Last Night the Michigan Legislature Pass a Law Intended to Eliminate Non-Existent Economic Damages from Trial

Dec 14, 2016

Saurbier

LAST NIGHT THE MICHIGAN LEGISLATURE PASSED A LAW INTENDED TO ELIMINATE NON-EXISTENT ECONOMIC DAMAGES FROM TRIAL

The Michigan House of Representatives yesterday evening, December 13, 2016, by a vote of 60-48, gave final approval to legislation that sought to remedy the problem created by the Court of Appeals in Greer v Advantage Health, 305 Mich App 192 (2014), while preserving the core of the Collateral Source Rule. It had previously passed the Senate by a vote of 26-10 on October 20, 2016. The Plaintiffs’ Bar and associated interest groups and organizations advocated and lobbied vociferously against final passage.

BACKGROUND: HOW DID WE GET HERE?

In July, 2016, the Michigan Supreme Court denied an Application for Leave on a Court of Appeals ruling in Greer v Advantage Health. The Court of Appeals ruling allowed plaintiffs to  “blackboard” economic damages during trial that were nonexistent and were never incurred by an injured plaintiff. In Greer, the billed expenses were $425,533, but due to the usual negotiated contract between the two knowledgeable parties (insurance company and hospital), the amount paid and accepted was $212,714. Nothing more was owed.

The Court of Appeals held that negotiated insurance discounts that reduced the amount of medical expenses Plaintiffs would otherwise be responsible for paying in verdicts or settlements are “‘benefits received or receivable’ from an insurance policy, and therefore, a collateral source within the meaning of MCL 600.6303(4).”

In denying leave to appeal, Justice Zahra authored a Concurrence, joined by Justice Markman and Chief Justice Young, arguing that in reaching this conclusion, the: “… result is at odds with my understanding of the purpose of the collateral source statute. As is evident from the Court of Appeals’ opinion, the Legislature did not expressly limit its exclusion from the collateral-source rule to the amount actually paid for medical services by the lienholder.”

Due to this inequity, Justice Zahra implored the Legislature to take a closer look at this ruling and to fix this likely unintended purpose.  SB 1104, authored by Senator Mike Shirkey, sought to remedy this problem by limiting damages for past medical expenses or rehabilitation services to “the actual damages for medical care,” meaning “the dollar amount actually paid for past medical expenses or rehabilitation service expenses by or on behalf of the individual whose medical care is at issue, including payments made by insurers…”

The intent of this legislation, now passed, if applied to the Greer case, would mean that plaintiffs could “blackboard” the $212,714 and not the $425,533.

While the intention of the legislation was to remedy the issue outlined by Justice Zahra and outwardly seems clear, we anticipate plaintiffs will file motions interpreting the bill as a nullity. Plaintiffs will seek interpretation of the exact language in the bill that defines “actual damages” as:

  1. The dollar amount actually paid for past medical expenses or rehabilitation service expenses by or on behalf of the individual whose medical care is at issue, including payments made by insurers, but excluding any contractual discounts, price reductions, or write-offs by any person, and the

(ii)       remaining dollar amount that the plaintiff is liable to pay for the medical care.

The dollar amount actually paid in most cases is inherently inclusive of contractual discounts, write-offs, and price deductions of negotiated-down charges. This will create a situation whereby Plaintiffs’ attorneys will argue that the plain language of the statute prohibits Defendants from informing the jury of the amount actually paid because that amount results from these previously-applied deductions.

This legislation will take effect 90 days after the date is enacted into law, but will apply only to actions filed on or after the effective date of this act.

Absent a subsequent legislative fix in the new session early next year, this likely will be back in front of the Michigan Court of Appeals and the Michigan Supreme Court at some point in time.