IN THE COURT OF APPEALS OF TENNESSEE

AT JACKSON

October 27, 2015 Session

TERRY HOLLIDAY v. STATE OF TENNESSEE

Appeal from the Tennessee Claims Commission 

No. T20101729 Nancy Miller-Herron, Commissioner, TN. Claims Commission 

Western Division

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No. W2014-02188-COA-R3-CV – Filed December 16, 2015

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This is an appeal by the State of Tennessee from the Tennessee Claims Commission’s award 

of a judgment against it. While he was an inmate in the State’s custody, Plaintiff sustained

injuries when he fell out of a pickup truck that was being operated by a State employee. 

Plaintiff filed a complaint with the Claims Commission in which he alleged that the State’s 

negligence caused his injuries and sought damages for, among other things, the medical 

expenses that were incurred as a result of the fall. The State argued that it should receive a 

credit against any award of damages for the medical expenses Plaintiff incurred during his 

incarceration because it paid those expenses through its contracts with two private medical 

vendors. The Claims Commission disagreed and held that evidence of payments made by the 

medical vendors for Plaintiff’s treatment was barred by the collateral source rule. The 

Claims Commission awarded Plaintiff $125,000 in damages, which included damages for the 

medical expenses that he allegedly incurred. On appeal, we conclude that because the State 

was required by law to pay for all medical expenses Plaintiff incurred during his 

incarceration, the Claims Commission erred in considering the cost of the medical services 

provided to Plaintiff in calculating his damages. We therefore vacate the Claims 

Commission’s award of damages and remand this matter for a new trial on the issue of 

damages. 

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission Vacated

and Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the Court, in which J. STEVEN STAFFORD,

P.J., W.S., and BRANDON O. GIBSON, J., joined.
2

Herbert H. Slatery, III, Attorney General and Reporter; Andrée S. Blumstein, Solicitor 

General; and Eric A. Fuller, Assistant Attorney General, Nashville, Tennessee, for the 

appellant, State of Tennessee.

Glenn K. Vines and Eric A. McEnerney, Memphis, Tennessee, for the appellee, Terry 

Holliday.

OPINION

I. BACKGROUND AND PROCEDURAL HISTORY

On September 1, 2009, Terry Holliday, then an inmate in the custody of the State of 

Tennessee Department of Correction (“TDOC”), was injured while assigned to a work detail 

in Lauderdale County, Tennessee. Immediately prior to being injured, Holliday was riding 

with other inmates in the bed of a pickup truck driven by a TDOC officer. As the officer 

accelerated the truck to go up a hill, the truck hit a mound of dirt, and Holliday fell out of the 

truck and was injured. He was transported by ambulance to a local hospital where tests 

revealed that he had fractured multiple ribs. He was released from the hospital and returned 

to the prison the same day but continued to experience severe pain in his chest in the days 

that followed. On September 19, 2009, Holliday was taken back to the local hospital where 

further testing revealed blood inside his lungs. He was immediately transported by 

ambulance to a hospital in Nashville where he underwent surgery to remove several liters of 

coagulated blood from his lungs. Holliday spent approximately two weeks recovering from 

the surgery at the hospital in Nashville before being taken back to the prison. He was 

released from TDOC custody in July 2010.

On May 27, 2010, Holliday filed a notice of a claim for damages against the State of 

Tennessee (“State”) with the Tennessee Division of Claims Administration. On August 25, 

2010, the claim was transferred to the Tennessee Claims Commission (“Claims 

Commission”) pursuant to Tennessee Code Annotated section 9-8-402(c).1 On August 30, 

2010, Holliday filed a complaint with the Claims Commission in which he alleged that his 

fall from the truck, and the injuries he suffered as a result, were caused by the TDOC 

officer’s negligent operation of the truck. As an attachment to his complaint, Holliday 

submitted a summary of the charges for the medical services he received in September 2009.

The State filed an answer denying the material allegations of the complaint and asserting that 

Holliday’s own negligence was the sole cause of his injuries.

