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Dedmon v. Steelman

Supreme Court of Tennessee, Jackson

November 17, 2017

JEAN DEDMON
v.
DEBBIE STEELMAN ET AL.

          Session April 5, 2017

         Appeal by Permission from the Court of Appeals Circuit Court for Crockett County No. 3228 Clayburn Peeples, Judge

         We granted this appeal to address whether our holding in West v. Shelby County Healthcare Corp., 459 S.W.3d 33 (Tenn. 2014), applies in personal injury cases. We hold that it does not. West held that "reasonable charges" for medical services under Tennessee's Hospital Lien Act, Tennessee Code Annotated sections 29-22-101 to -107 (2012), are the discounted amounts a hospital accepts as full payment from patients' private insurers, not the full, undiscounted amounts billed to patients. West, 459 S.W.3d at 46. West defined "reasonable charges" in the context of interpreting the Hospital Lien Act, and its holding is limited to that Act. As an alternative argument, we are asked in this appeal to consider applying the principles in West to the determination of reasonable medical expenses in personal injury cases. Doing so involves the collateral source rule, which excludes evidence of benefits to the plaintiff from sources collateral to the tortfeasor and precludes the reduction of the plaintiff's damage award by such collateral payments. The rule is based on the principles that tortfeasors should be responsible for all of the harm they cause and that payments from collateral sources intended to benefit an injured party should not be used to reduce the liability of the party who inflicted the injury. After a thorough review of court decisions in Tennessee and across the country on the collateral source rule, we decline to alter existing law in Tennessee. We hold that the collateral source rule applies in this personal injury case, in which the collateral benefit at issue is private insurance. Consequently, the plaintiffs may submit evidence of the injured party's full, undiscounted medical bills as proof of reasonable medical expenses. Furthermore, the defendants are precluded from submitting evidence of discounted rates accepted by medical providers from the insurer to rebut the plaintiffs' proof that the full, undiscounted charges are reasonable. The defendants remain free to submit any other competent evidence to rebut the plaintiffs' proof on the reasonableness of the medical expenses, so long as that evidence does not contravene the collateral source rule. The decision of the Court of Appeals is affirmed in part and reversed in part, and the case is remanded to the trial court for further proceedings.

         Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed in Part and Reversed in Part; Case Remanded to the Trial Court

          Melanie M. Stewart, Memphis, Tennessee, for the appellants, Debbie Steelman, and Danny T. Cates, Sr., as co-personal representatives of the Estate of John T. Cook, deceased.

          Glenn K. Vines, Mark N. Geller, Kevin N. Graham, and Jason J. Yasinsky, Memphis, Tennessee, for the appellee, Jean Dedmon.

          Bradford D. Box and Adam P. Nelson, Jackson, Tennessee, for the Amicus Curiae, the Tennessee Defense Lawyers Association.

          W. Bryan Smith, Memphis, Tennessee; John Vail, Washington, D.C.; and Brian G. Brooks, Greenbrier, Arkansas, for the Amicus Curiae, Tennessee Trial Lawyers Association.

          Holly Kirby, J., delivered the opinion of the Court, in which Jeffrey S. Bivins, C.J., and Cornelia A. Clark, Sharon G. Lee, and Roger A. Page, JJ., joined.

          OPINION

          HOLLY KIRBY, JUSTICE.

         Factualand Procedural Background

         The relevant facts in this appeal are undisputed. In February 2010, Plaintiff/Appellee Jean Dedmon was involved in an automobile accident with John T. Cook. Mrs. Dedmon was seriously injured in the accident. Mrs. Dedmon and her husband, Fred Dedmon (collectively, "Plaintiffs"), filed this lawsuit against Mr. Cook, alleging that his negligence caused Mrs. Dedmon to suffer severe and permanent injuries and to incur past and future medical expenses. The complaint itemized Mrs. Dedmon's medical bills from sixteen different medical providers, which totaled $52, 482.87. The bills were attached to the complaint.

