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Irony in the Texas Supreme Court

Last Friday, the Texas Supreme Court denied petitions for review filed by both sides in BFI Waste Systems of North America, Inc. v. Browning-Ferris Industries, Inc. However, in denying the petitions, the Court issued a per curiam opinion criticizing the court of appeals for issuing a footnote on an issue that was not raised in the trial court or the court of appeals and was not briefed by any of the parties.

However, the Supreme Court itself chose the same tactic on a critically important personal injury case just a few months ago. One of the current hot issues in personal injury litigation is the “paid or incurred” issue. Many personal injury victims have health insurance, and those health insurers often have contracts with medical providers that reduce the bills. For example, a physician may charge a patient without insurance $1,000.00 for a particular procedure, but the physician would have an agreement with the insurance companies to only charge $750.00 for the same procedure. Texas has a long standing rule called “the collateral source rule” that says that defendants should not receive the benefits of any collateral source of payment made by or on behalf of a plaintiff. For example, in a wrongful death case, a defendant couldn’t reduce the damages awarded against it by any life insurance that the plaintiff had purchased. But the most prevalent occurrence of the rule was in the routine personal injury case with health insurance. Because of the collateral source rule, plaintiffs were entitled to ask for the full $1,000.00 charged by a medical provider and not the reduced amount paid by a health insurance company.

Two legislative sessions ago, the legislature passed a law saying that personal injury plaintiffs were entitled to seek recovery for any amounts “paid or incurred” by them or on their behalf. But the legislature didn’t say what that means. Plaintiffs’ lawyers claim that the full amount of the bills are incurred and, thus, plaintiffs are entitled to ask a jury for the full amount of the bills. Defense lawyers claim that if a plaintiff has health insurance, then the plaintiff can only ask for the amount actually paid by the plaintiff and health insurer. So it’s a big quandry.

During the last legislative session, the legislature didn’t offer any guidance, but did pass legislation that clarified that the “paid or incurred” rule only applied to medical malpractice litigation. Unfortunately, Governor Perry played lap dog to insurance companies and big business and vetoed that bill.

So today, approximately three years after the law was passed, we do not have any legislative guidance about what this means and we don’t have any established court of appeals opinions giving us an answer to what it means.

But the Texas Supreme Court tried to change that. In Daughters of Charity Health Services of Waco v. Linnstaedter (handed down June 1, 2007 after being argued on Feb. 14, 2006), the Court slipped in a footnote on the “paid or incurred” issue. At that time, it was not an issue that was before the Court (the new law went into effect long after the facts of the case occurred), and it was not an issue that was briefed by any of the parties. It was merely an attempt by the Court to do the exact same thing that they now chastise the BFI Court of Appeals for doing.

When this issue is addressed in the future, we only hope that the Courts of Appeals and the Supreme Court itself ignore this ill-placed dicta.

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