Case Name: Carla Diane TEZAK, as trustee for the heirs and next of kin of Martin Tezak, Respondent, v. Bruce BACHKE, et al., Appellants
Court: Minnesota Court of Appeals
Jurisdiction: Minnesota
Decision Date: 2005-06-21
Citations: 698 N.W.2d 37
Docket Number: No. A04-2134
Parties: Carla Diane TEZAK, as trustee for the heirs and next of kin of Martin Tezak, Respondent, v. Bruce BACHKE, et al., Appellants.
Judges: Considered and decided by STONEBURNER, Presiding Judge, HUDSON, Judge, and DIETZEN, Judge.
Reporter: North Western Reporter 2d
Volume: 698
Pages: 37–44

Head Matter:
Carla Diane TEZAK, as trustee for the heirs and next of kin of Martin Tezak, Respondent, v. Bruce BACHKE, et al., Appellants.
No. A04-2134.
Court of Appeals of Minnesota.
June 21, 2005.
Timothy A. Little, Little & Tierney, P.A., Duluth, MN, for respondent.
John D. Kelly, Kenneth A. Kimber, Hanft Fride, P.A., Duluth, MN, for appellants.
Considered and decided by STONEBURNER, Presiding Judge, HUDSON, Judge, and DIETZEN, Judge.

Opinion:
OPINION
STONEBURNER, Judge.
Appellants, who are liable for a decedent's special damages arising out of an automobile accident, challenge the district court's summary judgment determination that respondent may recover, as special damages under Minn.Stat. § 573.02, subd. 2, the full amount of decedent's reasonable medical expenses related to the accident rather than the amount for which the dece dent's health insurer settled the medical providers' claims for those expenses.
FACTS
The parties submitted this matter to the district court based on stipulated facts. Respondent is trustee for the heirs and next-of-kin of Martin Tezak. Tezak was injured when the automobile he was driving was struck by an automobile driven by appellant Jill Bachke. Appellant Bruce Bachke is the owner of the vehicle driven by Jill Bachke and he consented to Jill Bachke's use of the vehicle. Tezak was not negligent. The collision was caused, at least in part, by Jill Bachke's negligence. Tezak incurred medical expenses in excess of $100,000 related to the accident. Tezak initiated a lawsuit against appellants but died of causes unrelated to the accident before that lawsuit was completed, and the lawsuit was dismissed. Tezak's health insurer settled all claims for medical expenses related to the accident for $32,000.
Respondent, as trustee for the heirs and next-of-kin of Tezak, purchased the health insurer's subrogation rights and initiated this action against appellants under Minn. Stat. § 573.02, subd. 2 (2004), for special damages, including the full amount of medical expenses billed to Tezak by medical providers. Appellants sought to limit respondent's claim for medical expenses to the $32,000 amount for which the medical bills were settled by Tezak's health insurer.
The district court determined that respondent may claim the full amount of expenses billed. Judgment was entered consistent with the parties' stipulation, in which respondent agreed to limit her claim to $100,000, and this appeal followed.
ISSUE
May the trustee for the heirs and next-of-kin of a person who is injured in an automobile accident and who dies of causes unrelated to the accident, after acquiring the subrogation rights of the decedent's health insurer, pursue a claim for the full amount of medical expenses incurred by the decedent as a result of the accident?
ANALYSIS
When a district court grants summary judgment based on the application of a statute to undisputed facts, the district court's decision is purely a legal conclusion reviewed de novo. Lefto v. Hoggsbreath Enters., Inc., 581 N.W.2d 855, 856 (Minn.1998). The issue presented in this case is one of first impression in Minnesota.
MinmStat. § 573.02, subd. 2 (2004) provides:
When injury is caused to a person by the wrongful act or omission of any person . and the person thereafter dies from a cause unrelated to those injuries, the trustee . may maintain an action for special damages arising out of such injury if the decedent might have maintained an action therefore had the decedent lived.
" 'Special damages' are those damages to which an exact dollar amount can be assigned, such as medical expenses or lost wages to date of death." Deal v. Northwood Children's Home Soc'y., 608 N.W.2d 922, 925 n. 1 (Minn.App.2000), review denied (Minn. June 13, 2000).
Appellants rely on general principles governing compensatory damages to argue that respondent's claim should be limited to damages for which a person has actual losses. See, e.g., Phelps v. Commonwealth Land Title Ins. Co., 537 N.W.2d 271, 275 (Minn.1995) (noting that compensatory damages are generally synonymous with actual damages, but damages may be multiplied when statute provides for multiplication of actual damages to arrive at compensatory damages). Appellants also rely on cases that hold that parties should not receive "double recovery" of damages. See, e.g., Imlay v. City of Lake Crystal, 453 N.W.2d 326, 332 (Minn.1990) (noting that stated purpose of collateral-sources statute, Minn.Stat. § 548.36, is to prevent double recoveries by plaintiffs, which is a legitimate purpose).
