Court Opinion

ID: 2829381
Source: CourtListenerOpinion
Date Created: 2015-08-21 06:36:48.444075+00
Date Added: 2024-06-11T08:04:44.555934
License: Public Domain

IN THE SUPREME COURT OF TEXAS
 
════════════
No. 09-0377
════════════
 
Aaron Glenn Haygood, Petitioner,
 
v.
 
Margarita Garza De Escabedo, Respondent
 
════════════════════════════════════════════════════
On Petition for Review from 
the
Court of Appeals for the Twelfth District of 
Texas
════════════════════════════════════════════════════
 
 
Argued September 
16, 2010
 
 
            
Justice Lehrmann, joined by 
Justice Medina, dissenting
 
 
            
Today, the Court holds that a claimant may neither recover amounts 
written off and never paid, nor introduce evidence of such amounts during trial. 
I agree with the Court that section 41.0105 reflects the Legislature’s intent to 
restrict the amount of past medical expenses that may be recovered. However, I 
disagree with the Court’s conclusion that the Legislature intended to prohibit 
the introduction of evidence of amounts that are written off and never paid, as 
they represent collateral source benefits. Neither the “express terms” of the 
statute, which speak only to a claimant’s recovery of past medical 
expenses, “[n]or [any] necessary implications” support such a conclusion. Cash Am. Int’l, Inc. v. Bennett, 35 S.W.3d 12, 16 (Tex. 2000) 
(citation omitted). Furthermore, one consequence of the Court’s decision 
is that juries may deliver insupportably divergent results as between those 
plaintiffs who are insured and those who are not, resulting in inconsistent 
appellate review of damages awards in some tort cases. I would hold that the 
court of appeals erred to the extent it held that section 41.0105 affects the 
admissibility of evidence of past medical expenses. It suggested a remittitur, but based on improper grounds. Therefore, I 
would reverse the court of appeals’ judgment and remand to that court.
I. ANALYSIS
            
I agree with the Court that section 41.0105 abrogates the collateral 
source rule as a rule of recovery by proscribing damages awards for amounts 
written off and never paid. While the precise issue was not before us, we 
implied as much in Daughters of Charity Health Services of Waco v. Linnstaedter, 226 S.W.3d 409, 410 (Tex. 2007). However, 
while the Court’s reasoning as to recovery is solidly grounded, its holding as 
to the admissibility of evidence of adjusted charges finds scant support in the 
statute’s language, is contradicted by the statute’s legislative history, and 
runs counter to long-standing common law.
            
It is not the prerogative of the Court to second-guess the Legislature’s 
policy choices. Rather, it is the Court’s duty to discern and implement the law 
in accordance with, not in contravention of, the Legislature’s intent. Here, the 
Court ignores the obvious conflict between section 41.0105’s title and its text. 
In doing so, the Court reaches its conclusion without utilizing either the 
statute’s legislative history or any one of the enumerated statutory 
construction aids. See Tex. Gov’t Code 
§ 311.023. When a statute’s text is only amenable to 
one reasonable interpretation we eschew extrinsic sources. When a statute is 
subject to more than one reasonable interpretation, however, its history 
provides valuable insight. The Court’s unwillingness to consult the drafting 
history of section 41.0105—even in the face of two competing, yet reasonable, 
interpretations—shakes the foundations of its decision. It is clear, in my 
opinion, that section 41.0105 was intended to limit a claimant’s recovery of 
past medical expenses without disturbing the long-standing prohibition on 
introducing evidence of collateral source benefits such as medical charges that 
are written off and never paid. The legislative history of section 41.0105 
supports this conclusion.
A. Evidence of Past Medical Expenses
            
