Low, Ball & Lynch’s

WEEKLY LAW RESUME

April 27, 2006 Issue  By: Ray Coates

 

Damages - Evidence of Gratuitous Payments Barred By Collateral Source Rule

 

Smock v. State of California

(April 18, 2006)

 

Court of Appeal, First District

 

The Collateral Source Rule bars defendants from introducing evidence to show that a plaintiff has received benefits from a party not involved in the litigation to compensate for the damages the plaintiff sustained. The rule has often been criticized as permitting a plaintiff to receive a double recovery.

 

In this case, Plaintiff Morgan Smock was seriously injured in a traffic accident on the San Francisco-Oakland Bay Bridge. Smock filed a complaint alleging his injuries were caused by the negligence of another driver and a dangerous condition of State of California property. The case proceeded to trial in Alameda County Superior Court. The jury found for Smock and apportioned 10% liability to the State and 90% to the other driver. Tort damages included past and future medical expenses, and past lost earnings.

 

At the time of the accident, Smock was an attorney, who had recently become a partner in a law firm. As a result of his injuries, Smock did not work for portions of two years. Nevertheless, his law firm paid his agreed salary and bonus without any reduction. At trial, the court applied the Collateral Source Rule, and excluded evidence of the payments by his employer from the jury’s consideration. After hearing the evidence, the jury awarded Smock $108,000 in lost earnings. The State appealed. The First District Court of Appeal affirmed.

 

On appeal, the State contended that the Collateral Source Rule should not apply, because its policy justifications are not fulfilled when the rule is applied to exclude gratuitous payments made to a plaintiff. The Court of Appeal disagreed, holding that the rule is an essential element of our tort damage system. The Court pointed to various policy justifications. In particular, the rule does not provide double-recovery in situations where the payor has a right of subrogation or reimbursement. In situations where the victim’s insurance provides compensation, the rule is said to serve a public policy of encouraging people to purchase and maintain insurance. Further, the Collateral Source Rule is also considered to play a necessary role in the calculation of damages. For example, the cost of medical care is often an important indicator of Plaintiff’s general damages.

 

The Court held that under California law, it makes no difference if the benefit or payment arises from some gratuitous payment, or from some obligation. In the end, while barring the collateral source from consideration by the jury could benefit a plaintiff, allowing it to be considered would benefit the wrongdoer. The First District chose to give the benefit to Mr. Smock.  The judgment was therefore affirmed.

 

COMMENT

 

The case provides a good example of courts being reluctant to place limits on the Collateral Source Rule. As the Court of Appeal commented, if changes are going to be made to the long-established rule, they will need to come from the Legislature.

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