 

1

“If the division fails to honor or deny the claim within the ninety-day settlement period, the division shall 

automatically transfer the claim to the administrative clerk of the claims commission.” Tenn. Code Ann. § 9-8-

402(c) (2012). 
3

On October 3, 2013, attorneys for both parties met to take the deposition testimony of 

Thomas Rawlinson, M.D. (“Dr. Rawlinson”). During the deposition, Dr. Rawlinson 

reviewed documents related to the medical treatment that Holliday received as a result of the 

fall. Holliday’s attorney submitted a summary of Holliday’s medical bills with supporting 

invoices that reflected that Holliday incurred $30,922.58 in medical expenses in September 

2009. Dr. Rawlinson reviewed the documents and testified that Holliday’s medical treatment 

and expenses were caused by his fall from the truck and were reasonable and necessary.

Following the deposition of Dr. Rawlinson, the State filed a motion in limine seeking 

to exclude evidence of the $30,922.58 in medical expenses that Holliday incurred in 

September 2009. In support of its motion, the State argued that Holliday was not entitled to 

recover medical expenses he incurred while in TDOC custody because those expenses were 

paid by the State through its contracts with two medical vendors—First Medical Management 

(“FMM”) and Correctional Medical Services (“CMS”). The State asserted that the Claims 

Commission should therefore exclude evidence of the medical expenses in calculating the 

amount of Holliday’s damages. Alternatively, the State argued that if the Claims 

Commission did not exclude evidence of the medical expenses, the State should receive a 

credit equal to the amount of the medical expenses towards any award of damages Holliday 

received. 

A trial of Holliday’s claim was held before the Claims Commission on April 17, 2014. 

At the outset, the Claims Commissioner stated that she would allow Holliday to make an 

offer of proof regarding the medical expenses that he incurred in September 2009 but would 

allow the parties to submit additional briefs on their admissibility post-trial.2 Holliday 

introduced the deposition testimony of Dr. Rawlinson and a summary of the medical 

expenses Holliday incurred in September 2009. The summary reflected that the total amount 

of medical expenses Holliday incurred in September 2009, $30,922.58, was the sum of six 

separate charges from medical providers for services ranging from transportation by 

ambulance to surgery. Each of the charges reflected in the summary was supported by an 

attached invoice from the medical provider. Several of the invoices reflected specific 

payments that had been made by FMM or other unnamed insurance carriers.

The Claims Commission also heard testimony from several witnesses, including 

Holliday. During his testimony, Holliday stated that he did not have health insurance. 

 

2 Based on the hearing transcript, it appears that the Claims Commissioner decided not to make an immediate 

ruling on the admissibility of evidence related to Holliday’s medical expenses because Holliday did not 

respond to the State’s motion in limine until the day before trial.
4

Additionally, on cross-examination, Holliday testified that he had not received invoices for or 

made payments on the medical expenses: 

Q. Okay. And I would like to talk about these medical bills you received. You 

testified you went to the hospital and an ambulance came and got you and 

things of that nature; correct?

A. Yes, sir, that’s correct.

Q. Okay. And did you actually receive bills while you were in prison for these 

medical visits?

. . . . 

THE WITNESS: I was not given any bills.

Q. So you haven’t been billed for any of those medical services?

A. I haven’t been --

. . . . 

Q. So you haven’t received any of the bills, just to clarify.

A. I haven’t received any as of yet.

Q. Okay. Have you personally had to pay any of these bills?

A. Only what I’ve incurred since I’ve been out.

Q. Okay. July of 2010 since; correct?

A. Yes.

Lisa Parks, the TDOC’s Director of Budget and Fiscal Services, also testified at the trial. 

Parks testified that the State meets its legal obligation3to pay the medical expenses incurred 

 

3

Tennessee Code Annotated section 41-21-204(b) (2014) requires the State to provide medical treatment to 

inmates in its custody. See also Bryson v. State, 793 S.W.2d 252, 254 (Tenn. 1990) (holding the State 

responsible for medical expenses of an inmate injured in an automobile accident while on a three-day furlough 

from prison).
5

by inmates in its custody through its contracts with FMM and CMS. She explained that, 

pursuant to its contracts with the two medical vendors, the State pays a specified rate per day 

for each inmate in its custody, and, in return, FMM and CMS pay medical providers directly 

for inmate medical expenses up to $50,000. Accordingly, Parks testified that FMM and CMS 

paid the medical expenses Holliday incurred in September 2009 on the State’s behalf. 