The collateral source rule has applied in Texas since 1883. Tex. & Pac. Ry. Co. v. Levi & Bro., 59 Tex. 674, 676 
(1883). Under the common law, a tortfeasor was 
not entitled to a liability offset for proceeds procured as a result of the 
injured party’s independently bargained-for agreement with an insurance company 
or other source of benefits. See Mid-Century Ins. Co. of Tex. v. 
Kidd, 997 S.W.2d 265, 274 (Tex. 1999); see also Brown v. Am. 
Transfer & Storage Co., 601 S.W.2d 931, 934 (Tex. 1980). The rule was 
predicated on the notion that a tortfeasor should not 
benefit from an agreement to which the tortfeasor is 
not privy. Brown, 601 S.W.2d at 934. The 
collateral source rule has been applied to all manner of benefits, including 
payments received under a worker’s compensation policy, see Exxon Corp. v. 
Shuttlesworth, 800 S.W.2d 902, 907–08 (Tex. 
App.—Houston [14th Dist.] 1990, no writ), income received as part of veterans’ 
benefits, see Montandon v. Colehour, 469 S.W.2d 222, 229–30 (Tex. Civ. App.—Fort 
Worth 1971, no writ), and Social Security disability payments, see Traders 
and Gen. Ins. Co. v. Reed, 376 S.W.2d 591, 593–94 (Tex. Civ. App.—Corpus 
Christi 1964, writ ref’d n.r.e.). In this sense, the collateral source rule was a 
rule of recovery.
            
But the collateral source rule also has an evidentiary aspect; the 
defendant may not introduce evidence at trial of collateral sources of 
compensation for a plaintiff’s injuries. See, e.g., Taylor v. Am. 
Fabritech, 132 S.W.3d 613, 626 (Tex. App.—Houston 
[14th Dist.] 2004, pet. denied) (holding that governmental assistance payments 
made to plaintiff were a collateral source and that trial court erred when it 
allowed evidence of such payments); Exxon Corp., 800 S.W.2d at 907–08 
(excluding evidence of worker’s compensation benefits). As a rule of evidence, 
the collateral source rule has excluded such things as evidence of payments and 
downward adjustments in accordance with Medicare guidelines. See Matbon, Inc. v. Gries, 288 S.W.3d 471, 480–82 (Tex. App.—Eastland 2009, 
no pet.); Wong v. Graham, No. 03-00-00440-CV, 2001 WL 123932, at *11 
(Tex. App.—Austin Feb. 15, 2001, no pet.) (not 
designated for publication); see also Briese v. 
Tilley, No. C 08-4233 MEJ, 2010 WL 3749442 slip op. at 
7–10 (N.D. Cal. Sept. 23, 2010).
1. Is the rule implicated?
            
The Court concludes that the collateral source rule is not implicated by 
statutory or contractual adjustments to medical charges because the discounted 
amounts are “a benefit to the insurer,” not the insured. ___ 
S.W.3d ___, ___. While I agree the discounting of medical charges 
benefits insurers, I disagree that the rule is not otherwise implicated. 
Although medical expenses that are discounted and written off are not direct, 
out-of-pocket payments made on the plaintiff’s behalf, the discount would not 
have occurred but for the claimant’s efforts.1 That is to say, if Haygood had not been covered by Medicare or some private 
insurer, he would have been responsible for the full charges that were billed, 
and Margarita Garza de Escabedo would have become 
liable for them as the result of her negligence. See George A. Nation 
III, Obscene Contracts: The Doctrine of Unconscionability and Hospital Billing of the Uninsured, 
94 Ky. L. J. 101, 104 (2005–06). 
Even if Haygood had private insurance coverage, he 
might have been liable for the full charges if his insurer disputed the charges 
or the medical providers did not have a contractual relationship with Haygood’s insurers.2 The same rationale undergirding the 
collateral source rule’s application to payments made by third-party providers 
applies equally to write-offs secured as a result of a contractual relationship 
with an insurance provider or rules governing programs like Medicare. The 
collateral source rule is clearly implicated when a tortfeasor would otherwise obtain a windfall from the 
injured party’s efforts. See Brown, 601 S.W.2d at 934–35; see 
also Restatement (Second) of 
Torts § 920A cmt. b 
(1979). I would therefore hold that amounts written off and never paid pursuant 
to an insurance contract, Medicare, or Medicaid guidelines are collateral 
benefits.
2. Legislature’s intent
            