         After the complaint was filed, Mr. Cook died. In September 2013, the Plaintiffs filed an amended complaint substituting Mr. Cook's personal representatives, Debbie Steelman and Danny T. Cates (collectively, "Defendants"), for Mr. Cook.[1]

         Meanwhile, in March 2013, the Plaintiffs deposed one of Mrs. Dedmon's treating physicians, neurosurgeon Vaughn Allen, M.D. Dr. Allen treated Mrs. Dedmon between April 2010 and September 2012, and in September 2010, he performed neck surgery on her.[2] In his deposition, Dr. Allen testified that all of Mrs. Dedmon's medical bills, including those from his own clinic and those from Mrs. Dedmon's other medical providers (hospitals, physical therapists, radiologists, etc.), were reasonable and necessary to a reasonable degree of medical certainty. Dr. Allen's deposition was filed in the trial court, and the medical bills were attached as exhibits.[3]

         On December 19, 2014, this Court issued its decision in West v. Shelby County Healthcare Corp., 459 S.W.3d 33 (Tenn. 2014). West interpreted Tennessee's Hospital Lien Act (HLA), Tennessee Code Annotated sections 29-22-101 to -107 (2012). We will discuss West in more detail below, but suffice it to say at this juncture that West held that a hospital's "reasonable charges" under Section 29-22-101(a) are the amount the hospital accepts from the patient's private insurer, not the amount in the medical bills sent to the patient. West, 459 S.W.3d at 46. In the course of its analysis, the West Court commented that the amount of the full, undiscounted charges billed to the patient is "unreasonable" as compared to the amount of the discounted bills paid by the insurer. Id. at 44. The undiscounted bills sent to the patient, the West opinion stated, do "not 'reflect what is [actually] being paid in the market place.' Because 'virtually no public or private insurer actually pays the full charges[, ] . . . [a] more realistic standard is what insurers actually pay and what hospitals [are] willing to accept.'" Id. at 45 (quoting What's the Cost?: Proposals to Provide Consumers with Better Information about Healthcare Service Costs: Hearing Before the Subcomm. on Health of the House Comm. on Energy and Commerce, 109th Cong. 99 (2006) (statement of Dr. Gerard Anderson, Professor, Bloomberg School of Public Health & School of Medicine at Johns Hopkins University; Director, Johns Hopkins Center for Hospital Finance and Management)).

         Prompted by the holding in West, the Defendants in the instant case filed a "Motion in Limine to Exclude Evidence of Unreasonable Medical Charges."[4] Citing West, they argued that evidence of Mrs. Dedmon's full, undiscounted medical bills must be excluded because the amounts of those bills are, as a matter of law, unreasonable. The Defendants asserted that West's pronouncements on hospital bills "set[ ] forth a new standard in Tennessee, as a matter of law." According to the Defendants' calculations, Mrs. Dedmon's health insurer paid only $18, 255.42 to satisfy Mrs. Dedmon's medical bills. As a result, they argued, the full charges reflected in Mrs. Dedmon's medical bills are irrelevant and should be excluded on that basis.

         The Defendants also took the position in their motion that "[t]he collateral source rule does not apply to [the] issue" of whether the discounted amounts paid by Mrs. Dedmon's insurance company are admissible. They insisted that "evidence of payment of the medical expenses by medical insurance will not be used to show that the medical expenses have been paid in an attempt to mitigate the damages. Rather, the evidence would be used to show whether the charges are reasonable, as defined by the Supreme Court." We interpret the Defendants' position in the motion in limine as arguing that the amount paid by Mrs. Dedmon's insurance company should be submitted into evidence instead of the undiscounted medical bills sent to the patient. Under the Defendants' reasoning, there is purportedly no need to mention the fact that the discounted amounts resulted from Mrs. Dedmon's insurance contract, so the collateral source rule would not be violated.