Following the parties’ submission of post-trial briefs, the Claims Commission entered 

its final order on July 11, 2014. As an initial matter, the Claims Commissioner ruled that the 

collateral source rule barred the State from receiving any credit for payments made by FMM 

or CMS:

The Commission FINDS that FMM and CMS were collateral sources 

akin to insurance companies. As the State’s own witness noted, their names 

were even listed as the policy name on the medical invoices. Therefore, the 

fact that payments were made by FMM and/or CMS for Claimant’s medical 

treatment is not admissible and will not be considered by the Commission 

when assessing damages against the State.

It should be noted that the State presented no evidence regarding the 

amount of credit due to the State for payments allegedly made to FMM and 

CMS on behalf of Claimant. 

After reviewing the trial testimony and the deposition of Dr. Rawlinson, the Claims 

Commission’s order stated:

Based on Claimant’s pain and suffering, medical expenses, loss of 

enjoyment of life and all other damages, the Commission FINDS that 

Claimant sustained damages in the amount of one hundred twenty-five 

thousand dollars ($125,000).

The Commission declines to find that Claimant was at fault. Claimant 

was assigned the task of picking okra in the field. To do that, he had to ride in 

the back of the white Dodge with the broken bench and rotten rail. There was 

no evidence whatsoever that he would have been free to decline.

The Commission, therefore, FINDS that zero percent (0%) of the fault 

reasonably can be apportioned to the Claimant. The Commission further 

FINDS that one hundred percent (100%) of the fault reasonably can be 

apportioned to the State of Tennessee.
6

Accordingly, the Claims Commission awarded Holliday a judgment against the State in the 

amount of $125,000. Following the Claims Commission’s denial of the State’s motion to 

alter or amend, the State filed a timely notice of appeal to this Court.

ISSUE PRESENTED

The State raises the following issue on appeal, slightly restated from its brief:

1. Whether the Claims Commission erred in applying the collateral source rule 

to award damages related to Holliday’s medical expenses that had already been 

paid by the State.

STANDARD OF REVIEW

Appeals from a decision of the Claims Commission are governed by the same rules 

applicable to appeals from trial court civil actions. Tenn. Code Ann. § 9-8-403(a)(1) (2012). 

Thus, when the Claims Commissioner acts as the finder of fact, our review of his or her 

findings is de novo upon the record with a presumption of correctness unless the evidence 

preponderates against the Commissioner’s findings. Tenn. R. App. P. 13(d); Usher v. 

Charles Blalock & Sons, Inc., 339 S.W.3d 45, 58 (Tenn. Ct. App. 2010). Still, we review the 

Claims Commissioner’s legal conclusions de novo with no presumption of correctness. Ray 

Bell Const. Co., Inc. v. Tenn. Dep’t of Transp., 356 S.W.3d 384, 386 (Tenn. 2011). 

ANALYSIS

As an initial matter, we note that, in his appellate brief, Holliday contends that the 

State waived the affirmative defenses of payment, credit, set-off, or accord and satisfaction 

by failing to raise them as an affirmative defense in its Answer as required by Rule 8.03 of 

the Tennessee Rules of Civil Procedure. We note, however, that Holliday’s attorney did not 

object to the issue at trial and, in fact, acknowledged that the State should receive credit for 

payments it made directly to medical providers on Holliday’s behalf:

[Holliday’s Attorney]: Well, I guess what we have from our perspective is I 

certainly agree that the State is entitled to a credit --

THE COURT: Uh-huh.

[Holliday’s Attorney]: -- for all amounts they paid if it was paid directly by the 

State of Tennessee.
7

THE COURT: Right.

