Opinion ID: 2363683
Heading Depth: 2
Heading Rank: 1

Heading: The Proper Setoff Amount from Yeiser's Damage Award

Text: We first address the issue of what amount should properly be set off from Yeiser's damage award as a result of Farmers's payments to Yeiser and her contractors and Ferrellgas's settlement with Farmers. The trial court and the court of appeals held, and the parties argue here, that Farmers's payments to Yeiser and her contractors implicate Colorado's collateral source doctrine and its various exceptions and caveats. The lower courts and the parties advanced numerous arguments over how much, if any, of Farmers's payments could be set off under the collateral source doctrine. We find these arguments unavailing, however, because they fail to fully account for the subrogation arrangement in this case. Considering that issue, we hold that the collateral source doctrine, even if applicable in the context of Yeiser's breach of contract claim, could not serve to bar the setoff of the full $212,071.94 amount that Farmers reimbursed Yeiser and her contractors for repairs to Yeiser's house. Farmers's subrogation interest in the $212,071.94 amount effectively allowed it to stand in Yeiser's shoes with respect to that amount, and Ferrellgas's $172,657.55 settlement of Farmers's subrogation interest was thereby an effective settlement with Yeiser of her interest in the $212,071.94 amount. Accordingly, the settlement extinguished Yeiser's right to seek the $212,071.94 amount from Ferrellgas. That amount therefore did not constitute a collateral source payment, and consequently, the collateral source doctrine could not operate to bar the setoff of that amount. The relationship between Yeiser, Farmers, and Ferrellgas in this case is governed by the law of subrogation in the context of insurance. When an insurer reimburses a victim for damages pursuant to a claim under the victim's insurance policy, the insurer enjoys a right to subrogation, under which he can stand in the victim's shoes and collect the reimbursed amount from the party responsible for the damages. Am. Family Mut. Ins. Co. v. DeWitt, 218 P.3d 318, 323 (Colo.2009). The right can arise pursuant to an express provision in the insurance policya conventional subrogation rightor under principals of equityan equitable subrogation right. Id. Regardless, once the subrogated insurer has resolved the claim, either through litigation or settlement, the insured is no longer entitled to recover the reimbursed portion of the loss from the responsible party. See 16 Lee R. Russ & Thomas F. Segalla, Couch on Ins. § 222:14 (3d ed.2010) (citation omitted). Here, it is unclear what type of subrogation interest Farmers held in the payments of $212,071.94 to Yeiser and her contractors. It is similarly unclear whether Farmers followed the proper (or any) procedure to perfect its subrogation interest in the payments. Yeiser concedes, however, that Farmers had some type of subrogation interest in the $212,071.94 amount, and that Farmers accepted Ferrellgas's payment of $172,657.55 in full satisfaction of that interest. Accordingly, once Ferrellgas settled Farmers's subrogation interest, Yeiser no longer had any claim to the $212,071.94 amount, regardless of the nature of Farmers's subrogation interest. Yeiser complains that she was not a party to the settlement and therefore should not be bound by it since Farmers settled the subrogation claim for less than its full value. Yeiser, however, is in no position to contest the settlement; Farmers had the right as a subrogee to stand in Yeiser's shoes and resolve the claim without litigation by settling for less than the full value, [3] and its doing so had no effect on the inevitable extinguishing of Yeiser's interest in the $212,071.94. [4] As a result, Ferrellgas's settlement of Farmers's subrogated interest in the $212,071.94 that it reimbursed Yeiser and her contractors for damages to Yeiser's house effectively constituted a partial settlement with Yeiser for that amount. The collateral source doctrine is inapplicable to bar the setoff of payments that are in some way attributable to the defendant. Colo. Permanente, 926 P.2d at 1232 (quoting Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070, 1074 (Colo.1992)). In particular, neither rule is designed to bar the setoff of [s]ums paid [by the defendant] to avoid liability at trial. Smith v. Zufelt, 880 P.2d 1178, 1184 (Colo. 1994) (citing with approval Simon v. Coppola, 876 P.2d 10, 20-21 (Colo.App.1993) (Briggs, J., specially concurring)). Because Ferrellgas effectively settled Yeiser's interest in the $212,071.94 amount to avoid liability for that amount at trial, that amount is fully attributable to Ferrellgas and thus cannot be set off under the collateral source doctrine. Accordingly, we affirm the trial court's setoff of the $212,071.94 amount and reverse the court of appeals' holding to the contrary. Having settled the issue of the proper setoff from Yeiser's damage award, we turn to the proper consideration of the setoff with respect to Yeiser's pre-judgment interest award.