No Minnesota cases have addressed the issue of whether a trustee may recover from the person who caused the accident, as special damages under Minn.Stat. § 573.02, subd. 2, the full amount of medical expenses incurred as a result of the accident when medical providers have settled for less than the full amount. But in a case involving a claim for economic-loss benefits under Minn.Stat. § 65B.46,. subd. 1 (2000), which provides for basic eeonomic-loss benefits for persons who suffer loss from an injury arising out of the maintenance or use of a motor vehicle, the supreme court declined to allow a tortfeasor to benefit from a settlement agreement between an injured party's health insurer and medical providers and allowed full recovery of medical expenses incurred. Stout v. AMCO Ins. Co., 645 N.W.2d 108 (Minn.2002).
The decision in Stout is based primarily on an analysis of the language of the No Fault Act. The Act makes economic-loss benefits payable on a monthly basis as the loss accrues and provides that loss accrues as medical expense is incurred. Minn. Stat. § 65B.54, subd. 1 (2004). The supreme court held that "[a] reduction in the amount billed, whether obtained pursuant to a settlement agreement or a health insurer's fee schedule, does not modify the amount of medical expense incurred." Stout, 645 N.W.2d at 113. Stout relied on the reasoning in Collins v. Farmers Ins. Exch., 271 Minn. 239, 135 N.W.2d 503 (1965). Id. at 112-13. In that case, Collins, the insured, sued an insurance company to recover medical expenses under an automobile policy that provided $5,000 worth of coverage for "reasonable [medical] expenses actually incurred." Collins, 271 Minn, at 240-41, 135 N.W.2d at 504-05. Collins was billed in excess of $5,000 by medical providers but was able to settle the provider's claims for $2,250. Id. at 241, 135 N.W.2d at 505. The insurer claimed that the expense Collins incurred was the amount Collins paid pursuant to the settlement, but the supreme court stated that the definition of "incur" is " 'to become liable for' as distinguished from actually 'pay for.' " Id. at 244, 135 N.W.2d at 507. The holding in Collins is that the insured became liable for, and therefore incurred, the amount originally billed, and not the amount Collins paid as a result of a collateral transaction. Id.
The stipreme court in Stout noted that under case law in Minnesota, "if there is to be a windfall either to an insurer or to an insured, the windfall should go to the insured" because it is more just " 'that the insured who has paid a premium should get all he paid for rather than that the insurer should escape liability for that for which it collected a premium.' " 645 N.W.2d at 114 (quoting Van Tassel v. Horace Mann Ins. Co., 296 Minn. 181, 187, 207 N.W.2d 348, 352 (1973)). Recognizing that Stout, the insured, had not paid a premium for the coverage provided, the supreme court nonetheless concluded that it was more just that any windfall should go to Stout rather than the insurer of the vehicle that struck him. Id. at 114-15. Although Stout and Collins are distinguishable from the case before us, which does not involve the construction of the No Fault Act or an insurance policy, the cases are instructive.
In this case, we must determine whether the amount of medical expenses recoverable as special damages under MinmStat. § 573.02, subd. 2, is the reasonable amount billed by the providers or the amount by which those bills were settled by a health insurer prior to initiation of the action under Minn.Stat. § 573.02, subd. 2. We conclude that resolution of this issue turns on whether the collateral-source statute or the common-law collateral-source rule applies to the difference between the amount billed and the amount for which the bills were settled.
We first note that the collateral-source statute applies to the $32,000 for which the health insurer settled the medical provider's claims. Minn.Stat. § 548.36, subd. 1 (2004) (defining collateral source as "payments related to the injury . in question made to the plaintiff, or on the plaintiffs behalf up to the date of the verdict"). Under the collateral-source statute, however, the parties agree that the $32,000 paid by the health insurer will not be set off from any recovery by respondent because respondent obtained the health insurer's subrogation rights. Respondent's right to recover the $32,000 is not disputed. The issue is whether respondent can recover the $68,000 gap between what the medical providers billed decedent and the $32,000 paid by decedent's health insurer to settle the medical providers' bills.
