The Collateral Source Rule – Who Benefits?

The collateral source rule prevents an injured person’s damages from being reduced by payments made by their own medical insurance or worker’s compensation. Steamship Mutual has published an article by Francisco Carvalho, Syndicate Executive, Americas Syndicate analyzing the ramifications of an important rule for marine insurers.

In DePerrodil v Bozovic Marine Inc in November 2016 the US Court of Appeal for the Fifth Circuit clarified the effect of the collateral source rule on the recovery of medical costs. The question considered was whether a plaintiff was allowed to recover the unpaid, written-off portion of his billed medical expenses, or only those expenses actually paid by his employer under the Longshore and Harbour Workers’ Compensation Act (LHWCA). The conclusion was that a plaintiff is limited to recovery of those medical costs actually paid.

The collateral source rule prevents an injured person’s damages from being reduced by payments made by their own medical insurance or worker’s compensation.

Robert dePerrodil, a 70-year-old oilfield consultant who worked for Petroleum Engineers Inc (PEI), was transported on a crew boat owned and operated by Bozovic Marine Inc from Venice, Louisiana, to his work site on an offshore platform. Upon arrival at the platform site, dePerrodil realised that he would not be able to board the platform because no lift boat was present and so he asked to return to port. While returning to port the vessel encountered rough seas, causing dePerrodil to fall to the floor and suffer injuries to his back.

PEI carried workers’ compensation insurance for dePerrodil pursuant to the LHWCA and his medical providers billed the insurer $186,080, of which $128,695 was written off as part of the insurer’s negotiated rates. Ultimately the insurer paid $57,385 in medical expenses.

Subsequently dePerrodil commenced a claim in the US District Court for the Western District of Louisiana against Bozovic Marine Inc for compensation in connection with the injuries sustained aboard the defendant’s vessel.

Following a bench trial on the merits, the court concluded that Bozovic Marine had acted negligently and accepted the claim. In awarding dePerrodil US $984,396 the court held the collateral-source rule allowed recovery for the full amount billed for medical expenses and not the lesser amount actually paid. Accordingly, the court awarded the plaintiff the full $186,080 of medical expenses billed for his treatment. Bozovic Marine appealed, and the appeal court found that Bozovic was a third-party tortfeasor that played no role in securing the insurance coverage and that therefore the collateral-source rule applied.

On the question whether the collateral source rule allowed the plaintiff to recover the amount billed, or only the amount paid, the court recognized that there was no direct authority regarding the treatment of written-off or discounted LHWCA medical expenses in the maritime-tort context.

Looking for authority it took the case of Manderson v Chet Morrison Contractors in 2012, which prohibited write-off recovery, as equally applicable to LHWCA maritime-tort cases.

Mr Carvalho noted that the dePerrodil decision provided a clarification of the law that was welcomed by maritime defendants. “The effect of the collateral-source rule has been limited to the extent that a plaintiff is only allowed to recover the actual amount of medical expenses paid by his employer (or its insurer) in an LHWCA claim and not the higher amount originally billed”, Mr Carvalho concluded.