         In addition to the motion in limine, the Defendants filed a "Notice of Intent to Rebut Presumption Pursuant to T.C.A. § 24-5-113." See Tenn. Code Ann. § 24-5-113(b)(2). The notice, like the motion in limine, was based solely on the Defendants' interpretation of West. The Defendants argued that, if the full, undiscounted medical bills are admitted into evidence, then the discounted amounts accepted by the medical provider should be admissible to rebut the Plaintiffs' expert testimony that the undiscounted charges are reasonable. They argued that, in comparing the two bills, the full, undiscounted medical bills are unreasonable "under the West standard."

         In March 2015, the trial court conducted a hearing on the Defendants' motion in limine. The trial court agreed with the Defendants that, based on West, Mrs. Dedmon's full, undiscounted medical bills are irrelevant to the question of her reasonable medical expenses and that the discounted amounts paid by Mrs. Dedmon's insurer constituted her reasonable medical expenses as a matter of law. Accordingly, it granted the motion in limine and excluded evidence of Mrs. Dedmon's full, undiscounted medical bills. The trial court commented that it interpreted West as having advanced a policy of not allowing "the subterfuge that the medical community uses with regard to insurance and expenses to sully the court system." The trial court added that it could not "imagine that [this Court] would use any other logic in this situation than they used in [the hospital lien statute] situation."

         Mrs. Dedmon sought permission for an interlocutory appeal from the trial court's order. Permission was granted by both the trial court and the Court of Appeals. See Tenn. R. App. P. 9.

         The Court of Appeals reversed. See Dedmon v. Steelman, No. W2015-01462-COA-R9-CV, 2016 WL 3219070, at *11 (Tenn. Ct. App. June 2, 2016), perm. app. granted (Tenn. Oct. 21, 2016). Citing limiting language in West, the appellate court concluded that West did not apply to personal injury cases. Id. at *9. The language in West cited by the Court of Appeals included a comment that West was intended to define "reasonable charges for the purpose of Tenn. Code Ann. § 29-22-101(a), " id. (citing West, 459 S.W.3d at 44), and a footnote stating that the West holding was limited to private insurance cases, id. (citing West, 459 S.W.3d at 39 n.2). The intermediate appellate court reasoned: "If the [West] [C]ourt did not intend for its opinion to apply to hospital liens in all circumstances, surely the court did not intend for its opinion to be binding as to all determinations of reasonable medical expenses under Tennessee law." Id. Thus, the Court of Appeals rejected the Defendants' argument that West required the exclusion of Mrs. Dedmon's full, undiscounted medical bills and reversed the trial court's grant of the Defendants' motion in limine. Id. at *10.

         The Court of Appeals then went further. It addressed the evidence that would be permissible on remand to rebut the Plaintiffs' expert testimony that the undiscounted medical bills represented Mrs. Dedmon's reasonable medical expenses. It held that evidence of discounted amounts accepted by Mrs. Dedmon's medical providers may be admissible to rebut the Plaintiffs' expert testimony on the reasonableness of the amount of the full, undiscounted bills. The appellate court acknowledged the collateral source rule, which generally provides that collateral-source benefits such as insurance must not be used to "diminish the damages otherwise recoverable from the defendant." Id. at *10 n.8 (quoting Nance ex rel. Nance v. Westside Hosp., 750 S.W.2d 740, 742 (Tenn. 1988)). It then commented, however, that "existing law in this state also makes clear that Defendants are permitted to offer proof contradicting the reasonableness of the medical expenses, " id. at 11, citing cases from other jurisdictions holding that discounted amounts accepted by medical providers are admissible to rebut the Plaintiffs' proof of the reasonableness of the full, undiscounted medical bills, so long as insurance is not mentioned. Id. (quoting Martinez v. Milburn Enters., Inc., 233 P.3d 205, 222-23 (Kan. 2010)) (citing Stanley v. Walker, 906 N.E.2d 852, 858 (Ind. 2009) (holding that the collateral source rule does not bar evidence of discounted amounts so long as that evidence is "introduced . . . without referencing insurance"). In a separate concurrence, Judge Joe G. Riley took the position that the majority's apparent approval of the "hybrid" method-allowing evidence of both the full, undiscounted medical bills and also the discounted amounts accepted by medical providers-"is dictated by existing case law" in Tennessee.[5] Id. (Riley, J., concurring).

