Evaluating Medical Bills in Admiralty Cases in North Carolina: Does Rule 414 Apply? | JD Supra

Evaluating Medical Bills in Admiralty Cases in North Carolina: Does Rule 414 Apply? | JD Supra

Maritime and admiralty law can be vastly different from the law in North Carolina.  One area of continued interest to the maritime bar is how admiralty law should treat evidence of medical expenses, especially in light of the varied positions different states, including North Carolina, take on the Collateral Source Rule. Generally, this Rule bars evidence of independent sources of compensation for a plaintiff’s alleged damages and usually arises when there is some type of health insurance coverage available.

North Carolina injury and defense lawyers are familiar with Rule 414 of the North Carolina Rules of Evidence—a product of tort reform that abrogates the Collateral Source Rule by essentially limiting the admissibility of medical bills to those that are actually paid or actually owed. Tort Reform for Citizens and Businesses Act, 2011 N.C. Sess. Laws 283. (emphasis added). This is important because many healthcare providers substantially reduce, write-down, or write-off medical bills, particularly for patients with private insurance, Medicaid, Medicare, Tricare, etc.

The application of Rule 414 in admiralty cases pending in North Carolina is many times a source of contention because there can be significant differences in the quantum of medical damages when comparing the medical expenses paid versus the medical expenses billed. The application of the Reverse-Erie Doctrine in maritime law, “which requires that the substantive remedies afforded by the states conform to governing federal maritime standards,” provides ample munitions for a legal volley regarding the proper measure of medical damages when personal injuries are at issue. Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 222-23 (1986). 

Plaintiffs lawyers generally take the position that Rule 414, because it is a state rule, is inapplicable in admiralty cases that are subject to federal standards and contend that they get to rely on the gross medical bills as a measure of damages. In line with this position, Plaintiffs attorneys attempt to bolster this position by pointing to the Collateral Source Rule, which is generally recognized as applicable under federal maritime law, e.g., Stanley v. Bertram-Trojan, Inc., 868 F. Supp. 541, 543 (S.D.N.Y. 1994), and that doctrine’s general preclusion of evidence of any independent payments for a plaintiff’s damages. This argument, however, does not fully contemplate the appropriate application of admiralty law in this context.

While it is true that when state and admiralty law clash, state law generally must give way to the application of federal admiralty law, not all discrepancies between state law and admiralty law are as clear-cut as perhaps the most common example of a conflict in North Carolina: the negligence standard. North Carolina follows the law of contributory negligence which, absent a defendant having the “last clear chance,” will defeat recovery. E.g., Williams v. Odell, 90 N.C. App. 699, 701–04, 370 S.E.2d 62, 64–66 (1988). However, admiralty law follows the law of comparative negligence, which supersedes and replaces the rule of contributory negligence in admiralty cases in North Carolina.  U.S. v. Reliable Transfer Co., 421 U.S. 397, 411 (1975); Pope & Talbot v. Hawn, 346 U.S. 406, 408–11 (1953). Unfortunately, the application of Rule 414 does not turn on a simple, direct conflict in state and admiralty law, as no similar rules of evidence exist in the Federal Rules of Evidence nor have they arguably been cemented into the general maritime law of the United States.

In fact, the standard for evaluating what types of medical bills may be introduced into evidence in an admiralty case has not yet been decided universally or even in the 4th Circuit. Courts sitting in admiralty, however, are empowered to use state law to fill in the gaps in federal maritime law, especially in areas where there is no well-established rule. Yamaha Motor Corp v. Calhoun, 516 U.S. 199, 216 (1996). Although the law is not settled, there appears to be a recent trend towards allowing courts to consider all evidence of medical bills, including reductions, write-downs, and write-offs, as to empower the fact-finder to determine the reasonable value of medical damages in cases of maritime torts.

In Buccina v. Grimsby,a maritime personal injury case, the court distinguished the Collateral Source Rule from the preclusion of evidence of medical bill reductions, write-downs, and write-offs by noting that “[t]he collateral source rule excludes only evidence of benefits paid by a collateral source. Because no one pays the write-offs, it cannot possibly constitute payment of any benefit from a collateral source.” 157 F.Supp.3d 704 (N.D. Oh. 2016) (quoting Robinson v. Bates, 112 Oh. St. 3d 17, 22-23 (2006)). In addition, that court noted that “it is not inappropriate to look to state law to determine whether the written-off portions of [plaintiff’s] medical bills constitute a ‘benefit’ for purposes of the collateral-source rule” in holding that “write-offs do not constitute a benefit from a collateral source.”  Id. at 707.

The holding in Buccina v. Grimsbysuggests that in the absence of a federal rule, a state’s laws can fill gaps, particularly with respect to the type of medical bills that should or should not be admitted into evidence.  Accordingly, defense attorneys generally take the position that North Carolina courts sitting in admiralty should adopt and follow the policy of this state as housed in Rule 414, which restricts evidence of medical damages to bills paid/owed.  Although arguably only an evidentiary rule, Rule 414 represents well-negotiated public policy and a likely substantive change from North Carolina’s prior Collateral Source Rule.

More recently, the issue was addressed by the 11th Circuit in Higgs v. Costa Crociere S.P.A. Company, in which the court decided to leave the “ultimate determination—the reasonable value of medical services received by a particular plaintiff in a particular case—to the [fact-finder], upon its consideration of all relevant evidence, notably including the amount billed, the amount paid, and any expert testimony and other relevant evidence the parties may offer.” 969 F.3d 1295, 1313-1314 (11 Cir. Aug. 14, 2020). This method for addressing medical bills may be emerging as the dominate approach. E.g., Reed v. Royal Caribbean Cruises, Ltd., No. 19-24668-CIV, 2021 WL 4990902, at *9 (S.D. Fla. Aug. 20, 2021); In Re Lasala, No. CV 18-11057, 2021 WL 5039639, at *18–19 (E.D. La. Oct. 29, 2021) (discussing and relying on the 5th Circuit’s reluctance to allow the recovery of medical bills charged as opposed to medical bills paid in the maintenance and cure context, Deperrodil v. Bozovic Marine, Inc., 842 F.3d 352 (5th Cir. 2016), and under the Longshore and Harbor Workers’ Compensation Act, Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373 (5th Cir. 2012), when conducting an analysis of the recoverable medical bills based on the approach utilized in Higgs v. Costa Crociere S.P.A. Company). The 11 Circuit noted that it was making this ruling “in the absence of any legislation clarifying this measure of damages.” Id. at 1313. This suggests that North Carolina courts sitting in admiralty may, in addition to taking into consideration the emerging dominate approach, also look to the legislated public policy of Rule 414 to help fill in any gaps in federal maritime law. 

It remains unclear whether courts in admiralty within North Carolina will completely exclude evidence of medical expenses billed, but not paid, pursuant to Rule 414 or simply admit all evidence of all medical expenses as to determine the reasonable value of medical damages incurred. Regardless of which approach is eventually taken, strong arguments exist in favor of a fact-finder (frequently a judge in a federal admiralty case) being allowed to evaluate the evidence of what medical bills were actually paid versus just billed in determining the reasonable value of the medical services provided.  Whether courts are bound to limit the damages based on this evidence, however, remains an unsolved riddle of the deep.    

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