Robert Crotty v. Mark Flora, M.D. (Concur in Part and Dissent in Part)

09/29/2023

IN THE SUPREME COURT OF TENNESSEE

AT NASHVILLE

October 5, 2022 Session

ROBERT CROTTY, ET AL. v. MARK FLORA, M.D.

Appeal by Permission from the Court of Appeals

Circuit Court for Davidson County

No. 17C614 Joe P. Binkley, Jr., Judge

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No. M2021-01193-SC-R11-CV

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ROGER A. PAGE, C.J., concurring in part and dissenting in part.

This interlocutory appeal involves two pretrial orders. I concur with the holding

and analysis of the majority as to the first pretrial order involving Rule 8.03 and George v.

Alexander, 931 S.W.2d 517 (Tenn. 1996). However, I respectfully dissent from the

majority’s holding and analysis as to the second pretrial order involving Tennessee Code

Annotated section 29-26-119 and the collateral source rule. This issue requires the Court

to interpret the meaning of section 29-26-119. I would hold that, when section 29-26-119

governs damages in a health care liability action, the statute’s clear language contemplates

only “actual economic losses suffered . . . paid or payable,” thereby abrogating the

collateral source rule. Thus, I would reverse the trial court’s pretrial order.

I.

As explained by this Court in Dedmon v. Steelman, 535 S.W.3d 431 (Tenn. 2017),

“the collateral source rule has evolved as both a substantive rule of law and an evidentiary

rule.” Id. at 443. “Substantively, it affects the amount of damages that may be awarded

against a defendant by prohibiting reduction of a plaintiff’s recovery by benefits from

sources unrelated to the tortfeasor.” Id. “The evidentiary component of the collateral

source rule flows from the rule of law. If a plaintiff’s recovery may not be reduced by

collateral benefits, then ‘evidence that a plaintiff has received benefits or payments from a

collateral source independent of the tortfeasor’s procuration or contribution’ must be

excluded.” Id. at 444 (quoting Bozeman v. State, 879 So. 2d 692, 699 (La. 2004)). With

this common law rule in mind, the language of section 29-26-119 provides:

In a health care liability action in which liability is admitted or established,

the damages awarded may include (in addition to other elements of damages

authorized by law) actual economic losses suffered by the claimant by reason

of the personal injury, including, but not limited to, cost of reasonable and

necessary medical care, rehabilitation services, and custodial care, loss of

services and loss of earned income, but only to the extent that such costs are

not paid or payable and such losses are not replaced, or indemnified in whole

or in part, by insurance provided by an employer either governmental or

private, by social security benefits, service benefit programs, unemployment

benefits, or any other source except the assets of the claimant or of the

members of the claimant’s immediate family and insurance purchased in

whole or in part, privately and individually.

Tenn. Code Ann. § 29-26-119 (2012).

The parties’ arguments on appeal boil down to the correct interpretation of section

29-26-119. They dispute whether the trial court abused its discretion by applying an

incorrect legal standard when it ruled that the “‘cost of reasonable and necessary medical

care’ refers to the amount charged by the provider, not the amount paid,” and that “the

collateral source rule is in full force and effect” in this case.

“Generally, the admissibility of evidence is within the sound discretion of the trial

court.” Borne v. Celadon Trucking Servs., Inc., 532 S.W.3d 274, 294 (Tenn. 2017)

(quoting Mercer v. Vanderbilt Univ., Inc., 134 S.W.3d 121, 131 (Tenn. 2004)). However,

a “trial court’s decision to admit or exclude evidence will be overturned on appeal only

where there is an abuse of discretion,” such as applying an incorrect legal standard. Id.

(quoting Mercer, 134 S.W.3d at 131).

The majority holds that “[a]ssuming . . . Mr. Crotty’s claimed medical expenses

were paid ‘in whole or in part by insurance’ that was ‘purchased in whole or in part

privately and individually,’ the trial court did not err in holding that ‘the collateral source

rule is in full force and effect’ as the premise for its ruling on the parties’ cross-motions in

limine.” As with the majority, I also “defer to the trial court’s conclusion that Mr. Crotty’s

claimed medical expenses were paid ‘in whole or in part by insurance’ that was ‘purchased

in whole or in part privately and individually.’” However, in contrast with the majority, I

do not believe that fact determines the outcome of this issue.