We next conclude that the collateral-source statute does not apply to the $68,000, because the gap between the bills and the settlement was not a payment made to anyone and therefore is not a collateral source as defined by the statute. MinmStat. § 548.36, subd. 1; Smith v. Am. States Ins. Co., 586 N.W.2d 784, 786 (Minn.App.1998), review denied (Minn. Feb. 18, 1999) (holding that payments not yet received due to insurer's denial of coverage or discontinuation of payments based on insured's failure to show continued entitlement to benefits are not collateral sources under statutory definition because they have not been paid). Although the collateral-source statute abrogated the common-law collateral-source rule in some situations, when benefits are not subject to the collateral-source statute, the common-law collateral-source rule still applies. Smith, 586 N.W.2d at 786. Under the common-law rule:
'if the plaintiffs special damages . such as hospital or medical expenses or loss of wages, are paid for by some third person, either as a gift or on the basis of some contractual obligation, this circumstance does not bar the plaintiff from recovering this item from the defendant, even though it may in effect accord to the plaintiff a double benefit or a double recovery.'
Id. (quoting Beschnett v. Farmers Equitable Ins. Co., 275 Minn. 328, 332, 146 N.W.2d 861, 864 (1966)).
Appellants argue that the gap between the amount billed and the settlement in this case does not fall under the common-law collateral-source rule because, as with the collateral-source statute, it was not "paid" to anyone. But in the context of a lawsuit against tortfeasors to recover for injuries sustained in an automobile accident, the supreme court has held that under the common-law collateral-source rule, a father had a right to recover special damages for the reasonable value of medical expenses for care provided to his injured son, although the provider (Shriner's Hospital) did not charge the family anything for the child's care. Hueper v. Goodrich, 314 N.W.2d 828, 831 (Minn.1982) (citing Dahlin v. Kron, 232 Minn. 312, 45 N.W.2d 833 (1950) for the proposition that a plaintiff could recover the reasonable value of medical services provided by a hospital even though those services were rendered gratuitously by the hospital).
We do not see a distinction between the value of services gratuitously rendered in the cases cited above and the $68,000 debt extinguished by the action of decedent's health insurer in this case, and we conclude that the $68,000 difference between the amount billed and the amount paid is covered by the common-law collateral-source rule. See Duluth Steam Coop. v. Ringsred, 519 N.W.2d 215, 217 (Minn.App.1994) (quoting Restatement (Second) of Torts § 920A(2) (1979), for the proposition that the "tortfeasor's responsibility to compensate for all harm that he causes [is] not confined to the net loss that the injured party receives," and that "[t]he law does not differentiate between the nature of the benefits, so long as they did not come from the defendant or a person acting for him").
Our conclusion is consistent with Foust v. McFarland, 698 N.W.2d 24 (Minn.App. June 14, 2005), an opinion released after this case was submitted. In that personal-injury case arising out of an automobile accident, appellants requested a set off from a jury award of past medical expenses for $72,481.27 billed by medical providers but discounted pursuant to an agreement between the medical providers and the injured person's health insurer. Id., at 29. As in this case, we noted in Foust that the collateral source statute does not prohibit double recoveries in all instances. Id. at 35 (citing Smith v. American States Ins. Co., 586 N.W.2d 784, 786 (Minn.App.1998)). And we concluded that appellants were not entitled to a deduction for medical charges billed by medical providers but not paid for. Id. at 36.
In this case, the district court appropriately analyzed this case under the common-law collateral-source rule and correctly concluded that respondent may recover as special damages the value of the reasonable medical services provided to decedent in the amount stipulated to by the parties.
DECISION
Under the common-law collateral-source rule, which governs this case, respondent is entitled to recover the full amount of medical expenses billed for decedent's injuries arising out of the accident (subject to the stipulated limit) as special damages in her action under Minn.Stat. § 573.02, subd. 2 (2004).
Affirmed.
. Tezak's no-fault insurer paid $20,000 for his medical expenses. That payment and set-off for that payment is not at issue in this lawsuit.
.The collateral-source statute excludes the deduction of collateral-source amounts paid for the benefit of the plaintiff for which a subrogation right has been asserted. Minn. Stat. § 548.36, subd. 2(1) (2004). And because respondent acquired the subrogation rights of decedent's health insurer, the health insurer's subrogation rights are considered to have been "asserted" in this case. See Buck v. Schneider, 413 N.W.2d 569, 570-71 (Minn.App.1987) (holding that injured employee who was assigned employer/insurer subrogation rights to workers' compensation payments had asserted the subrogation right within the meaning of subdivision 2(1) in suit against third party responsible for his injuries).
. The parties stipulate that decedent was billed in excess of $100,000 but respondent has agreed to limit her claim to $100,000, therefore we are using $100,000 as the amount billed for purposes of our analysis.
. The dissent would preclude this recovery because the health insurer would not have been able to assert a subrogation claim for this gap, overlooking the fact that respondent is not suing to assert the health insurer' sub-rogation claim, but is suing for special damages that decedent could have sued for had he lived. Nothing in the wrongful-death statute places a limitation on respondent's claim that would not have applied to decedent. Minn. Stat. § 573.02, subd. 2.