I agree with the Court to the extent it concludes that the Legislature 
did not intend to abrogate the rule as it relates to payments made by 
collateral sources. Consequently, my analysis is confined to whether the 
Legislature intended to abrogate the common law prohibition of evidence of 
amounts written off and never paid that may be ascribed to collateral sources. 
In construing a statute, we always strive to give effect to the Legislature’s 
stated intent. Tex. Gov’t Code § 311.021; First 
Am. Title Ins. Co. v. Combs, 258 S.W.3d 627, 631–32 (Tex. 
2008). “The plain meaning of the text is the best 
expression of legislative intent unless a different meaning is apparent from the 
context or the plain meaning leads to absurd or nonsensical results.” Molinet v. Kimbrell, 
___ S.W.3d ___, ___ (Tex. 2011) (citing City of Rockwall v. Hughes, 246
S.W.3d 621, 625–26 (Tex. 2008)). When the Legislature’s intent is not apparent 
from the plain meaning of a statute’s language, we may resort to other 
construction aids, including legislative history. Tex. Gov’t Code § 311.023(3); see 
also Galbraith Eng’g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867–68 (Tex. 2009). We further 
presume that the Legislature is aware of existing law when it enacts 
legislation. See Am. Transitional Care Ctrs. of 
Tex., Inc. v. Palacios, 46 S.W.3d 873, 877–78 (Tex. 
2001).
            
The plain language of section 41.0105 does not support the Court’s 
conclusion that the Legislature intended to alter the status quo with regard to 
the admissibility of evidence. The statute’s unambiguous text, which states that 
“recovery of medical or health care expenses incurred,” refers only to a 
limitation on recovery, and makes no mention of evidence. Tex. Civ. Prac. & Rem. Code § 
41.0105 (emphasis added). The collateral source rule’s prohibition on the 
introduction of evidence of payments by insurers as well as other collateral 
benefits, e.g., written off medical charges, has long been firmly 
embedded in our common law. The Legislature was undoubtedly aware of the 
collateral source rule when it passed section 41.0105. See Palacios, 
46 S.W.3d at 877–78. Therefore, had the Legislature 
intended to abrogate even a portion of the rule’s evidentiary component, it 
would have explicitly done so in the text of the statute. Two provisions in 
chapter 41, which expressly limit the evidence that the trier of fact may consider in determining the amount of 
exemplary damages, stand as further proof that when the Legislature intends to 
alter the admissibility of evidence it unequivocally does so. See Tex. Civ. Prac. & Rem. 
Code §§ 41.008(e), 
.011(b).3          
Haygood contends that the Legislature would 
not have included the word “evidence” in the title unless it intended to limit 
the evidence that can be introduced during trial. While I disagree with Haygood’s proposed interpretation of section 41.0105, at a 
minimum, the conflict between section 41.0105’s text and its title renders the 
statute susceptible to more than one reasonable interpretation. Thus, the use of 
statutory construction aids, including legislative history, is warranted. Id. at § 311.023(3). The lengthy and complicated 
legislative history of section 41.0105 clearly militates against Haygood’s and, ultimately, the Court’s characterization of 
the Legislature’s intent in passing section 41.0105. The Legislature worked 
through several iterations of draft bills before settling on the current 
statute. The first iteration of section 41.0105, which was included as part of a 
broader effort to reform medical malpractice laws, would have allowed “a 
defendant physician or health care provider [to] introduce evidence in a health 
care liability claim of any amount payable to the claimant as a collateral 
benefit.” Tex. H.B. 3, 78th Leg., R.S. (2003). The proposed legislation would 
have defined “collateral source benefit[s]” as “benefit[s] paid or payable to or 
on behalf of a claimant under [] the Social Security Act . . .; [] a state or 
federal income replacement, disability, workers’ compensation, or other law that 
provides partial or full income replacement; or [] any insurance policy, other 
than a life insurance policy, including an accident, health, or sickness 
insurance policy; and [] a disability insurance policy.” Id. There was no 
question at all that the bill would have abrogated the collateral source rule as 
a rule of evidence, but its application was limited to health care liability 
claims under former article 4590i. This proposed language survived the merging 
of House Bill 3, whose application was limited to medical malpractice claims, 
and House Bill 4, an omnibus civil justice reform bill. Tex. H.B. 4, 78th Leg., 
R.S. (2003). However, an amendment to House Bill 4 stripped from it the language 
abrogating the evidentiary aspect of the collateral source rule.
            