II.

We review questions of statutory interpretation, like the one presented here, de

novo. Lawson v. Hawkins Cnty., 661 S.W.3d 54, 59 (Tenn. 2023). When interpreting a

statute, “[w]e look to ‘the language of the statute, its subject matter, the object and reach

of the statute, the wrong or evil which it seeks to remedy or prevent, and the purpose sought

to be accomplished in its enactment.’” Yebuah v. Ctr. for Urological Treatment, PLC, 624

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S.W.3d 481, 486 (Tenn. 2021) (quoting Spires v. Simpson, 539 S.W.3d 134, 143 (Tenn.

2017)). “The text of the statute is of primary importance.” In re Kaliyah S., 455 S.W.3d

533, 552 (Tenn. 2015) (quoting Mills v. Fulmarque, Inc., 360 S.W.3d 362, 368 (Tenn.

2012)). “[O]ur role is to determine how a reasonable reader would have understood the

text at the time it was enacted.” Lawson, 661 S.W.3d at 59 (citing State v. Deberry, 651

S.W.3d 918, 924 (Tenn. 2022)). “We give terms their natural and ordinary meaning in

their statutory context unless the statute defines them.” Id. (citing Mills, 360 S.W.3d at

368). “In the absence of statutory definitions, we look to authoritative dictionaries

published around the time of a statute’s enactment.” Deberry, 651 S.W.3d at 925 (citing

State v. Edmondson, 231 S.W.3d 925, 928 & n.3 (Tenn. 2007)). Further, “[c]ourts presume

that every word in a statute has meaning and purpose and that these words ‘should be given

full effect if the obvious intention of the General Assembly is not violated by so doing.’”

Johnson v. Hopkins, 432 S.W.3d 840, 848 (Tenn. 2013) (quoting Lind v. Beaman Dodge,

Inc., 356 S.W.3d 889, 895 (Tenn. 2011)). If a statute is in derogation of the common law,

it must be “strictly construed and confined to [its] express terms.” Moreno v. City of

Clarksville, 479 S.W.3d 795, 809 (Tenn. 2015) (quoting Doyle v. Frost, 49 S.W.3d 853,

858 (Tenn. 2001)).

III.

Although section 29-26-119 is certainly “not a model of clarity” as the majority

admits, in my view, its language is still sufficiently clear to conclude that it abrogates the

collateral source rule and only permits recovery of the actual amounts paid or payable by

Plaintiffs or their insurance. The first half of the statute (beginning with “In a health care

liability action” and ending with “loss of earned income”) provides the overarching rule of

the statute. Tenn. Code Ann. § 29-26-119. This portion outlines what “the damages

awarded may include” in a health care liability action. Id. Section 29-26-119 states that

“the damages awarded may include (in addition to other elements of damages authorized

by law) actual economic losses suffered by the claimant by reason of the personal injury.”

Id. (emphasis added). As the majority highlights, the statute does not define the term

“actual economic losses,” but instead provides some non-exclusive examples. Although

the list of non-exclusive examples is useful in attempting to ascertain the meaning of

“actual economic losses suffered,” it is still necessary to first interpret the preceding

undefined language that provides the overarching rule of the statute. See Lawson, 661

S.W.3d at 59.

The word “actual” means “[i]n existence; real; factual.” Actual, The American

Heritage Dictionary of the English Language 14 (1969). The adjective “economic” means

“[o]f or pertaining to matters of finance.” Economic, The American Heritage Dictionary

of the English Language 413 (1969). The noun “loss” means “[s]omething or someone

that is lost” or “[t]he amount of a claim on an insurer by an insured.” Loss, The American

Heritage Dictionary of the English Language 771 (1969). Piecing these definitions

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together, “actual economic losses” under section 29-26-119 “may include” a financial

amount that is lost and in existence, or the real financial amount of a claim on an insurer

by an insured. Critically, section 29-26-119 also requires that these losses be “suffered.”

The verb “suffer” means to “sustain loss, injury, harm, or punishment.” Suffer, The

American Heritage Dictionary of the English Language 1286 (1969).