Thus, even if we accept that the State should have raised the credit issue as an affirmative 

defense, the theory was tried by the express or implied consent of the parties as contemplated 

by Rule 15.02 of the Tennessee Rules of Civil Procedure.4 We therefore reject Holliday’s 

assertion that the State waived the argument by failing to raise it in its Answer.

The State contends that the Claims Commission erred in holding that evidence of 

payments made by FMM and CMS for Holliday’s treatment was barred by the collateral 

source rule. Tennessee has adopted the collateral source rule as it is set forth in Restatement 

(Second) of Torts section 920A. Fye v. Kennedy, 991 S.W.2d 754, 763 (Tenn. Ct. App. 

1998) (“The subject before us is addressed in [Restatement (Second) of Torts section 920A], 

which we adopt.”). That section provides:

§ 920A Effect of Payments Made to Injured Party

(1) A payment made by a tortfeasor or by a person acting for him to a person 

whom he has injured is credited against his tort liability, as are payments made 

by another who is, or believes he is, subject to the same tort liability.

(2) 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.

Restatement (Second) of Torts § 920A (1977). Additionally, comment a to Section 920A

provides:

a. Payments by or for defendant. If a tort defendant makes a payment toward 

his tort liability, it of course has the effect of reducing that liability. This is 

also true of payments made under an insurance policy that is maintained by the 

defendant, whether made under a liability provision or without regard to 

liability, as under a medical-payments clause. . . . The rule applies to benefits 

other than cash payments.

Restatement (Second) of Torts § 920A cmt. a. Thus, the collateral source rule provides that 

when a plaintiff receives a payment or benefit from a collateral source, other than payments 

made by or for the defendant, evidence of the payment or benefit is not admissible and does 

 

4

“When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be 

treated in all respects as if they had been raised in the pleadings.” Tenn. R. Civ. P. 15.02.
8

not reduce or mitigate the defendant’s liability. Fye, 991 S.W.2d at 763 (quoting Donnell v. 

Donnell, 415 S.W.2d 127, 134 (Tenn. 1967)). In several past cases, Tennessee courts have 

recognized that defendants should receive credit for payments towards a plaintiff’s medical 

expenses made on their behalf prior to trial. 

In Byrd v. Stuart, 450 S.W.2d 11 (Tenn. 1969), the plaintiffs and defendant were in an 

automobile accident in which the plaintiffs were injured. Id. at 12. Following the accident, 

the defendant’s insurance carrier, acting as the defendant’s agent, paid the plaintiffs $1,040 

for which the plaintiffs executed an agreement titled “Receipt for Expenses Advanced.” Id. 

In pertinent part, the agreement stated that, “[t]his amount is to be credited to any final 

settlement or to the amount payable under our policy for any judgment which you may obtain 

as a result of your accident.” Id. Later, the plaintiffs filed a lawsuit and received a jury 

verdict against the defendant. Id. The defendant sought a credit against the jury’s verdict for 

the amount of the advanced payment, but the trial court refused. Id. at 13. Thereafter, the 

defendant filed a separate lawsuit seeking an injunction to prevent the plaintiffs from 

enforcing the full amount of their judgment. Id. The trial court dismissed the defendant’s 

claim. Id. On appeal, the Tennessee Supreme Court set aside the trial court’s ruling and 

stated that, under the circumstances, it would “manifestly be an injustice” to allow the 

plaintiffs to recover the full amount of the jury’s verdict. Id. 

This Court faced similar factual circumstances in Howard v. Abernathy, 751 S.W.2d 

432 (Tenn. Ct. App. 1988). Like Byrd, the case involved an automobile accident between the 

plaintiff and the defendant. Id. at 433. Following the accident, the defendant’s insurance 

carrier paid $1,407 to plaintiff to cover his medical expenses. Id. Later, the plaintiff filed a 

lawsuit, and evidence of his medical expenses was presented to the jury. Id. The jury was 

not informed that the defendant’s insurer had already paid the expenses and returned a 

verdict in favor of the plaintiff for $7,500. Id. The defendant filed a motion seeking a credit 

against the jury’s verdict for the amount of the advanced payment, but the trial court refused. 