         In sum, the Court of Appeals reversed the trial court's grant of the Defendants' motion in limine and held that Mrs. Dedmon's full, undiscounted medical bills were admissible to prove her reasonable medical expenses resulting from the accident. It also indicated that evidence of the discounted amounts accepted by Mrs. Dedmon's medical providers is admissible to rebut the Plaintiffs' proof that the undiscounted medical bills are reasonable, so long as insurance is not mentioned. Id. The Court of Appeals concluded by asking this Court to accept review in this case to address these important issues. Id. We granted the Defendants' application for permission to appeal.

         Issues on Appeal and Standard of Review

         On appeal to this Court, the Defendants make the same argument they made in the lower courts, namely, that the holding in West applies in this case to exclude Mrs. Dedmon's full, undiscounted medical bills from the evidence regarding her reasonable medical expenses. If West does not apply directly, the Defendants argue, the West principles should nevertheless apply in personal injury cases to limit a plaintiff's recovery of "reasonable medical expenses" to the discounted amounts accepted by medical providers.

         All of the issues raised by the Defendants are questions of law, which we review de novo, affording no deference to the decisions of the lower courts. Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836 (Tenn. 2008).

         Analysis

         To address the issues raised in this appeal, we first review Tennessee law on damages in personal injury cases and the current status of the collateral source rule in Tennessee. We next review our holding in West and address whether the definition of "reasonable charges" under the HLA should be applied to the issue of the "reasonable medical expenses" recoverable in personal injury cases. If the rule in West is not directly applicable, we will consider whether any of the principles in West should be applied in personal injury cases to exclude evidence of Mrs. Dedmon's undiscounted medical bills. If not, we will address the Court of Appeals' language indicating that defendants may submit evidence of discounted amounts accepted by medical providers in order to rebut evidence that the undiscounted medical bills constitute reasonable medical expenses.

         A. Existing Tennessee Law

         1. Damages

         "A person who is injured by another's negligence may recover damages from the other person for all past, present, and prospective harm." Rye v. Women's Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 267 (Tenn. 2015) (quoting Singh v. Larry Fowler Trucking, Inc., 390 S.W.3d 280, 287-88 (Tenn. Ct. App. 2012)). "An award of damages, which is intended to make a plaintiff whole, compensates the plaintiff for damage or injury caused by a defendant's wrongful conduct." Meals ex rel. Meals v. Ford Motor Co., 417 S.W.3d 414, 419 (Tenn. 2013) (citing Inland Container Corp. v. March, 529 S.W.2d 43, 44 (Tenn. 1975)). "The party seeking damages has the burden of proving them." Overstreet v. Shoney's, Inc., 4 S.W.3d 694, 703 (Tenn. Ct. App. 1999).

         A plaintiff who is injured by another's negligence is entitled to recover two types of damages: economic (or pecuniary) damages and non-economic (or personal) damages. Meals, 417 S.W.3d at 419-20. Economic damages include past medical expenses, future medical expenses, lost wages, and lost earning potential.[6] Id. at 419. A plaintiff may seek recovery for all "economic losses that naturally result from the defendant's wrongful conduct." Id.