Based on this language, it is evident that the losses contemplated by this statute only

involve the actual amounts paid by Plaintiffs or their insurance rather than the full,

undiscounted amounts. The majority highlights the definition of the word “actual” to make

the point that the undiscounted costs do exist and are not legally imputed. However, as

emphasized above, the statute does not stop there. Importantly, the word “suffered”

requires that the losses actually be sustained. Here, neither Plaintiffs nor their insurance

sustained a loss for the full, undiscounted medical bills. Rather, the losses sustained in this

instance were the expenses actually paid by Plaintiffs or their insurance. Any negotiated

rate differential or write-off cannot be said to have been “suffered” under the statute if

neither Plaintiff nor their insurance will ever be required to pay it. In contrast to the facts

of this case, the majority provides a hypothetical in which “a patient’s insurance company

denies his claim,” and the “patient gets no benefit from any discounts negotiated by the

insurance company.” However, in that hypothetical, the undiscounted fees would be

“suffered” under the statute because the patient would actually sustain those losses by being

obligated to pay them.

Before moving to the second half of section 29-26-119, it is also necessary to

address the following language: “cost of reasonable and necessary medical care.” Similar

language was also at issue in Dedmon, 535 S.W.3d at 446–50, and West v. Shelby County

Healthcare Corporation, 459 S.W.3d 33, 43–44 (Tenn. 2014) (holding that “reasonable

charges” for medical services under the Tennessee Hospital Lien Act are the discounted

amounts a hospital accepts as full payment). While Dedmon provided that “West was

intended only to construe the phrase ‘reasonable charges’ in the context of determining the

maximum amount of a hospital’s HLA lien,” 535 S.W.3d at 450, it is important to note that

Dedmon did not involve a specific statutory scheme like this case or the West case. See id.

at 450–51. Rather, Dedmon interpreted the phrase “reasonable medical expenses” in the

context of generic personal injury cases. Id. at 437.

Here, we are faced with a statutory scheme in the specific context of the Health Care

Liability Act. Similar to the Court in West interpreting the phrase “reasonable and

necessary charges for hospital care” in the context of the Hospital Lien Act, 459 S.W.3d at

44, we must interpret the phrase, “cost of reasonable and necessary medical care,” in the

context of section 29-26-119. The “cost of reasonable and necessary medical care” is

among the list of examples of “actual economic losses” provided in the statute. Tenn. Code

Ann. § 29-26-119. And as explained above, the overarching rule of section 29-26-119

explicitly contemplates only “actual economic losses suffered.” Thus, in the context of

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this statute, the “cost of reasonable and necessary medical care” refers to the expenses

actually paid by Plaintiffs or their insurance.

In addition to the plain meaning of the first half of the statute, the plain meaning of

the second half of the statute (beginning with the phrase “but only to the extent”) further

supports the conclusion that section 29-26-119 abrogates the collateral source rule. I agree

with the amicus that the second portion of the statute “defines when a plaintiff has borne

or ‘suffered’ an ‘actual economic loss.’” To reiterate the statute’s language, “actual

economic losses” may be recovered,

but only to the extent that such costs are not paid or payable . . . by insurance

provided by an employer either governmental or private . . . or any other

source except the assets of the claimant or of the members of the claimant’s

immediate family and insurance purchased in whole or in part, privately and

individually.

Tenn. Code Ann. § 29-26-119 (emphasis added).

The language “paid or payable” further supports the plain meaning of “actual

economic losses suffered” interpreted above. The word “paid” is the past tense of “pay”

and means “[t]o remunerate or recompense for goods or services rendered” or “[t]o give

the indicated amount of; discharge (a debt or obligation).” Pay, The American Heritage

Dictionary of the English Language 963 (1969). In this case, the amount remunerated and

that discharged the financial obligation was the amount actually paid by Plaintiffs or their

insurance. Further, the word “payable” means “[r]equiring payment on a certain date; due”

or “[t]hat can or may be paid.” I agree with Defendant’s argument that if “neither the

Plaintiff nor his insurance company is obligated to pay the ‘charged’ amount, . . . then the

charged amount cannot be defined as payable.” Thus, stated in positive terms, if the “actual

economic losses suffered” are “paid or payable” by “the assets of the claimant or of the

members of the claimant's immediate family and insurance purchased in whole or in part,

privately and individually,” then the losses actually sustained are recoverable under the

statute.

