Citing a Mouledoux, Bland, Legrand & Brackett case, DePerrodil v. Bozovic Marine, Inc., 842 F.3d 352, 358-60 (5th Cir. 2016), the Western District of Louisiana limited Plaintiffs’ “windfalls” under the collateral source rule.

Guillory v. Starr Indemnity & Liability Co. Background

Plaintiffs may have a much harder time getting paid for expenses that they never actually incurred under a recent Western District of Louisiana ruling. In Guillory v. Starr Indemnity & Liability Co., 2020 WL 967572, the court limited the “windfall” that plaintiffs can receive under the collateral source rule—holding that plaintiffs are not necessarily entitled to damages for medical bills that a third party negotiated down and paid.

The collateral source rule accounts for the fact that many plaintiffs’ medical bills are paid by third parties after an accident, such as private health insurers or Medicare. The collateral source rule holds that a defendant tortfeasor cannot rely on those payments to reduce the damages that they owe to the Plaintiff. Rather, the defendant owes the plaintiff the same sum of damages that it would owe if no third-party payor had contributed anything.

The justification, so it goes, is that the third-party’s obligation to the plaintiff is contractual, whereas the tortfeasor’s obligation is delictual. Thus, as the U.S. Fifth Circuit Court of Appeals noted, if the third-party payment is inevitable, “better a potential windfall for the injured plaintiff than the liable tortfeasor.”

However, Louisiana courts do require that a plaintiff provide some type of consideration for the benefit if it is to be subject to the collateral source rule. This consideration can be as simple as the payment of a health insurance premium. It also encompasses less straight-forward transactions, such as a plaintiff negotiating down a hospital bill in exchange for paying the balance immediately.

Western District of Louisiana Ruling

In Guillory, the Western District of Louisiana declined to apply the collateral source rule if the third-party payor and the medical provider—without any consideration from the plaintiff—negotiated down a medical bill themselves.

The Guillory court relied on DePerrodil v. Bozovic Marine, Inc., 842 F.3d 352, 358-60 (5th Cir. 2016)—a prior case which MBLB defended—in its decision. The court noted that in DePerrodil, the Fifth Circuit refused to extend the collateral source rule to a plaintiff who was seeking to recover the full amount that his medical providers billed to his employer—despite the fact that the employer’s worker’s compensation carrier negotiated the bill down to a fraction of the original costs. Because the plaintiff provided no consideration and did not “diminish his patrimony” to obtain the discount, the plaintiff was not entitled to the benefit of the collateral source rule.

Adopting the rationale set forth in DePerrodil and in other cases, the Guillory court again refused to apply the collateral source rule when a healthcare provider gratuitously wrote off a portion of its billed medical expenses.

How the Court’s Decision Affects Windfalls

Guillory is a decision that reduces the scale of the “windfalls” that plaintiffs can receive under the collateral source rule. While the collateral source rule is an entrenched stalwart of personal injury litigation, Guillory—and its reliance on DePerrodil—will serve to limit the “windfall” that plaintiffs receive when other third-party payors obtain reductions in their medical bills.