One of the purposes of tort law is to “make injured parties whole.” This is typically accomplished when a person whose negligent conduct caused injury to another party compensates the injured party for his injury.  Understanding the Indiana Courts’ treatment of the method by which parties may introduce evidence of damages is necessary to adequately assess the value of a personal injury claim.  The process by which defendants may introduce evidence for purposes of calculating the reasonable value of a plaintiff’s medical treatment was recently clarified by the Indiana Supreme Court in Patchett v. Lee, 60 N.E.3d 1025 (Ind. 2016).

The factual circumstances in Patchett are relatively common: a motor vehicle collision gave rise to a personal injury claim wherein the parties agreed that the defendant’s negligent operation of a motor vehicle caused plaintiff to suffer injuries, but the parties disagreed as to the reasonable value of those injuries.  The parties were unable to resolve the dispute informally and proceeded with litigation so that a neutral third party – a jury – could examine the evidence and determine the value of plaintiff’s claim.

Prior to trial, the parties agreed that plaintiff was permitted, pursuant to Indiana Rule of Evidence 413, to introduce her related medical bills as prima facie evidence of the reasonable value of her medical expenses.  Accordingly, the plaintiff introduced her medical bills, totaling $87,706.36, as evidence of the value of her treatment.  However, an issue arose when the defendant sought to introduce evidence demonstrating that plaintiff’s medical providers accepted $12,051.48 as payment in full. Whether the accepted amount could be introduced as evidence was imperative for the defendant given the potential impact the $75,654.88 discount could have on the jury’s damages assessment.  

Understanding the bases of the parties’ arguments requires an understanding of Indiana’s collateral-source statute, Ind. Code § 34-44-1-et seq. (2010), and the Indiana Supreme Court’s opinion in Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009).  Indiana’s collateral-source statute bars, subject to specific exceptions, the introduction of evidence showing that a plaintiff received compensation from non-party “collateral” sources.  In Stanley, the Indiana Supreme Court held that the collateral-source statute did not bar the introduction of reduced amounts paid by a private insurer as evidence of the value of plaintiff’s medical treatment, so long as the introducing party did not reference the source of the payment. 

The Patchett plaintiff claimed that the reasoning of Stanley did not apply because the prices paid by government programs were not bargained for in arms-length transactions, unlike the prices for private insurers.  Thus, plaintiff claimed the collateral-source statute barred introduction of the reduced payments as evidence of the reasonable value of plaintiff’s medical treatment. The trial court agreed with plaintiff, prohibiting the introduction of the reduced payments into evidence.  In November 2015, the Court of Appeals affirmed the trial court’s decision, inciting questions as to the broader implications of this decision and the disparate treatment of claims brought by privately-insured versus government-program plaintiffs.

In October of this year, the Indiana Supreme Court reversed the Court of Appeals and held that Stanley applies uniformly to reduced payments made by private insurance companies and government payers. The Court explained that the proper focus of the inquiry was the medical provider’s acceptance of the reduced amount for payment rather than the source of the payment.   The Court believes this was the “fairest approach” and touted its trust in the jury’s ability to fully consider all aspects of a claim before assigning it a reasonable value. 

The Patchett decision created a clear, uniform approach to the damages evidentiary process, but the concurring opinion left the door open for future challenges.  Of the five Indiana Supreme Court Justices, two concurred with the majority’s conclusion that the Stanley reasoning allowed introduction of payments made by government payers as well as private insurers, but also noted their belief that the Stanley decision was wrongfully decided.  The concurring justices expressed willingness, if asked directly, to reconsider and overturn Stanley, after which the collateral source doctrine would bar the introduction of any evidence whatsoever of payments by any non-party, including both private insurers and government health programs.  While a two-justice concurrence is not a majority, it will be important to stay tuned for future legislative and judicial developments, as plaintiffs may see this as an invitation to challenge the existing analysis.  

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Posted on Dec. 19, 2016, by Katie R. Osborne