This conclusion finds direct support from multiple federal decisions and two recent

decisions from the Tennessee Court of Appeals. In Nalawagan v. Dang, the United States

District Court for the Western District of Tennessee ruled that section 29-26-119 “limits

damages to costs ‘paid or payable.’” No. 06-2745-STA-dkv, 2010 WL 4340797, at *3

(W.D. Tenn. Oct. 27, 2010). Basing its conclusion on the “plain meaning” of the terms of

the statute, the court concluded that “it is clear that medical expenses are limited to

expenses already paid or such expenses yet to be paid, and not simply the amounts billed.”

Id.; see also Calaway v. Schucker, No. 2:02-cv-02715-STA-cgc, 2013 WL 12033182, at

*1 (W.D. Tenn. Aug. 12, 2013) (approving of the ruling of Nalawagan by limiting a

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plaintiff’s damages to amounts “paid or payable,” and providing that the plaintiff could not

recover the “amounts billed,” the “gross price,” or the “sticker price”); Guthrie v. Ball, No.

1:11-cv-333-SKL, 2014 WL 5094140, at *1–2 (E.D. Tenn. Oct. 10, 2014) (also approving

of the ruling and rationale of Nalawagan).

In addition to these federal decisions, two recent decisions of the Tennessee Court

of Appeals provide support for the conclusion that section 29-26-119 only contemplates

the recovery of the amount actually paid by Plaintiffs or their insurance. In Stevens v. State,

No. M2017-01114-COA-R3-CV, 2018 WL 1128476 (Tenn. Ct. App. Feb. 6, 2018), the

Court of Appeals considered the question of whether a provision of the Claims Commission

Act abrogated the collateral source rule and limited the plaintiffs’ recovery to the amounts

actually paid. Id. at *3. The statute at issue in Stevens provided:

The state will be liable for actual damages only. No award shall be made

unless the facts found by the commission would entitle the claimant to a

judgment in an action at law if the state had been a private individual.

Tenn. Code Ann. § 9-8-307(d) (2017) (emphasis added).

The Court of Appeals held in favor of the plaintiff by construing “actual damages”

to mean “compensatory damages.” Stevens, 2018 WL 1128476, at *3; see also Estate of

Tolbert v. State, No. M2017-00862-COA-R3-CV, 2018 WL 1124511, at *3 (Tenn. Ct.

App. Feb. 28, 2018) (holding the same). The intermediate court explained that “[n]othing

in the Claims Commission Act indicates that the General Assembly intended to deviate

from the well-recognized common law meaning of ‘actual damages.’ Thus, the language

used in subsection (d) falls far short of the clear expression of legislative intent necessary

to abrogate the collateral source rule.” Stevens, 2018 WL 1128476, at *3. However, the

Court of Appeals went further and stated that their “conclusion is buttressed by a

comparison of the language used in subsection (d) to the language the General Assembly

used to abrogate the collateral source rule in health care liability actions. There, the

General Assembly expressly limited recoverable damages to[] ‘actual economic

losses’ . . . .” Id. (citation omitted). Thus, it appears the Court of Appeals was of the view

that there is a difference between the language of “actual damages” and “actual economic

losses suffered by the claimant,” such that the latter “abrogate[d] the collateral source rule

in health care liability actions.” Id.

Despite the persuasive authority from these federal and state opinions that directly

address the specific issue before us today, the majority opinion cites to other

distinguishable cases. See Nance by Nance v. Westside Hosp., 750 S.W.2d 740, 743–44

(Tenn. 1988) (holding that while worker’s compensation benefits fall under the phrase “any

other source” in section 29-26-119, where “benefits carry a right of subrogation,” the

plaintiff’s losses are not “replaced or indemnified” under the statute); Hunter v. Ura, 163

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S.W.3d 686, 710–11 (Tenn. 2005) (holding that because an employee deferred a portion of

his income to a death benefit program, that deferment qualified under the phrase “insurance

purchased in whole or in part, privately and individually”); Steele v. Ft. Sanders Anesthesia

