New Ruling Highlights Evolving Collateral Source Issues In Nevada
LGC Staff
Tue August 23, 2016
5:46 PM UTC

By Jennifer DelCarmen

In Nevada, the collateral source rule provides that when “an injured party [has] received some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor.”  Proctor v. Castelleetti, 911 P.2d 853, 854 (Nev. 1996).  In other words, independent third-party contributions (e.g. insurance payments) will not reduce the amount the plaintiff can collect from the defendant.

Proctor, for instance, involved a car accident resulting in substantial alleged personal injuries to Plaintiff.  At trial, the court allowed Defendant to present evidence of payments that Plaintiff received from disability insurance to show Plaintiff’s malingering, and a judgment was eventually entered.  The Nevada Supreme Court, however, overturned the judgment and remanded the case for a new trial, adopting a per se rule barring the admission of collateral source payments into evidence for any purpose.

In cases after Proctor, defendants and plaintiffs disputed what amount of past medical damages could be presented to a jury when some of a plaintiff’s bills were paid by insurance providers. Defendants argued that damages had to be “incurred” to be recoverable, and because a plaintiff is not responsible for any portion of a medical bill written-off or reduced by insurance, the plaintiff did not “incur” those damages.  Thus, a plaintiff should only be permitted to present evidence of medical bills  that the plaintiff actually had to pay or would be responsible to pay in the future.  Plaintiffs, on the other hand, argued that admission of any evidence of such deductions violated the per se rule announced in Proctor.

Similarly, plaintiffs would argue that any evidence of medical liens should be likewise be excluded from trial pursuant to the collateral source rule.  Defendants, on the other hand, have long argued that medical liens are not evidence of payment from any source, and thus the collateral source rule is inapplicable and a defendant can use a medical lien as proof of bias.

This confluence of issues has now recently been addressed by the Nevada Supreme Court in Khoury v. Seastrand, 132 Adv. Nev. Op. 52, *39 (2016).  The case involved significant alleged personal injuries due to an automobile accident.  Plaintiff’s doctors provided treatment to Plaintiff on a lien, but at trial, the court excluded evidence of the amount of the lien, despite Defendant’s argument that the evidence was relevant to prove the reasonable amount of Plaintiff’s medical costs and to establish bias.

On appeal, the Nevada Supreme Court rejected Defendant’s contention that the amount of the liens was relevant to show the value of the medical treatment, holding that the liens were akin to write-downs made by third-party insurers, which were likewise irrelevant to the issue of the reasonable value of the medical services.  As to the issue of bias, however, the Supreme Court ruled that using a medical lien to prove bias does not invoke the collateral source rule because a medical lien represents an amount plaintiff has personally paid for treatment and not an amount a third party has paid to plaintiff.  While the Supreme Court determined that the underlying court had erred in excluding such evidence, the Supreme Court also found the error to be harmless.

Ultimately, this ruling is a mixed-bag.  On the one hand, plaintiffs will likely tout the language of the ruling indicating that both liens and insurance write-downs are inadmissible under the collateral source rule.  That language, however, is arguably dicta, and the case law regarding insurance write-downs is still evolving.  Defendants, on the other hand, now have an opening to potentially argue the existence of the liens as a source of potential bias for the medical experts.

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