         "Non-economic damages include pain and suffering, permanent impairment and/or disfigurement, and loss of enjoyment of life." Id. at 420 (quoting Elliot v. Cobb, 320 S.W.3d 246, 247 (Tenn. 2010)). Non-economic damages are often highly subjective and are not susceptible to proof by a specific dollar amount. While there must be some evidence to justify the amount awarded, plaintiffs are not required to prove the monetary value of non-economic damages because such injuries are not easily quantified in economic terms. For this reason, the trier of fact is given broad latitude in fixing the monetary amount of non-economic damages. Id.; Coakley v. Daniels, 840 S.W.2d 367, 372 (Tenn. Ct. App. 1992) (emphasizing that damages for personal injuries are not based on fixed rules of law and are generally left to the trier of fact). In practice, "the traditional lawyer's rule-of-thumb" is often to value the non-economic damages based on a multiple of the amount of the plaintiff's economic damages. See Meals ex rel Meals v. Ford Motor Co., No. W2010-01493-COA-R3-CV, 2012 WL 1264454, at *27 (Tenn. Ct. App. Apr. 13, 2012) (Kirby, J., dissenting), rev'd on other grounds, 417 S.W.3d 414 (Tenn. 2013).

         In this case, the economic damages at issue are past medical expenses. For this type of award, a plaintiff must prove that the medical bills paid or accrued because of the defendant's negligence were both "necessary and reasonable." Borner v. Autry, 284 S.W.3d 216, 218 (Tenn. 2009) (citing 22 Am. Jur. 2d Damages § 166 (2003 & Westlaw 2008); 25 C.J.S. Damages § 259 (2002 & Westlaw 2008)); see West, 459 S.W.3d at 44 ("[R]ecoveries for medical expenses in personal injury cases are limited to those expenses that are 'reasonable and necessary.'"). "In all but the most obvious and routine cases, plaintiffs must present competent expert testimony to meet this burden of proof." Borner, 284 S.W.3d at 218. "A physician who is familiar with the extent and nature of the medical treatment a party has received may give an opinion concerning the necessity of another physician's services and the reasonableness of the charges." Long v. Mattingly, 797 S.W.2d 889, 893 (Tenn. Ct. App. 1990) (citing Emp'rs Ins. of Wausau v. Carter, 522 S.W.2d 175, 176 (Tenn. 1975)). "To be qualified to render these opinions, the physician must first demonstrate (1) knowledge of the party's condition, (2) knowledge of the treatment the party received, (3) knowledge of the customary treatment options for the condition in the medical community where the treatment was rendered, and (4) knowledge of the customary charges for the treatment." Id.

         Our Court of Appeals has explained that, in Tennessee, the focus is on "the 'reasonable' value of 'necessary' services rendered." Fye v. Kennedy, 991 S.W.2d 754, 764 (Tenn. Ct. App. 1998) (emphasis in original). In other words, even if it is undisputed that the medical services were necessary, the plaintiff must prove "that the charges in question were 'reasonable.'" Id. To rebut the plaintiff's proof on medical expenses, the "defendant is permitted to introduce relevant evidence regarding necessity, reasonableness, and whether a claimed service was actually rendered." Id.

         For small claims, Tennessee Code Annotated section 24-5-113(a) provides for a rebuttable presumption that medical bills of $4, 000 or less that are itemized and attached to the complaint create a prima facie presumption that the bills are both necessary and reasonable:

(a)(1) Proof in any civil action that medical, hospital[, ] or doctor bills were paid or incurred because of any illness, disease, or injury may be itemized in the complaint or civil warrant with a copy of bills paid or incurred attached as an exhibit to the complaint or civil warrant. The bills itemized and attached as an exhibit shall be prima facie evidence that the bills so paid or incurred were necessary and reasonable.
(2) This section shall apply only in personal injury actions brought in any court by injured parties against the persons responsible for causing such injuries.
(3) This prima facie presumption shall apply to the medical, hospital[, ] and doctor bills itemized with copies of bills attached to the complaint or civil warrant; provided, that the total amount of such bills does not exceed the sum of four thousand dollars ($4, 000).

