Header graphic for print
Offshore Winds A Legal Barometer for Marine and Energy Business

U.S. Fifth Circuit Clarifies the Role of the Collateral Source Rule with a Seaman’s Recovery of Cure

Posted in Jones Act, Marine Services, Ports & Cargo Shipping

A recurring issue in personal injury litigation is the amount of medical expenses a plaintiff is entitled to recover from the defendant.  The health care providers charge or bill the plaintiff for the treatment provided, but typically accept as payment in full significantly less from health insurers or the government.  The health insurers or government typically are protected via liens against the plaintiff’s recovery up to the amount they paid on behalf of the plaintiff.  Moreover, except for a potential deductible or co-payment, the plaintiff is not “out of pocket” any significant sum.  Yet, defendants often confront what is the proper recovery for the plaintiff’s medical expenses:  (1) the amount billed by the health care provider or (2) the amount accepted by the health care provider from third parties plus any deductible or co-pay by the plaintiff.  It does not strain the imagination to realize that awards based on the invoiced amount will result in a windfall to the plaintiff based on the spread between the amount billed and the amount accepted by the health care provider.

In Manderson v. Chet Morrison Contractors Inc., No. 10 – 31063 (5th Cir. Jan. 3, 2012), the U.S. Fifth Circuit reiterated that an injured seaman may recover cure (medical care) only for those medical expenses actually incurred.  In determining the seaman’s recovery for unpaid cure, the recoverable quantum is the amount “needed to satisfy the seaman’s medical charges.  This applies whether the charges are incurred by a seaman’s insurer on his behalf and then paid at a written-down rate, or incurred and then paid by the seaman himself, including at a non-discounted rate.”

The Fifth Circuit observed that the collateral source rule appeared incompatible with the obligation of Chet Morrison Contractors (“CMC”), the vessel owner, to provide cure to Manderson, an engineer, who was allegedly injured or became ill on CMC’s vessel.  Note:  In the same opinion, the Fifth Circuit had affirmed the district court’s denial of Manderson’s claims against CMC for negligence under the Jones Act or for unseaworthiness of the vessel under the general maritime law.

Generally speaking, the vessel owner’s obligations to pay maintenance (food and lodging during recuperation) and cure were implied in the contract of employment with the seaman, and did not depend on any determination of fault on the part of the vessel owner.  In contrast, the collateral source rule barred a tort defendant from reducing the quantum of damages owed to a personal injury / wrongful death plaintiff by the amount of recovery the plaintiff received from sources collateral to, or independent of, the defendant.  Under the general maritime law the collateral source rule has not been strictly applied to a seaman’s claims for maintenance and cure, which are owed irrespective of the vessel owner’s fault.  However, the Fifth Circuit previously recognized that “[W]here a seaman has alone purchased medical insurance, the ship owner is not entitled to a set-off from the maintenance and cure obligation moneys the seaman receives from his insurer.”

The Fifth Circuit recognized that a different result would have occurred had Manderson been pursuing a tort claim against CMC for which CMC would have been liable for compensatory damages.  Nevertheless, because CMC was liable to Manderson only for maintenance and cure, the bar of the collateral source rule was inapplicable.  As a result, Manderson’s recovery from CMC for breach of its cure obligation was reduced to the amount Manderson’s insurers actually paid his health care providers.  He was not entitled to recover the full amount billed by his health care providers.

  • Patricia Oney, B.C.S.

    Excellent review. Thank you!

    • http://www.kingkrebs.com/ Rebecca Wissler

      Approve.

  • Tflangan

    Great decision on an issue of first impression in the Fifth Circuit. Even better was the fact that the court threw out the arbitrary and capricious finding by the district court, raising tha bar to where it should be be such a holding.

    • http://www.kingkrebs.com/ Rebecca Wissler

      Approve.

  • Tflangan

    Great decision on an issue of first impression in the Fifth Circuit. Even better was the fact that the court threw out the arbitrary and capricious finding by the district court, raising tha bar to where it should be be such a holding.

  • Jim Bercaw

    @Patricia, thanks for your comment.

    @Tflangan, I agree that the 5th Circuit was correct in concluding the district court clearly erred in finding that CMC was arbitrary and capricious in denying maintenance and cure. In my view, had the trial court identified the evidence that supported that finding, rather than conclusively stating CMC was arbitrary and capricious, a different result would have obtained.

  • Sherri Hutton

    Great review. Thanks.