Grp., P.C., 897 S.W.2d 270, 282 (Tenn. Ct. App. 1994) (holding that section 29-26-119

“permits a plaintiff to introduce medical expenses when the plaintiff has paid part of the

insurance premium”). These cases do not consider the issue on appeal currently before us,

do not interpret the language “actual economic losses suffered,” and the opinions do not

appear to mention whether any health insurance write-offs or discounts were actually

involved. Also of significance, the facts and issue in Hunter primarily involved a

decedent’s death benefits, not medical bills. Hunter, 163 S.W.3d at 710–11. Overall,

Nance, Hunter, and Steele are distinguishable and do not provide meaningful guidance

concerning the specific issue before us today.

Although I would conclude that the statute’s language is unambiguous, which is

sufficient to end the analysis at that point, see Eastman Chem. Co. v. Johnson, 151 S.W.3d

503, 507 (Tenn. 2004) (providing that when “the statutory language is clear and

unambiguous, we must apply its plain meaning in its normal and accepted use”), the

legislative purpose of the Medical Malpractice Review Board and Claims Act of 1975

(“Medical Malpractice Act”) also lends support to the conclusion that the statute abrogates

the collateral source rule. See Yebuah, 624 S.W.3d at 486 (“We look to . . . ‘the wrong or

evil which [a statute] seeks to remedy or prevent[] and the purpose sought to be

accomplished in its enactment.” (quoting Spires, 539 S.W.3d at 143)).

As Dedmon highlights, the “purpose of [the Medical Malpractice Act] was to

contain the cost of medical malpractice litigation and control the cost of health care.” 535

S.W.3d at 445–46. Indeed, not long after the passage of the Medical Malpractice Act, this

Court highlighted that “this state and the nation were in the throes of what was popularly

described as a ‘medical malpractice insurance crisis.’ Because of alleged increasing

numbers of claims, insurance companies had grown reluctant to write medical malpractice

policies. Where policies were available, premiums had risen astronomically.” Harrison v.

Schrader, 569 S.W.2d 822, 826 (Tenn. 1978). Demonstrating the crisis,

[a] special report of a committee established under the Secretary of Health,

Education and Welfare, issued in 1973, indicated that between 1960 and

1970 insurance premiums rose on a national average of 540.8% [f]or

physicians and 949.2% [f]or surgeons. In Tennessee alone[,] the increase of

insurance premiums between 1968 and 1975 was approximately 700%.

Id. at n.5. Therefore, based on the state of affairs that existed around the time of the passage

of section 29-26-119, it is more than conceivable that the legislature intended to abrogate

the collateral source rule by passing legislation aimed at combating the rising costs of

malpractice insurance premiums and health care costs in general. The “purpose[s] sought

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to be accomplished” by section 29-26-119 are certainly advanced by forbidding recovery

of any costs not actually incurred by patients or their insurance. Yebuah, 624 S.W.3d at

486 (quoting Spires, 539 S.W.3d at 143).

The majority opinion asserts that the legislature likely “would not have had in mind

the current situation, where HMOs contractually require health care providers to discount

fees and pay insureds’ medical expenses partly by requiring providers to forgive a portion

of them.” Indeed, that may be true. Nevertheless, we must still apply the plain language

of section 29-26-119 to the facts of this case that involve modern-day managed care

insurance practices. While a reasonable reader of this statute in 1975 likely would not have

envisioned modern-day health insurance billing, he or she would have understood “actual

economic losses suffered” to mean that a plaintiff cannot recover losses that are never

sustained.

In sum, when considering the plain meaning of this statute in combination with the

legislative purpose of the Medical Malpractice Act, “actual economic losses suffered” must

mean that a plaintiff may only recover losses that are actually sustained. Although statutes

in derogation of the common law must be “strictly construed,” the “express terms” of this

statute simply do not permit recovery of full, undiscounted medical bills that neither a

plaintiff nor insurance are ever required to pay. Moreno, 479 S.W.3d at 809 (quoting

Doyle, 49 S.W.3d at 858).

III.

For the reasons stated above, I respectfully dissent from the majority’s decision to

affirm the trial court’s pretrial order involving Tennessee Code Annotated section 29-26-

119.

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ROGER A. PAGE, CHIEF JUSTICE

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