Collateral Source Rule Applies to Louisiana Workers’ Compensation Insurance Payments

Case: Royer v. State, Dep’t of Transp. & Dev.
Louisiana Third Circuit Court of Appeal
No. 16-534, 2017 La. LEXIS 53 (1/11/17)

In August 2006, Plaintiff, Thomas Royer was seriously injured when he hydroplaned on Louisiana Highway 1 in Natchitoches Parish, while in the course and scope of his employment. Plaintiff filed suit against the Louisiana Department of Transportation and Development (“DOTD”) in July 2007 alleging his damages were due to an unreasonably dangerous condition in the roadway. A year later, Stonehurst Commercial Insurance Company, the workers’ compensation insurer of Plaintiff’s employer filed a Petition of Intervention, asserting its right to reimbursement. However, in February 2013, the workers’ compensation insurer settled with Plaintiff and waived its lien for repayment of benefits. The trial court denied the DOTD Motion in Limine seeking credit for payments made by the workers’ compensation insurer, and the Third Circuit Court of Appeal later denied the DOTD’s application for supervisory writ on the collateral source issue. The case proceeded, and after a three-day jury trial beginning on October 12, 2015, a verdict was returned finding the DOTD 100% at fault in causing the accident and awarded damages.

On appeal, the Louisiana Third Circuit Court of Appeal affirmed the lower court opinion that the collateral source rule applied to the payments made by workers’ compensation carrier, even though Plaintiff paid no consideration, in the form of policy premium payments or otherwise, to receive the benefit gained. The DOTD argued that it should receive a credit for medical bills and disability wages paid by the workers’ compensation insurer on the ground that “principles of solidarity should apply to create a credit in favor of the State of Louisiana in the amount of payments made by the employer and/or it’s workers’ compensation” and that the collateral source rule should not be applied to bar the State from receiving a credit because the plaintiff would otherwise receive a windfall in the form of double recovery. The DOTD further argued the double recovery amounts to punitive or exemplary damages, and no policy goals are furthered by applying the rule because wrongful conduct is still deterred by the DOTD’s liability for past and future lost wages, future medical expenses, and general damages.

Generally speaking, the “collateral source” rule holds that a tortfeasor may not benefit, and an injured plaintiff’s tort recovery may not be diminished, because of benefits received by the plaintiff from sources independent of the tortfeasor’s procuration or contribution. However, courts have struggled with the situation when the victim receives compensation from an outside source because the goal of making the victim whole is thwarted when the victim recovers the same element of damages twice.

The court acknowledged this case involves a plaintiff who has not given consideration and a tortfeasor claiming a credit for a payment made by a collateral source, a workers’ compensation insurer. In its reasoning, the Third Circuit considered guidance from the Louisiana Supreme Court in Cutsinger v. Redfern, 08-2607 (La. 5/22/09), 12 So.3d 945, 954, which advised, “[w]hile it is important to consider whether plaintiff paid for the collateral source or suffered some diminution in her patrimony due to the availability of the benefit to determine whether a double recovery would result from application of the rule, this consideration alone is not the determinative factor in deciding whether the collateral source rule applies.” Rather, the Cutsinger Court reasoned that the collateral source rule exists to prevent the tortfeasor from benefiting from the victim’s receipt of monies from independent sources, and thus, the collateral source rule furthers the major policy of tort deterrence. Accordingly, the Third Circuit held that “if the primary goal of the collateral source rule is tort deterrence, the collateral source rule applies to a tortfeasor, even if consideration, in the form of policy payments, is non-existent, as will always be the case when a workers’ compensation carrier is the collateral source. Ultimately, the court found the overriding policy of tort deterrence outweighed the concern of the Plaintiff’s double recovery.