When House Bill 4 reached the Senate State Affairs Committee, it expanded 
section 41.0105’s application beyond health care liability claims. The Senate 
further renamed the proposed statute “Evidence Relating to Amount of Economic 
Damages,” and included the following language: “[a] defendant may introduce 
evidence of any amount payable to the claimant as a collateral benefit arising 
from the event in the cause of action.” Tex. C.S.H.B. 4, 78th Leg., R.S. (2003). 
Just like the initial version of section 41.0105 proposed in the House, the 
State Affairs Committee’s proposed statute would have undoubtedly abrogated the 
collateral source rule both as a rule of recovery and a rule of evidence. 
But the final enrolled version of the bill amended the proposed statute once 
more, this time deleting the provisions concerning evidence of collateral 
sources. Despite the language of the bill being expressly limited to recovery of 
past medical expenses, it retained its title from the State Affairs Committee: 
“Evidence Relating to Amount of Economic Damages.” Tex. H.B. 4, 78th Leg., R.S. 
(2003). The legislative history of section 41.0105 clearly illustrates that its 
title is nothing more than a remnant from proposed versions that failed to 
pass.
            
Furthermore, reading section 41.0105 in context with other laws 
concerning the proof and presentation of damages evidence supports my conclusion 
that section 41.0105 did not abrogate the collateral source rule’s application 
as a rule of evidence. At the time section 41.0105 was enacted, section 41.012 
directed that a court should instruct the jury with regard to several other 
provisions of chapter 41 establishing criteria and evidence to be considered in 
awarding exemplary damages. Tex Civ. Prac. & Rem. Code § 41.012. For instance, 
section 41.012 requires the jury to be instructed with regard to section 41.011, 
which limits the evidence that the trier of fact can 
consider in determining the amount of exemplary damages. Section 41.012 also 
requires that the jury be instructed with regard to section 41.003, under which 
exemplary damages may be awarded only if the claimant establishes by clear and 
convincing evidence that the claimant’s harm resulted from fraud, malice, gross 
negligence, or as otherwise specified by statute. If the Legislature intended to 
limit the evidence placed in front of the jury, as opposed to a plaintiff’s 
recovery, it likely would have amended section 41.012 and also expressly 
directed that the jury be instructed with regard to section 41.0105. See 
id.
            
Significantly, the Legislature also chose not to amend section 18.001 of 
the Code, which has long governed procedures for proving damages in personal 
injury cases. Under that section, an uncontroverted affidavit in proper 
form attesting
 
that the amount a person charged for a service was reasonable 
at the time and place that the service was provided and that the service was 
necessary is sufficient evidence to support a finding of fact by judge or jury 
that the amount charged was reasonable or that the service was necessary.
 
 
Tex. Civ. Prac. & Rem. 
Code § 18.001. If the 
Legislature intended that evidence of reasonable and necessary damages would no 
longer be admissible, it likely would have excluded medical services from 
section 18.001. The Legislature’s decision to leave these sections unaltered, 
thus maintaining the status quo regarding evidence to a substantial degree, is 
telling. Furthermore, “a statute may be interpreted as abrogating a common-law 
principle only when its express terms or necessary implications clearly indicate 
the Legislature’s intent to do so.” Cash Am., 35 S.W.3d 
at 16 (citation omitted). Here, neither the statute’s words nor its 
context express clear legislative intent to modify the collateral source rule’s 
evidentiary aspect. The legislative history of section 41.0105 likewise 
nullifies any argument that abrogation is necessarily implicit in the statute’s 
language.
            
