On November 17, 2016, the U.S. Fifth Circuit Court of Appeals restricted application of the collateral-source rule in maritime tort actions by Longshore and Harbor Workers’ Compensation Act (“LHWCA”) employees against third-party tortfeasors by refusing to allow plaintiffs to recover the unpaid, written-off portion of their medical expenses when the paid portion of their medical expenses was through the non-tortfeasor employer under the LHWCA.

Plaintiff Robert dePerrodil sought to recover for injuries he sustained as a passenger aboard Bozovic Marine, Inc.’s crewboat while working for Petroleum Engineers, Inc. (“PEI”). PEI carried workers’ compensation insurance pursuant to the LHWCA. PEI’s insurer paid $57,385.50 for plaintiff’s medical expenses. As part of plaintiff’s award against Bozovic, the lower court held that the collateral-source rule barred any discount of the medical expenses PEI and the insurer were billed, but not required to pay. Accordingly, the lower court awarded plaintiff the full amount of the medical expenses billed for his treatment, $186,080.30, even though only approximately one-third of those expenses were paid. Bozovic appealed the lower court’s decision and maintained that the court erred in applying the collateral-source rule by awarding plaintiff medical expenses as billed, rather than paid.

The collateral-source rule bars a tortfeasor from reducing his liability by the amount the plaintiff recovers from independent sources. The rule asks whether the tortfeasor contributed to, or was otherwise responsible for, a particular income source. If not, the income is considered independent of (or collateral to) the tortfeasor, and the tortfeasor may not reduce its damages by that amount. The primary question before the Fifth Circuit was whether the collateral-source rule allows plaintiffs to recover the amount billed, or only the amount paid.

The Fifth Circuit was guided by its prior decision in Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373 (5th Cir. 2012). The Manderson decision involved maritime cure benefits paid by the employer. The Manderson Court prohibited awarding plaintiff seamen the amount charged for medical expenses, rather than the amount paid. Although the Manderson decision was not directly applicable since it did not involve a maritime tort or LHWCA insurance, the Court found it persuasive because maritime cure and LHWCA benefits create similar obligations for employers. In sum, both cure and LHWCA benefits are owed regardless of fault, and when a third-party tortfeasor is responsible for the employee’s injury, cure and LHWCA insurance function in the same way by requiring the employer’s (or insurer’s) payment of medical expenses though it is not at fault.

Guided by Manderson, the Court held that LHWCA medical-expense payments are collateral to a third-party tortfeasor only to the extent paid; stated otherwise, under those circumstances, plaintiffs may not recover for expenses billed, but not paid. The Fifth Circuit reversed the lower court’s decision awarding the full amount billed, and instead determined the proper measure of those damages is the far lesser amount of $57,385.50 paid by PEI’s LHWCA insurer to cover plaintiff’s medical expenses.

This decision is significant because it limits a plaintiff’s ability to recover only the actual amount of medical expenses paid in an LHWCA claim, which are always significantly less than the amount of medical expenses billed.

The case is Deperrodil v. Bozovic Marine, Inc., No. 16-30009 (5th Cir. Nov. 17, 2016). A link to a copy of the decision can be found by clicking here.