         Tenn. Code Ann. § 24-5-113(a). The subsection (a) small-claims presumption "assists claimants for whom the expense of deposing an expert may exceed the value of the medical services for which recovery is sought." Borner, 284 S.W.3d at 218. This presumption may be rebutted "by proof contradicting either the necessity or reasonableness of the medical expenses." Id.

         Subsection (b) of the same statute sets forth another procedure to create a rebuttable presumption of the reasonableness (but not the necessity) of the plaintiff's medical bills:

(b)(1) In addition to the procedure described in subsection (a), in any civil action for personal injury brought by an injured party against the person or persons alleged to be responsible for causing the injury, if an itemization of or copies of the medical, hospital[, ] or doctor bills which were paid or incurred because of such personal injury are served upon the other parties at least ninety (90) days prior to the date set for trial, there shall be a rebuttable presumption that such medical, hospital[, ] or doctor bills are reasonable.
(2) Any party desiring to offer evidence at trial to rebut the presumption shall serve upon the other parties, at least forty-five (45) days prior to the date set for trial, a statement of that party's intention to rebut the presumption. Such statement shall specify which bill or bills the party believes to be unreasonable.

         Tenn. Code Ann. § 24-5-113(b). The presumption of reasonableness in subsection (b) can apply to medical expense claims of any size. See Boettcher v. Shelter Mut. Ins. Co., No. 2:14-cv-02796-JPM-dkv, 2016 WL 3212184, at *2 (W.D. Tenn. 2016) (citing Hogan v. Reese, No. 01-A-01-9801-CV-00023, 1998 WL 430627, at *7 (Tenn. Ct. App. July 21, 1998) (noting that subsection (b), added in 1989, "is not limited as to the amount of such medical bills")).

         As is apparent from the statutory language, the presumption statute establishes two different presumptions. Compliance with subsection (a) of Section 24-5-113 creates a presumption of both necessity and reasonableness. In contrast, compliance with subsection (b) of Section 24-5-113 creates a presumption only that the medical bills are reasonable. Id. at *2 n.2 (citing Laird v. Doyle, No. 02A01-9707-CV-00153, 1998 WL 74258, at *2-3 (Tenn. Ct. App. Feb. 24, 1998)). At trial, defendants may present evidence to rebut the presumption of reasonableness in subsection (b)(1) by following the procedures set out in subsection (b)(2). Id. (citing Tenn. Code Ann. § 24-5-113(b)(2)).

         Regardless of any presumption of necessity and/or reasonableness of medical expenses under subsections (a) or (b) of Section 24-5-113, plaintiffs must always establish causation, i.e., "that the injuries or condition for which the medical treatment was sought was caused by the conduct of the defendant." Iloube v. Cain, 397 S.W.3d 597, 603 (Tenn. Ct. App. 2012).

         2. Collateral Source Rule

         The collateral source rule originated from the common law in England as early as 1823. See Dag E. Ytreberg, Annotation, Collateral Source Rule: Injured Person's Hospitalization or Medical Insurance as Affecting Damages Recoverable, 77 A.L.R.3d 415, § 2[a] (1977). It was adopted in the United States in 1854 by the United States Supreme Court in The Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152 (1854). Id.; see also Mitchell v. Haldar, 883 A.2d 32, 37 & n.4; Baptist Healthcare Sys., Inc. v. Miller, 177 S.W.3d 676, 687 (Ky. 2005); Bozeman v. State, 879 So.2d 692, 700 (La. 2004); Perreira v. Rediger, 778 A.2d 429, 433 (N.J. 2001); Kenney v. Liston, 760 S.E.2d 434, 440 & n.9 ( W.Va. 2014). Mollison involved a collision between a steamship (The Propeller Monticello) and a schooner (the Northwestern) carrying a cargo of salt. The collision caused the schooner to sink. Mollison, 58 U.S. at 153. The schooner's owner, Mollison, recovered for the loss under his insurance policy. When Mollison sued the owner of the steamship for damages, the steamship owner denied liability based on Mollison's recovery under his insurance policy. Id. at 155. The United States Supreme Court rejected that argument, holding that the steamship owner could not benefit from Mollison's receipt of proceeds from his insurance policy. It explained that Mollison's insurance contract was "in the nature of a wager between third parties, with which the [steamship owner] has no concern. The insurer does not stand in the relation of a joint [tortfeasor], so that satisfaction accepted from [it] shall be a release of others." Id. The Court noted that its holding relied upon a doctrine that was "well established at common law and received in courts of admiralty." Id. The Court emphasized that the tortfeasor "is bound to make satisfaction for the injury he has done." Id.