Finally, the Court’s approach, which permits evidence of adjusted charges 
pursuant to an insurance agreement or Medicare and Medicaid requirements, will 
likely cause untenable and unjust results. See Tex. Gov’t Code § 311.021(3) (“[I]t is 
presumed that [the Legislature intended] a just and reasonable result”). An 
uninsured plaintiff who receives medical care or an insured plaintiff who 
received medical care out-of-network is liable for the full amount billed. Under 
the Court’s interpretation of section 41.0105, both plaintiffs would be entitled 
to recover the full amounts billed—assuming the jury finds them reasonable and 
necessary. However, insured plaintiffs would only be entitled to recover the 
aggregate of their payments plus the payments made by their insurance providers. 
Because the extent of the plaintiff’s medical charges may affect the jury’s 
calculation of non-economic damages, an uninsured plaintiff or an insured 
plaintiff who receives care out-of-network may be awarded significantly higher 
non-economic damages than an insured plaintiff. This would be the case even 
though they were billed the exact same amount for the exact same medical care to 
treat the exact same injuries.
            
Moreover, the severity of the plaintiff’s injury is a factor that enters 
into the review of the legal and factual sufficiency of evidence supporting 
mental anguish damages. See Fifth Club, Inc. v. Ramirez, 196 S.W.3d
788, 797–798 (Tex. 2006); D. Burch, Inc. v. Catchings, 2009 WL 2481862, at *4 (Tex. App.—Dallas 
2009, pet. denied). In Burch, for example, the court considered the 
amounts billed by various medical providers in evaluating the factual 
sufficiency of the evidence supporting the amount of mental anguish damages 
awarded. Consequently, insured plaintiffs whose medical charges are written off 
and never paid may find it more difficult to establish the sufficiency of 
evidence supporting the amount of any mental anguish damages awarded.
B. Application of Section 41.0105
            
Having determined that Section 41.0105 precludes a plaintiff from 
recovering past medical expenses that are discounted and written off, but does 
not abrogate the collateral source rule as it applies to the admissibility of 
evidence of such amounts, I now turn to the statute’s application. The 
Legislature’s limitation of a plaintiff’s recovery for past medical expenses 
through section 41.0105 is not novel. The Civil Practice and Remedies Code contains several similar examples of limitations on a 
plaintiff’s recovery. See Tex. 
Civ. Prac. & Rem. Code § 74.303 (limiting total recovery for wrongful 
death or survival action on a healthcare liability claim to $500,000, not 
including past and future medical expenses); id. § 75.004 (limiting 
liability in certain premises liability suits to $500,000 per person and $1 
million in the aggregate); id. § 108.002 (limiting personal liability in 
suits against public servants to $100,000 where act or omission occurs during 
the course and scope of the public servant’s employment). Section 41.0105’s 
limitation on a claimant’s recovery is analogous to these and other statutory 
damages caps. Like other statutory damages caps, Section 41.0105 should be 
implemented by the trial court post-verdict. See Columbia Med. Ctr. of Las 
Colinas, Inc. v. Hogue, 132 S.W.3d 671, 677–79 (Tex. App.—Dallas 2004) 
(applying Chapter 74 statutory damages caps), rev’d on other grounds, 271 S.W.3d 238 (Tex. 
2008); Signal Peak Enterprs. of Tex., Inc. v. Bettina Invs., 
Inc., 138 S.W.3d 915, 926–29 (Tex. App.—Dallas 2004, pet. struck) (holding 
that trial court should reform judgment to comply with statutory damages caps on 
exemplary damages).
            
Thus, I agree with the courts of appeals that have approved of the 
implementation of the section 41.0105 cap through a post-verdict modification. 
See Matbon, 288 S.W.3d at 481–82; Irving 
Holdings, Inc. v. Brown, 274 S.W.3d 926, 931 (Tex. App.—Dallas 2009, pet. 
denied); Gore v Faye, 253 S.W.3d 785, 789–90 (Tex. App.—Amarillo 2008, no 
pet.). Under that procedure, the defendant would include with any post-verdict 
motion any evidence of discounts, credits, and write offs, as well as amounts 
actually paid by the patient and third parties. The trial court then would have 
the opportunity to evaluate the evidence, and if need be, reform the jury’s 
verdict to reflect past medical expenses that were billed to the claimant, 
amounts actually paid, and amounts written off by the provider and never 
paid.
            
