Collateral Source Setoffs

collateral source picThis past week, I presented a webinar on collateral source setoffs.  The law in this area is a hopelessly confusing collection of statutes and case law that lacks consistency in theory and in application.  Because setoffs can have an immense impact on a plaintiff’s recovery, it’s critical to know what law applies.

Here are some of the  highlights of the presentation:

  • In Florida, the collateral source rule is a rule of evidence and a rule of damages.  While the common law rule of evidence remains largely intact (and generally prohibits the admission of evidence of collateral sources), the rule on damages has been abrogated by section 768.76, Florida Statutes (2017).
  • Other statutes related to setoffs include section 627.736, Florida Statutes (2017) (regarding personal injury protection (PIP) benefits) and section 627.727, Florida Statutes (2017) (regarding uninsured motorists (UM) coverage).  There is also a separate rule that applies in statutory arbitration for medical malpractice.
  • Until recently, the case law held that to receive the benefit of an offset, the defendant had to prove that the jury’s verdict duplicated the collateral source benefits the plaintiff received, and the extent of the duplication.  But the Fifth District has recently held that once the defendant establishes the plaintiff received collateral source benefits, it is entitled to an offset in the full amount–appearing to shift the burden to the plaintiff to disprove duplication.  See Woudhuizen v. Smith, No. 5D17-575, 2018 WL 665139 *2 (Fla. 5th DCA Feb. 2, 2018).
  • Under section 627.736, PIP is treated differently than other collateral sources.  The statute says the amount paid by PIP cannot be claimed as damages at trial.  Absent agreement, it is not an offset after trial.  PIP is subtracted from the economic damages before compartive fault is taken into account.
  • Medicare and Medicaid are not considered collateral sources under section 768.76.  But there is a developing dispute over whether the plaintiff’s damages are limited to the amount healthcare providers accepts as full payment under these government programs.
  • Health insurance payments are typical subject to a contractual or equitable right of subrogation and so are not considered collateral sources under section 768.76.  But under Goble v. Frohman, 901 So. 2d 830, 832-33 (Fla. 2005), the amount a healthcare provider reduces its bill based on health insurance contracts or for other reasons is subject to setoff.
  • Social Security Disability is a collateral source setoff.
  • Prior settlements must be setoff if (a) the defendant is vicariously liable for the damages caused by the settling party; or (b) the jury’s verdict covers the same damages the settlement was intended to pay.
  • In UM cases, the UM insurer is typically entitled to setoff the amount paid for PIP and any settlement with the tortfeasor (again, if there is a duplication).

Collateral source setoffs should be considered as part of the overall strategy for trial.  If you are an attorney faced with a difficult collateral source offset issue, please feel free to reach out to me.

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