Opinion ID: 1543224
Heading Depth: 1
Heading Rank: 11

Heading: Offset For Advance Payments

Text: The first issue raised by Loye Douglas on appeal is whether the circuit court erred in granting an offset against the jury verdicts for advance payments by Columbia Insurance. Under this point, Douglas argues against any offset being made and urges several theories for his position. We observe at the outset that a paucity of cases exists on this point. However, the cases that do exist tend to support a credit for advances paid. See, e.g., Keating v. Contractors Tire Serv., Inc., 428 So.2d 624 (Ala.1983); Russell v. Ashe Brick Co., 267 S.C. 640, 230 S.E.2d 814 (1976); Edwards v. Passarelli Bros. Auto. Serv., Inc., 8 Ohio St.2d 6, 221 N.E.2d 708 (1966). See also State Farm Mut. Auto. Ins. Co. v. Rose, 52 Ark.App. 175, 916 S.W.2d 764 (1996) (liability carrier entitled to an offset against a jury verdict for medical expenses previously paid). But see Matthews v. Watkins Motor Lines, Inc., 419 So.2d 1321 (Miss. 1982) (Supreme Court denied credit for advances made where defendant/tortfeasor did not raise issue of credit due until after the jury verdict). In Edwards v. Passarelli Bros. Auto. Serv., Inc., supra , for example, the Ohio Supreme Court held: [W]here an advance payment is made to a possible tort-claimant upon condition that such payment is to be credited to the amount of any final settlement or judgment in favor of such tort-claimant, such sum may be credited to any such final settlement or judgment; and, if judgment is rendered, the proper procedure is to ask by post-judgment motion for a credit toward satisfaction of the judgment. 8 Ohio St.2d at 9, 221 N.E.2d at 711. The distinguishing factor of the Edwards case is that there was an agreement in effect which conditioned receipt of payment on the basis that any payment would be credited against any final settlement or judgment. In two subsequent cases from other jurisdictions, there was no express agreement between the injured party and the insurance carrier, but advance payments were made nonetheless. In Russell v. Ashe Brick Co., supra , the South Carolina Supreme Court held that Ashe Brick was entitled to an offset notwithstanding the absence of any receipt from the potential claimant stipulating that payment would be credited against any final settlement or judgment. In that case, the plaintiff, Russell, had been injured at Ashe Brick when a pallet of bricks collapsed on top of him. The insurer for Ashe Brick sent Russell a check for $5,500.00, together with a letter stating its regret that a settlement had not been reached and its hope that the payment would bring the matter to an amicable conclusion. Russell subsequently brought suit against Ashe Brick, and judgment was entered against Ashe Brick in the amount of $ 2,000.00 for actual damages and $ 5,000.00 punitive damages. Ashe Brick then filed a posttrial motion in which it requested an offset and credit in the amount of the $5,000.00 previously paid to Russell. The trial court disallowed this, but the Supreme Court reversed. The Supreme Court noted that Russell had cited cases from other jurisdictions which involved advance payments, which the court described as the laudable practice of expediting payment to injured parties prior to and in anticipation of future settlement or judgment. Russell, 267 S.C. at 643, 230 S.E.2d at 815. Additionally, the Supreme Court stated that in those cases, receipts were signed which stipulated that the payments would be credited against any final settlement or judgment. The court concluded that even though signed receipts were a factor notably absent from the case at hand, a credit was warranted. The court said: However, there is a common thread running through all the cases which needs no precedential support and is particularly persuasive. Why should the respondent be allowed to collect $ 12,500.00 on a judgment that the jury has assessed at $7,000.00? The disjointedness of the question perhaps suggests why it has not been necessary heretofore to litigate it. The nonexistence of a receipt delineating the obvious desire to credit the payment against any future liability secured on the same claim is without legal significance. See Harrington v. Edwards , [footnote omitted] 262 S.C. 263, 203 S.E.2d 691 (1974). Russell, 267 S.C. at 643-44, 230 S.E.2d at 815. Similarly, in Keating v. Contractors Tire Serv., Inc., supra , the Alabama Supreme Court held that where the issue was properly raised prior to trial, the trial court did not err in requiring that advance payments to the injured claimant by the tortfeasor's liability insurer be credited against a subsequent judgment in favor of the claimant, notwithstanding the absence of a prior written agreement between the insurer and claimant. After being injured in a vehicle collision, the plaintiff, Keating, received payments totaling $ 8,853.35 for medical payments and $ 27,267.29 for lost wages from the defendant's insurer. There was no agreement that these advance payments would be credited against any judgment Keating might receive. Following Keating's filing of his suit, Contractors Tire pled payment and offset in its answer, and the court granted severance of the credit issue. The jury returned a verdict in favor of Keating for $ 114,000.00, which the trial court reduced by the amount of the advance payments made. In its opinion, the Alabama Supreme Court concluded: We hold, therefore, that the trial judge did not err in allowing credit for the advance payments. Keating accepted advances from the corporate Defendant's insurer, endorsed the drafts