         By 1876, it was "well settled that the reception of the amount of the loss from the insurers is no bar to an action subsequently commenced against the wrong-doer to recover compensation for [an] injury occasioned by [a] collision." The Atlas, 93 U.S. 302, 310 (1876). Atlas recognized that "[n]one can recover twice for the same injury." Id. Nevertheless, the United States Supreme Court reasoned: "Compensation by the wrong-doer after payment by the insurers is not double compensation, for the plain reason that insurance is an indemnity; and it is clear that the wrong-doers are first liable, and that the insurers, if they pay first, are entitled to be subrogated to the rights of the insured against the insurers." Id. at 310-11; see id. at 310 (indicating the rule is based on the principle "that a wrong-doer in such a case cannot claim the benefit of the contract of insurance if effected by the person whose property he has injured").

         The term "collateral source" derived from language used in a Vermont decision, Harding v. Town of Townshend, 43 Vt. 536 (1871). See Charles R. Mendez, The Impact of the Affordable Care Act on the Colorado Collateral Source Rule, 94 Denv. L. Rev. Online 1, 2 n.7 (2017); see also Miller, 177 S.W.3d at 687; Kenney, 760 S.E.2d at 440 n.9. The Vermont Supreme Court in Harding described the rule in terms similar to those used by the United States Supreme Court in Mollison, but the Vermont Court characterized insurance proceeds received by the plaintiff as "collateral" to any recovery from the wrongdoer:

The policy of insurance is collateral to the remedy against the defendant[] and was procured solely by the plaintiff and at his expense, and to the procurement of which the defendant was in no way contributory. It is in the nature of a wager between the plaintiff and the third person, the insurer, to which the defendant was in no measure privy, either by relation to the parties, or by contract, or otherwise. It cannot be said that the plaintiff took out the policy in the interest or behalf of the defendant, nor is there any legal principle which seems to require that it be ultimately appropriated to the defendant's use and benefit.

Harding, 43 Vt. at 538. After Harding, the principle eventually came to be known as the "collateral source rule."

         Similar to the United States Supreme Court's rationale in Mollison, the Vermont Supreme Court in Harding rejected the defendant's argument that the collateral source rule would permit double recovery for plaintiffs, reasoning that the insurer would likely have subrogation rights. It explained that any recovery against the tortfeasor for amounts paid by insurance would "create[] an equity between the plaintiff and the insurer, to be ultimately adjusted between them, in which the defendant has no interest, and with which he has no concern." Id. at 539. Thus, the rationale for the rule was that insurance proceeds emanate from an agreement between the plaintiff and the insurer, wholly "collateral" to the defendant, so the defendant should not benefit from the plaintiff's receipt of proceeds "with which he has no concern." Id.

         Over time, all fifty states, except perhaps Alabama, adopted some form of the collateral source rule. James L. Branton, The Collateral Source Rule, 18 St. Mary's L.J. 883, 883-84 (1987) (noting that, until legislative "abolitions of the [collateral source] rule, it was a part of the jurisprudence in every state"); Kevin S. Marshall, The Collateral Source Rule and its Abolition: An Economic Perspective, 15-FALL Kan. J.L. & Pub. Policy 57, 59 & n.28 (Fall 2005) (citing David Fellman, Unreason in the Law of Damages: The Collateral Source Rule, 77 Harv. L. Rev. 741, 742 (1964), and Alabama cases to demonstrate the exception in Alabama).