Escabedo argues that implementing section 
41.0105 post-verdict will not work. But the Legislature has adopted a scheme 
that necessitates the post-verdict adjustment of damages in other provisions of 
the Civil Practice and Remedies Code. See, e.g.,
Tex. Civ. Prac. & Rem. 
Code § 41.008 (applying limitation on 
plaintiff’s recovery of exemplary damages post-verdict). 
When the Legislature enacted liability caps on a plaintiff’s recovery in 
wrongful death and survival suits in health care liability claims, it also 
required the following jury instruction: “Do not consider, discuss, nor 
speculate whether or not liability, if any, on the part of any party is or is 
not subject to any limit under applicable law.” Id. § 74.303(e)(1); see also id. § 41.008(e). Thus, in other 
contexts in which the Legislature has placed a ceiling on a plaintiff’s 
recovery, it has chosen not to apply the cap as a restriction on the amount of 
damages the jury can award. Instead, the jury determines damages and enters its 
verdict, then the trial court enforces the limitations 
when it renders judgment on the verdict.
            
I likewise am unpersuaded by Escabedo’s argument that post-verdict modification could run 
afoul of our decisions in Crown Life Insurance, Co. v. Casteel, 22 S.W.3d
378 (Tex. 2000), and Harris County v. Smith, 96 S.W.3d 230 (Tex. 2002). 
Escabedo raised a hypothetical at oral argument in 
which a claimant receives treatment from two providers, one of whom has a 
contractual agreement with the hospital and one of whom does not. In the 
hypothetical, the jury is permitted to hear evidence of the total amount billed 
by both providers, as I propose, but the jury awards the plaintiff less than 
that amount. While Escabedo’s hypothetical could 
conceivably lead to a Casteel/Harris County issue, that likelihood can be accounted for through the 
submission of carefully tailored jury questions. See Greer 
v. Buzgheia, 46 Cal. Rptr. 3d 780, 785–86 (Cal. Ct. App. 2006) (rejecting 
defendant’s motion for post-verdict reduction in damages awarded by jury because 
defendant failed to object to failure to segregate damages in verdict 
form). This post-verdict mechanism, though cumbersome, has been used by a 
number of California courts for over twenty years, and the case law does not 
reflect any pervasive problems with the process. See, e.g., Olsen v. 
Reid, 79 Cal. Rptr. 3d 255, 256–57 (Cal. Ct. App. 
2008); see id. 263–65 (Moore, Acting P.J., concurring).
II. CONCLUSION
            
For these reasons, I am compelled to respectfully dissent. I would hold 
that section 41.0105 does not affect the admissibility at trial of evidence of 
discounts, credits, adjustments to medical bills, or amounts actually paid but 
disallows the recovery of the discounted portion as a past medical expense. The 
court of appeals suggested a remittitur reflecting the 
discounts, but based on improper grounds. I would therefore remand to the court 
of appeals.
 
                                                                        
____________________________________
                                                                        
Debra H. Lehrmann
                                                                        
Justice
 
 
OPINION DELIVERED: July 1, 
2011

1
Medicare recipients become eligible for benefits 
either by contributing to Social Security for a specified period or by paying 
premiums. See 42 U.S.C. §§ 402(a), 426, 426–1, 1395c, 1395j, 1395o 
(2010).
 

2
In some cases, a covered patient will receive 
medical services from an out-of-network medical provider. The insurance company 
will make payment to the provider for less than the full charges; however, the 
provider is not obligated to accept the insurer’s payment as satisfaction of the 
entire amount. In what is known as “balance billing,” the provider seeks the 
balance of the charges from the patient. See Miller v. Gorski Wladyslaw Estate, 547 F.3d 273, 282–83 (5th Cir. 2008) 
(applying Louisiana law).

3
Section 41.008(e) states that “[t]he provisions of 
this section may not be made known to a jury by any means, including voir dire, introduction into evidence, argument, or 
instruction”; section 41.011(b) states that “[e]vidence that is relevant only to the amount of exemplary 
damages that may be awarded is not admissible during the first phase of a 
bifurcated trial.”