Maritime Collateral Source Rule's Application to Claims of LHWCA Workers Against Third Parties
Monday, January 9, 2017
Gavel, Fifth Circuit

In dePerrodil v. Bozovic Marine, Inc., C.A. 16-30009, 2016 WL 6810728 (5th Cir. Nov. 17, 2016), in a case of first impression, the United States Court of Appeals for the Fifth Circuit was faced with the question of whether a Longshore and Harbor Workers' Compensation Act employee may recover medical expenses as billed, as opposed to as paid, from a third-party tortfeasor under the collateral source rule. The collateral source rule generally prohibits the reduction of a plaintiff's damages for an amount the plaintiff recovers from an independent source. For example, if a hospital bills an injured person's health insurance for $10,000 worth of services, but the insurance provider is only required to pay $5,000, the collateral source rule permits the injured person to recover $10,000 from the tortfeasor.

In dePerrodil, the plaintiff, an oilfield consultant, was injured on a vessel operated by Bozovic Marine Inc., a non-employer third party. The United States District Court for the Western District of Louisiana awarded the plaintiff the full amount of his medical expenses billed, despite the fact that his employer's LHWCA workers' compensation insurance paid only a fraction of that amount. The Fifth Circuit overruled the Western District of Louisiana, holding that under the maritime collateral source rule, LHWCA medical-expense payments are collateral to a third-party tortfeasor only to the extent paid, i.e., the plaintiff may recover only medical expenses actually paid by his employer or his employer's LHWCA insurer. 

In reaching its decision, the Fifth Circuit distinguished this case from the more common scenario in which an injured employee has sued his employer. Generally, in LHWCA employee suits against their employers, there is a question of whether the collateral source rule applies, which depends upon whether the employee and/or employer contributed to the source of the collateral payment. For example, if the injured employee contributes to a health insurance plan that pays for his medical expenses, the collateral source rule applies; whereas, if the source of the payments is a liability insurance plan purchased by the employer, the rule might not apply.[1] In this case, the Fifth Circuit held that the collateral source rule applies because it is undisputed that Bozovic Marine did not play a role in obtaining the workers' compensation insurance that paid the plaintiff's medical bills at a reduced rate. 

However, the Fifth Circuit held that while the collateral source rule applies, the maritime collateral source rule permits the injured person to recover only what was actually paid. In so holding, the court analogized this case to Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373, 381 (5th Cir. 2012), which held that an injured seaman could recover maintenance and cure only for expenses actually incurred, meaning that a seaman may recover only the amount needed to satisfy the seaman's medical charges, regardless of who initially pays the bill. In Manderson, the court reasoned that the collateral source rule was incompatible with maintenance and cure, a no-fault obligation that exists regardless of the employer's negligence. In dePerrodil, the Fifth Circuit likened maintenance and cure for seamen to workers' compensation benefits for LHWCA employees, which are also owed regardless of fault, in holding that "LHWCA medical-expense payments are collateral to a third party tortfeasor only to the extent paid … plaintiff may not recover for expenses billed, but not paid."

The Fifth Circuit's holding in dePerrodil provides clarity on the available damages an LHWCA employee may recover from a third party. Third-party defendants have a valid argument against plaintiffs' recovery of medical expenses billed, which have historically created a windfall for the plaintiffs.

[1] To determine whether to apply the collateral source rule in the employee suit against his employer, courts weigh the five factors enumerated in Phillips v. Western Co., 953 F.2d 923, 932 (5th Cir. 1992).


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