Illinois Appellate Court Reverses Jury Verdict Based on the Collateral Source Rule

The ruling by a Cook County trial judge mistakenly applying the collateral source rule against a jury verdict has been reversed. Hector Romero was alleged to have caused an automobile accident with the plaintiff, Sylvia Segovia. In that lawsuit, it was claimed that Segovia was injured while a passenger in her husband’s car caused by the negligence of the defendant Romero. Segovia’s husband, Rodolfo, was insured by State Farm, which paid for his vehicle repairs and reimbursed Sylvia $5,000 in medical bills under the “medpay” provision of the State Farm Insurance policy.

The medpay included $3,711 for treatment at Advocate Lutheran General Hospital in Park Ridge, Ill.  State Farm filed a subrogation lawsuit against Romero seeking $10,766 for the medical care for Sylvia. Romero’s insurance carrier, American Heartland Insurance Co., settled with State Farm for a total of $5,383.

Later, when Sylvia brought a lawsuit against Romero, she listed her damages as including $4,560 as a hospital bill from Lutheran General Hospital. The jury returned a verdict in her favor for $5,395, which was the medical expenses, but offered nothing for her loss of normal life or her pain and suffering.

Romero had filed a counterclaim for a setoff of $5,000 for the medpay that was already submitted to Sylvia. Based on the collateral source rule, the trial judge rejected the counterclaim.

The Illinois Appellate Court reversed that ruling and explained that the collateral source rule did not apply because “the benefits for which defendant seeks setoff did come from ‘defendant or a person acting for him’, he is seeking credit for the payment previously made by his insurer, American Heartland, acting on his behalf.”

The appellate court stated that the collateral source rule provides that “benefits received by the injured party from a source wholly independent of, and collateral to, the tortfeasor will not diminish damages otherwise recoverable from the tortfeasor.” Wills v. Foster, 229 Ill.2d 393 (2008).

The collateral source rule stands for the proposition that “payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable.” Wills, 229 Ill.2d at 399 (quoting Restatement (Second) of Torts Section 920A(2) (1979)). Collateral payments made to or benefits conferred on the plaintiff did not reduce the defendant’s liability, even though they reduce the plaintiff’s losses.

The collateral source rule has both evidentiary and substantive components. Wills, 229 Ill.2d at 400. As a rule of evidence, “the rule operates to prevent the jury from learning anything about the collateral income, such as benefits a plaintiff receives from her insurer or expenses paid on her behalf by Medicare or Medicaid.” Id. at 403.

As a substantive rule, the collateral source rule “protects collateral payments made to or benefits conferred on the plaintiff by denying the defendant any corresponding offset or credit. Such collateral benefits do not reduce the defendant’s tort liability, even though they reduce the plaintiff’s loss.” Wills, 229 Ill.2d at 419.

This case is different in that although State Farm made payments to or for the benefit of the plaintiff, the collateral payments would not allow the defendant a setoff for credit. American Heartland was not a collateral source. It is not a “source wholly independent of, and collateral to, [defendant] the tortfeasor.” American Heartland was the defendant’s insurer. It is a source related to the defendant through contract for insurance Romero had with American Heartland. Without a setoff, the defendant — through his insurer — would have to pay the judgment twice for the same medical expenses. Here because the benefits for which the defendant seeks a setoff did not come from “defendant or a person acting for him”, the defendant is seeking for a payment previously made by his insurer American Heartland on his behalf. Accordingly, the collateral source rule does not apply to those benefits.

In conclusion, the appellate panel stated that since the settlement agreement reached between State Farm and American Heartland in the subrogation action compromised the claim for $5,000 in medical payments asserted by State Farm, and that said claim was released, the court found that the defendant is entitled to a setoff in this matter for $5,000. The trial court’s decision denying the application of a collateral source rule is therefore reversed.

Segovia v. Romero, 2013 IL App (1st) 122392 (March 28, 2014).

Kreisman Law Offices has been handling automobile accident cases, product defect cases, medical negligence cases and nursing home abuse cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Chicago (Albany Park, Andersonville, Hegewisch, Humboldt Park, Hyde Park, Jefferson Park, Irving Park, Kenwood, Pilsen, Chinatown, Sauganash), Schaumburg, St. Charles, Western Springs, Oak Park, Norwood Park, Lockport, Lemont, Lake Forest, Hinsdale, Glencoe, Lincolnwood and Joliet, Ill.

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