-off.” In sum, with regard to statutory interpretation, the Court acknowledged the statute did grant a benefit to a defendant from a plaintiff’s insurance coverage (in violation of the collateral source rule), but, with regard to constitutionality of that same statute, it did not.

U.S. Supreme Court Finishes Rerouting
Traffic on the CERCLA Highway

By Joy E. Palazzo

With its opinion in United States v. Atlantic Research Corp., U.S., No. 06-562, 6/11/07, the United States Supreme Court silenced the Circuits’ feud over whether, and how, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), commonly known as Superfund, allows private parties that voluntarily clean up contaminated properties to file cost recovery claims. With this decision, the court finished rerouting CERCLA cost recovery lawsuits away from Section 113 and toward Section 107.

Three years ago, the Supreme Court sent shockwaves through the world of environmental litigation with Cooper Industries Inc. v. Aviall Services Inc., 543 U.S. 157 (2004) (“Aviall”), in which it overturned 20 years of case law explaining how CERCLA worked in such cases. After the Aviall decision, companies warily ventured into remedial actions, unsure of what their rights were to recover costs because the court blocked the road that had been traveled for the past 20 years without providing for a detour route. Now, the Court’s ruling in Atlantic provides the new roadway parties are to follow when bringing CERCLA cost recovery action.

Center stage of this controversy stood Atlantic Research Corp. (“Atlantic”) which had removed rocket propellants at a Camden, Arkansas, government facility – a retrofitting process that contaminated soil and groundwater. Atlantic voluntarily cleaned up the site, and in 2002, it sought recovery of a segment of those costs from the federal government under CERCLA. At that time, courts agreed that parties such as Atlantic could only recover costs by invoking Section 113 of CERLCA. Just before a cost recovery agreement was to be signed between the parties, the Supreme Court released its decision in Aviall, holding that parties such as Aviall (and, by extension, Atlantic) did not have standing to invoke Section 113’s contribution claims because they themselves had not first been sued by another party for cost recovery, nor were they the target of a federal CERCLA enforcement action. Because Atlantic could no longer make a cost recovery claim under Section 113 and because 20 years of case law said that it could not make a similar claim under Section 107, the government reneged on its agreement to settle Atlantic’s claims. Not giving up, Atlantic continued its lawsuit, seeking recovery under CERCLA Section 107(a) because in Aviall, the court specifically reserved deciding whether private parties, such as Aviall and Atlantic, had a viable 107(a) claim.

The viability of Atlantic’s CERCLA cost recovery claim pivoted on the interpretation of Section 107(a)(4)(b) that states that potentially responsible parties are liable for all government-incurred costs and “other necessary response costs incurred by any other person[.]” But just who was “any other person”? Atlantic argued that they were “any other person.” The government, citing old case law, argued that “any other person” now refers solely to innocent landowners. Rejecting the government interpretation, the Supreme Court adopted a plain and natural reading of 107(a) ruling that the phrase “any other person” means just what it says, and does not exclude potentially responsible parties such as Atlantic.

This unanimous opinion demonstrates once again the Supreme Court’s tendency to concentrate on the “plain language” of a statute. Under CERCLA Section 107, the term “any other person” means exactly that—“any other person” can sue under CERCLA to recover costs incurred in cleaning up contaminated properties. There is no requirement that parties be sued by anyone else before seeking such relief.

The Courts rulings in Atlantic and Aviall clarify that the rights and remedies under CERLCA 113 and 107(a) create two separate causes of action for parties in distinctive procedural postures. While Section 113 provides a contribution claim to secure an equitable apportionment among jointly liable parties for costs incurred, it is only available once a party has first been sued or the subject of an enforcement action. Conversely, Section 107(a) provides a claim for parties who incurred cleanup costs themselves, not for expenses others incurred.  

Joy E. Palazzo practices as an environmental trial lawyer at Gardere Wynne Sewell LLP in Houston.

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