         The Tennessee Supreme Court applied the rule espoused in both Mollison and Harding as early as 1896, though at that time it was not yet called the "collateral source rule." Anderson v. Miller, 33 S.W. 615, 617 (Tenn. 1896), cited in Benson v. Tenn. Valley Elec. Coop., 868 S.W.2d 630, 640 (Tenn. Ct. App. 1993) (recognizing Anderson's application of the collateral source rule); see also Ill. Cent. R.R. Co. v. Porter, 94 S.W. 666, 669-70 (Tenn. 1906), cited in Hearn v. Boswell, 1987 WL 5751, at *5 (Tenn. Ct. App. Jan. 27, 1987) (recognizing Porter's application of the collateral source). In Anderson, the plaintiffs sued the defendant in negligence for property damage from a fire; the plaintiffs had fully recovered for their property damage under their insurance policy. Anderson, 33 S.W. at 616. The defendant argued that the insurance company that covered the loss was actually the aggrieved party. The Anderson Court rejected this argument and held that the plaintiffs were the proper parties to bring the lawsuit. The Court described the plaintiffs' contract with their insurance company as unrelated to the defendant's obligation to the plaintiffs: "[The defendant] has no concern with any contract the plaintiff may have with any other party in regard to the goods, and his rights or liabilities can neither be increased nor be diminished by the fact that such a contract exists. He has no equities, as against the plaintiff, which can entitle him, under any circumstances, to an assignment of the plaintiff's policies of insurance." Id. (emphasis added) (quoting Perrott v. Shearer, 17 Mich. 48, 56 (1868)).

         Ten years later, the Tennessee Supreme Court in Porter excluded evidence of gratuitous salary payments received by the plaintiff mail carrier when he missed work because of the defendant's negligence. Porter, 94 S.W. at 667-68. The defendant in Porter argued that evidence of the gratuitous payments was relevant to show that, in effect, the mail carrier did not "miss" work because he received his salary during his disability. The defendant contended: "[T]he object of the law is to make the plaintiff whole, and if he has lost nothing in a pecuniary sense, from his disability, he is not entitled to damages for loss of time [from work]." Id. at 668. The Court in Porter rejected this contention; it held that evidence of the gratuitous payments to the mail carrier was not admissible and should not reduce the railroad's liability. Id. at 669-70. The Court cited "the well-settled rule that money received on accident insurance policies by the injured persons does not diminish the amount of recovery against the wrongdoer." Id. at 670.

         Since Anderson and Porter, the collateral source rule has become a familiar part of Tennessee jurisprudence. See, e.g., Nance, 750 S.W.2d at 742; Donnell v. Donnell, 415 S.W.2d 127, 134 (Tenn. 1967), abrogated on other grounds by Dupuis v. Hand, 814 S.W.2d 340 (Tenn. 1991); J&M, Inc. v. Cupples, No. E2004-01328-COA-R3-CV, 2005 WL 1190704, at *3 (Tenn. Ct. App. May 20, 2005) (observing that the collateral source rule "has long been adopted in Tennessee"); Fye, 991 S.W.2d at 763 (noting that "[a]n injured party's right to recover his or her 'reasonable and necessary expenses' must be viewed in connection with the collateral source rule"); Steele v. Ft. Sanders Anesthesia Grp., P.C., 897 S.W.2d 270, 282 (Tenn. Ct. App. 1994) ("The collateral source rule permits plaintiffs to prove and recover medical expenses, whether paid by insurance or not."); Cherry v. McCullough, No. 02A01-9201-CV-00005, 1992 WL 379074, at *6 (Tenn. Ct. ...


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