Id. The defendant appealed, and this Court reversed. Id. at 436. The Court acknowledged 

that, unlike the plaintiff in Byrd, the plaintiff in Howard did not expressly agree that the 

advance payment he received from the defendant’s insurance carrier would be credited 

against any judgment. Id. at 434. Nevertheless, the court determined that the circumstances 

implied such an agreement. Id. In holding that the defendant was entitled to a credit, the 

court stated that, “[t]he humanitarian practice of making advance payments to or for injured 

parties is to be commended and encouraged.” Id. at 435. 

It is clear in this case that FMM and CMS acted as insurance carriers for the State and 

paid Holliday’s medical expenses on behalf of the State in a manner analogous with the 

advanced payments made by the defendants’ insurance carriers in Byrd and Howard. Indeed, 

the fact that FMM and CMS acted as insurance carriers for the State is undisputed in this 
9

case. In his appellate brief, Holliday concedes that FMM and CMS acted as insurance 

carriers for the State but, based on that fact, argues that FMM and CMS were collateral 

sources and that evidence of their payments for Holliday’s medical expenses should be 

excluded. Holliday relies on this Court’s opinion in Cherry v. McCullough, No. 02A01-

9201-CV-00005, 1992 WL 379074 (Tenn. Ct. App. Dec. 21, 2012), in support of his 

argument. His reliance on that case is misplaced, however, because the advance payments to 

the plaintiff in that case were made by the plaintiff’s employer’s insurance carrier, not by the 

defendant or any party acting on its behalf. Id. at *5-6. Simply put, Holliday’s argument 

overlooks the distinction between payments made by the plaintiff’s insurer and payments 

made by the defendant’s insurer. Because FMM and CMS acted as insurance carriers for the 

State and paid Holliday’s medical expenses on the State’s behalf, the State should not be 

liable for those expenses. 

Despite its similarities, however, there is one notable aspect of this case that makes it 

distinguishable from Byrd and Howard. Unlike the defendants in those cases, the defendant 

here was not engaging in the humanitarian practice of making advance payments to the 

plaintiff, but was legally obligated to pay the full amount of the plaintiff’s medical expenses

while the plaintiff was in the State’s custody. See Tenn. Code Ann. § 41-21-204(b). Because

the State was required by law to pay the full amount of the medical expenses that Holliday 

incurred during his incarceration, we conclude the Claims Commission should not have 

considered evidence of the medical expenses in calculating the amount of Holliday’s 

damages award.5 While we do not hold that evidence of the medical expenses Holliday 

incurred during his incarceration was not admissible for any purpose, we conclude that, given 

the unique circumstances of this case, such evidence was not admissible for proving the 

amount of the medical expenses as a measure of damages. 

Though the Claims Commission’s order states that part of its $125,000 award is

intended to compensate Holliday for medical expenses, it does not specify the dollar amount 

assigned to each measure of damages and, in particular, what portion of the total award is 

attributable to the medical expenses the plaintiff incurred during incarceration. Because we 

cannot speculate as to what portion of the Claims Commission’s award was erroneously 

awarded, we must vacate the entire award of the Claims Commission and remand this matter 

for a new trial on the issue of damages. On remand, we instruct the Claims Commission not 

to award plaintiff damages for medical expenses incurred during his incarceration.

 

5

This should not be construed as limiting consideration of plaintiff’s medical expenses that arose out of this 

injury and were incurred subsequent to his release from the State’s custody in July 2010. Clearly, any medical 

expenses incurred by the plaintiff, arising out of this injury, post incarceration may be considered as part of his 

damages. 
10

CONCLUSION

In light of the foregoing, we vacate the Claims Commission’s award and remand this 

matter for a new trial on the issue of damages. In calculating the amount of its award on 

remand, the Claims Commission should not award damages for the cost of the medical

services provided to Holliday during his incarceration. The costs of this appeal are taxed to 

the Appellee, Terry Holliday, for which execution may issue if necessary. 

_________________________________

ARNOLD B. GOLDIN, JUDGE