New Illinois Supreme Court decision on the Collateral Source Rule

On June 19, 2008, in Wills v. Foster, the Illinois Supreme Court issued an important decision on the Collateral Source Rule.

Collateral Source Rule: Benefits received by the plaintiff from a collateral source (i.e., health-care insurance provider, Medicare/Medicaid, etc.) will not diminish/reduce damages otherwise recoverable from the defendant.
* Please note that the Collateral Source Rule has been modified in some situations by statute; but the Illinois Supreme Court did not address this issue.

Issue ruled on by the Illinois Supreme Court: How does the Collateral Source Rule apply in cases in which the plaintiff's medical bills are paid by Medicaid and/or Medicare at a discounted rate? In other words, can a plaintiff recover as damages the entire amount billed by health-care providers for medical services, or is a plaintiff limited to recovering the discounted amount actually paid for the medical services?

Holding: The plaintiff may recover the amount the health-care providers initially billed for services rendered, regardless of what was actually paid.

Bottom Line:

Illinois now follows the "reasonable-value approach" with respect to what a plaintiff is entitled to recovery as damages for medical bills incurred. The reasonable-value approach allows the plaintiff to recover the "reasonable" value of medical services regardless of whether the patient has private insurance, is covered by a government program (Medicare or Medicaid) or received gratuitous services.

Are paid bills admissible by the defense to show that the billed amount was not reasonable? No. The Collateral Source Rule bars the jury from learning anything about collateral income. Defendants are free to cross examine witnesses that a plaintiff might call to establish reasonableness, and the defense is also free to call its own witnesses to testify that the billed amounts do not reflect the reasonable value of the services. However, defendants may not introduce evidence that the plaintiff's bills were settled for a lesser amount.

This decision is certainly favorable to plaintiffs.

New Illinois Supreme Court Decision (on Section 2-622)

In O'Casek v. Children's Home and Aid Society of Illinois (filed on June 19, 2008), the Illinois Supreme Court was asked to decide which version of the 2-622 statute applied to a lawsuit filed in 2002 and refiled in 2004, after the case was voluntarily dismissed. The decision is very complicated and hard to follow. In order to understand the decision and its future application, an understanding of the following (simplified to the extent possible) chronologically is critical.

1) Before 1995, section 2-622 did not require that the 2-622 physician be identified; and, the plaintiff was entitled to a 90-day extension for filing a 2-622 report, regardless of whether the plaintiff had previously voluntarily dismissed the lawsuit.

2) On 03/09/95, Public Act 89-7 amended section 2-622 in two ways: (1) the name of the 2-622 physician was now required; and (2) if the plaintiff voluntarily dismissed the lawsuit, the plaintiff had to file a 2-622 report upon refiling. A 90-day extension upon refiling was prohibited.

3) On 12/18/97, the Illinois Supreme Court, in Best v. Taylor Machine Works, held Public Act 89-7 (which encompassed various Tort Reform provisions including section 2-622 changes) void in its entirety. Therefore, section 2-622 reverted back to the pre-1995 version (see #1 above).

4) On 02/04/98, Public Act 90-579 amended section 2-622 by adding naprapaths to the list of covered health professionals. Notably, Public Act 90-579 did not add naprapaths to the pre-1995 version of section 2-622 (see #1 above). Rather, it added naprapaths to the 1995 version struck down by Best (see #2 above).

In Cargill v. Czelatdko, the appellate court held that Public Act 90-579 resurrected the changes in Public Act 89-7 (see #2 above) which had been struck down by the Illinois Supreme Court's decision in Best. In other words, that the name of the 2-622 physician was required and a 90-day extension was prohibited upon refiling.

5) On 08/25/05, Public Act 94-677 amended section 2-622 in various ways (this was part of the Tort Reform bill that was struck down by Judge Larsen in Cook County and a decision on all of Tort Reform including the 2-622 changes is currently pending in the Illinois Supreme Court).

Illinois Supreme Court's Holding: the plaintiff's medical malpractice lawsuit is governed by the pre-1995 version of section 2-622, as amended with the addition of the naprapath language found in Public Act 90-579. In other words, that the name of the 2-622 physician is not required and a 90-day extension is permitted (see #1 above) upon refiling.

Bottom Line: for causes of action accruing before 08/25/05, the 2-622 physician does not need to be identified and the plaintiff is entitled to a 90-day extension for filing a 2-622 report, regardless of whether the plaintiff had previously voluntarily dismissed the lawsuit. This case overrules Cargill, Crull, and the others that are inconsistent with this opinion.

Unanswered Question: as you know, Tort Reform (Public Act 94-677) amended section 2-622 and the identity of the 2-622 physician, among other things, is required (except in Cook County) for causes of action accruing on or after 08/25/05. The Illinois Supreme Court specifically did not address this issue. The Court is presumably saving that decision for its ultimate decision on all of Tort Reform.

Setoff (complicated but important)

Brief (to the extent possible) Facts: In Thornton v. Garcini, et. al., the plaintiff brought lawsuit against a hospital, a physician and nurses for wrongful death, survival and negligent infliction of emotional distress in relation to the death of her son during child birth and the circumstances of delivery. A jury found the physician and the nurses not liable on all claims, but ruled against the hospital on plaintiff's emotional distress claim and awarded the plaintiff $175,000. The plaintiff filed a post trial motion challenging the jury's verdict. While the motion was pending, the plaintiff settled with the nurses and the hospital for all of the claims for $175,000. The settlement agreement specifically stated that the settlement would not effect the plaintiff's claim against the physician. The plaintiff's post trial motion proceeded against the physician and eventually the appellate court ordered a new trial against the physician. After a second trial, a jury found in favor of the physician on the wrong death and survival claims, but found the physician liable for negligent infliction of emotional distress and awarded the plaintiff $700,000. The physician sought a setoff for $175,000, and the trial court denied that request. The Third District Appellate Court agreed with the trial court.

Holding/Reasoning: The physician was not entitled to a $175,000 setoff because the physician failed to show what portion of the $175,000 settlement was attributable to the claim for which he was held liable. In other words, the court held it was the physician's burden to show what portion of the $175,000 settlement was attributable to the emotional distress claim for which he was found liable.

Implications/Problems with the Court's Holding: I find this ruling problematic for at least a couple of reasons. First, if the physician is not a party to the settlement agreement between the plaintiff and the hospital/nurses, how can the physician meet his burden to show what portion of the settlement is attributable to the claim for which he is held liable when he has no control over the settlement agreement? Second, this decision appears to allow plaintiffs to manipulate a settlement agreement to avoid a setoff against co-defendants that choose to go to trial. In light of these problems, I strongly recommend evaluating a co-defendant's settlement agreement and perhaps seeking court intervention when indicated.