Virginia Lawyers Weekly

In a ruling hailed by personal injury defense lawyers, a Norfolk federal magistrate judge has rejected an injured motorist’s effort to claim medical bills that were discharged in bankruptcy court.

Wesley Payne claimed he was hurt in 2007 when his car collided with another in Virginia Beach. Nine months later, Payne filed for Chapter 7 bankruptcy and listed nearly $20,000 in medical bills among his debts.

In his lawsuit against the other driver’s employer, he sought to introduce his medical bills as evidence of his damages, including the bills that were discharged in bankruptcy.

U.S. Magistrate Judge F. Bradford Stillman refused to allow the discharged bills, ruling they could not be used to prove either Payne’s financial losses or his pain and suffering.

Things did not improve for Payne after the adverse ruling on his medical bills in Payne v. Wyeth Pharmaceuticals, Inc. (VLW 009-3-001). At trial on Dec. 18, the jury found for the defendant. Payne’s motion for a directed verdict or a new trial is pending.
Issue still out there

The use of discharged bills to prove “special damages” was left unresolved in a 2004 decision by the Supreme Court of Virginia.

Although many trial courts in Virginia have rejected evidence of discharged medical bills in personal injury lawsuits, at least two courts saw the issue differently. A 2006 opinion by Roanoke Circuit Judge Jonathan M. Apgar allowed the use of discharged medical bills to prove special damages (VLW 006-8-107). A Virginia federal judge also permitted evidence of discharged medical debts in a 2006 order.

Payne’s lawyers argued that the medical bills should be allowed to prove his financial loss under Virginia’s “collateral source rule.” That rule provides that someone whose negligence causes injury owes the victim full compensation, and payments from a collateral source should not relieve the wrongdoer of that obligation. Under the rule, a plaintiff’s monetary losses come into evidence even if they were offset by insurance payments, government benefits, workers’ compensation benefits, vacation and sick leave allowances, or medical write-offs.

Nevertheless, Stillman held the collateral source rule should not apply to a bankruptcy discharge. “The very term ‘collateral source’ implies the existence of a third party,” he wrote, finding no “third party” involved in a bankruptcy situation.

Further, Stillman held, “applying the collateral source rule to debts discharged in bankruptcy may encourage bankruptcies.” That tendency would be poor public policy, Stillman wrote.

“When a plaintiff can … take affirmative steps after the injury to ensure that there will be double recovery if he or she succeeds in the lawsuit, equity no longer favors a windfall for the plaintiff and the collateral source rule should not apply,” he said.

Stillman not only excluded the discharged medical bills for proof of financial loss, he also barred their use as evidence of the plaintiff’s pain and suffering, implicitly rejecting the 2004 analysis of the Supreme Court of Virginia. Interpreting the Federal Rules of Evidence, Stillman held that medical bills are not relevant because the amount charged does not necessarily correlate to a patient’s suffering and might cause jury confusion.

One of the lawyers for the defendant, Robert F. Redmond Jr. of Richmond, welcomed the ruling. He said Stillman’s opinion is consistent with the weight of authority. “There’s a large collection of opinions that come down firmly in favor of excluding the medical bills discharged by the plaintiff,” he said.

One plaintiff’s lawyer thinks the Supreme Court of Virginia might see things differently. Peter A. Katt of Roanoke obtained a 2006 circuit court opinion with the opposite result. “With the Supreme Court of Virginia the way we have it, I think they’d allow it in,” he said. “They have been very strong on the collateral source rule in the past five years.”

Virginia Beach attorney Carlton F. Bennett, one of Payne’s lawyers, said the issue might be headed for appeal. “I just think it’s a wrong decision,” he said, adding, “The Virginia Supreme Court got it right.”

Bennett was referring to the 2004 opinion in Barkley v. Wallace, 267 Va. 369 (VLW 004-6-038). The Barkley court found that plaintiffs can use medical bills as evidence of nonmonetary damages such as pain, suffering and inconvenience from an accident, a view rejected by Stillman. The Barkley opinion left open the question of using medical bills as evidence of a plaintiff’s financial loss.

Richmond lawyer Stanley P. Wellman, president of the Virginia Association of Defense Attorneys, thinks Stillman’s ruling on the special damages issue was correct. “I think he has correctly predicted the way the Virginia Supreme Court would rule on the issue,” Wellman said.

Wellman said the Payne opinion is in accord with the equities and with case law nationally. It would have been “shocking,” he said, if the outcome went the other way. “I don’t think public policy is served by letting the plaintiff put in discharged medical bills.”

Chiming in was Richmond lawyer Gary J. Spahn, who won a similar ruling defending a personal injury suit in 1993. The opinion, he said, is “consistent with the policy behind the collateral source rule.”

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