of payment, and received credit for his medical expenses with full knowledge of both the source and purpose of these advances. These payments were made during the two and one-half year lapse between the date of injury and date of verdict, thereby undoubtedly sparing Plaintiff the economic pressure which otherwise may have caused him to settle out of court to his disadvantage. Even if Plaintiff had received no judgment for his claim, he would have benefited to the extent of the payments received in advance. We find unavailing the argument that the same insurer, in the absence of conduct amounting to waiver or fraud, should pay to the same person the same elements of damage again, merely because the insurer failed to get that person to sign a receipt evidencing an agreement to reduce possible future liability. We agree with the Supreme Court of South Carolina: The nonexistence of a receipt delineating the obvious desire to credit the payment against any future liability secured on the same claim is without legal significance. Russell v. Ashe Brick Company, 267 S.C. 640, 230 S.E.2d 814, 815 (S.C.1976). Keating, 428 So.2d at 626-27. We agree with the rationale put forward in these cases. In addition, we are persuaded by the reasoning of one commentator for American Law Reports, Third, who has said that advance payment arrangements have been designed to avoid criticisms which have been leveled at the liability insurance system on the ground that the injured party is normally in no financial position to await the outcome of a trial which might be long delayed and that therefore liability insurers are in a position to exert leverage in forcing a settlement more favorable than might otherwise be available because of the pressure of the injured party's financial necessities. W.E. Shipley, Annotation, Effect of Advance Payment by Tortfeasor's Liability Insurer to Injured Claimant, 25 A.L.R.3d 1091 (1969). Without question, the law favors the amicable settlement of controversies, and because of this, it is the duty of the courts to encourage parties to reach a compromise. See Burke v. Downing Co., 198 Ark. 405, 129 S.W.2d 946 (1939). Because it appears to us that all of this is precisely what Columbia Insurance on behalf of Adams Trucking was attempting to do in this case, it should not be penalized for this practice. Moreover, should this court do otherwise, a double recovery could well be the result. This court has often expressed its disapproval of double recoveries. See, e.g., Almond v. Cigna Property and Cas. Ins. Co., 322 Ark. 268, 908 S.W.2d 93 (1995). We hold that credit for some of the advances made to Douglas by Columbia Insurance should be allowed. Douglas also argues that the payments from Columbia Insurance constituted payments from a third-party collateral source and, thus, could not be credited against damages awarded. This point has no merit. This Court has defined the collateral source rule as a general rule that `recoveries from collateral sources do not redound to the benefit of a tortfeasor, even though double recovery for the same damage by the injured party may result.' Bell v. Estate of Bell, 318 Ark. 483, 490, 885 S.W.2d 877, 880 (1994) (quoting Green Forest Pub. Schools v. Herrington, 287 Ark. 43, 49, 696 S.W.2d 714, 718 (1985)) (quoting Amos v. Stroud & Salmon, 252 Ark. 1100, 482 S.W.2d 592 (1972)). However, for the collateral source rule to pertain, the third-party payment must be wholly independent of the tortfeasor. Overton v. United States, 619 F.2d 1299 (8th Cir.1980); Black's Law Dictionary 256 (7th ed.1999); 22 AM.JUR.2D Damages § 566 (1988). That certainly is not the case in the matter before us. Columbia Insurance, the source of the payments, was the liability carrier for the tortfeasor and, as a result, was not wholly independent. We conclude that under such circumstances, the collateral source rule does not apply. Douglas further maintains that Columbia Insurance's advance payments were voluntarily paid, and, because of this, a credit for those payments against the judgment amount should not be allowed. In TB of Blytheville, Inc. v. Little Rock Sign & Emblem, Inc., 328 Ark. 688, 946 S.W.2d 930 (1997), this court noted that in its past application of the voluntary payment rule, we said: When one pays money on demand that is not legally enforceable, the payment is deemed voluntary. Absent fraud, duress, mistake of fact, coercion, or extortion, voluntary payments cannot be recovered. TB of Blytheville, 328 Ark. at 693-94, 946 S.W.2d at 932 (quoting Boswell v. Gillett, 226 Ark. 935, 940, 295 S.W.2d 758 (1956)). See id. In Boswell v. Gillett, supra , one of the appellants, a tenant-partner, sought to recover rental amounts paid to his landlord because the landlord had not repaired slight damage to the leased theater building after a fire. We made it clear in that case that the voluntary payment rule applied where the payor continued to pay full rent without demanding the repairs. In the case before us, the insurer did pay Loye Douglas advances and there was no agreement that the insurer would receive full credit for doing so. Nevertheless, it cannot be said that Columbia Insurance had no legal obligation to make such advance payments based on its liability. It is clear from the outset that the liability carrier was paying advances against future settlement or any damage award resulting from the liability of Adams Trucking to mitigate such damages. And Douglas, without question, considered the purpose of the advance payments to be exactly that. The voluntary payment rule simply does not apply to the facts of this case.