Lebsack v. Rios et al

Filing 29

ORDER granting 20 Defendants' Motion for a Determination of Law; denying 21 Plaintiff's Motion for a Determination of Law by Judge R. Brooke Jackson on 11/14/17. (jdyne, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No 16-cv-02356-RBJ
ERIN L. LEBSACK,
Plaintiff,
v.
JORGE L. RIOS,
SEABOARD FOODS, LLC, a Limited Liability Company d/b/a Seaboard Farms,
SEABOARD CORPORATION, a Foreign Corporation,
Defendants.

ORDER

This matter is before the Court on the parties’ respective motions for a determination of
law. See ECF Nos. 20, 21.1 Specifically, they ask this Court to address two basic questions: (1)
which claims does Ms. Lebsack have standing to bring in light of a settlement between
defendants and her workers’ compensation carrier; and (2) what medical expense evidence is
admissible in light of the collateral source rule and Colorado workers’ compensation law. I
answer those questions in this order.
BACKGROUND
Plaintiff Erin Lebsack alleges that on September 27, 2013, while driving her employer’s
vehicle, she was struck by a vehicle driven by defendant Jorge L. Rios. ECF No. 1 at ¶ 14. Like
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There is no procedural rule providing for a “motion for determination of law” as such. The motions
could be viewed as motions for partial summary judgment, or motions for a partial declaratory judgment,
or motions in limine. Regardless of the label, both parties indicate that they are hampered in their ability
to consider settlement or otherwise to proceed with this case until the legal issues they pose are resolved.

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Ms. Lebsack, Mr. Rios was driving his employer’s vehicle and performing company business at
the time of the crash. Id. at ¶ 11–12. As a result of the crash, Ms. Lebsack required medical
treatment and missed some work. Id. at ¶ 61.
Ms. Lebsack claimed and received workers’ compensation benefits from her employer,
TMB Corporation, through its insurer, Pharmacist Mutual Insurance Company (PMI). ECF No.
20-1. PMI covered Ms. Lebsack’s medical treatment costs, lost wages, and physical impairment
claims from the date of the crash until June 7, 2016. ECF No. 20-3. Ms. Lebsack’s medical
treatment was billed at $152,575.62, but PMI satisfied these medical bills by paying the
healthcare providers a total of $67,434.46. Id. Further, PMI paid Ms. Lebsack $19,270.92 for
lost wages and physical impairment. Id.
On September 19, 2016 Ms. Lebsack sued Mr. Rios and his employers, Seaboard Foods,
LLC, and Seaboard Corporation, (together, “defendants”). ECF No. 1. Ms. Lebsack seeks
damages including past and future healthcare expenses, wage losses, permanent impairments and
disfigurements, and non-economic losses. Id. Relevant to the pending motions, she is
specifically seeking to recover for medical treatment at the billed amount of $152,575.62, lost
wages totaling $10,000, and an unidentified amount for physical impairment. ECF No. 20 at 2
(referencing Plaintiff’s Initial Disclosure Ex. E).
One week after Ms. Lebsack filed her suit against defendants, PMI sued defendants in
Colorado state court pursuant to its subrogation right as Ms. Lebsack’s workers’ compensation
carrier. ECF No. 20-6. PMI sought the full amount of all benefits it paid to or on behalf of Ms.
Lebsack, totaling $90,167.81. Id. Later, PMI and defendants settled these claims on March 9,
2017 under confidential terms. ECF No. 20-7.

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Shortly thereafter, Ms. Lebsack filed an unopposed motion for a telephonic hearing to
discuss the effect of the settlement between PMI and defendants on this case. ECF No. 18. On
March 21, 2017 I ordered that in lieu of a hearing, the parties should submit briefing on the
issues raised in Ms. Lebsack’s motion. ECF No. 19. The motions have been fully briefed. ECF
Nos. 20–25.
ANALYSIS
This Court has subject matter jurisdiction over this case by reason of diversity of
citizenship. 28 U.S.C. § 1332. In diversity actions, a federal court must “apply the substantive
law of the forum state,” Macon v. United Parcel Serv., Inc., 743 F.3d 708, 713 (10th Cir. 2014),
which, in this case, is Colorado. Because the Colorado Supreme Court has not addressed the
precise questions presented here, this Court must “attempt to predict how [Colorado's] highest
court would interpret [the issue].” Squires v. Breckenridge Outdoor Educ. Ctr., 715 F.3d 867,
875 (10th Cir. 2013); see also Pehle v. Farm Bureau Life Ins. Co., 397 F.3d 897, 901 (10th Cir.
2005) (“Because [Colorado] has not directly addressed this issue, this court must make an Erieguess as to how the [Colorado] Supreme Court would rule.”). This Court may “consider all
resources available” in doing so, “including decisions of [Colorado] courts, other state courts and
federal courts, in addition to the general weight and trend of authority.” In re Dittmar, 618 F.3d
1199, 1204 (10th Cir. 2010) (internal quotation marks omitted).2

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In their reply brief defendants request that the questions of law presented by the motions be certified to
the Colorado Supreme Court pursuant to Colo. App. R. 21.1(a). ECF No. 23 at 2. However, after
considering the briefs, the Court concludes that it can make a reasonable guess at how the Colorado
Supreme Court would rule by applying existing statutory and case law.

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A. Ms. Lebsack’s Claims Post-Settlement.
When a workers’ compensation carrier pays an injured employee’s expenses that are
covered under the workers’ compensation statute it is subrogated for the amount of the benefits
paid.3 One option for pursuing its subrogation right is to place a lien on any settlement or
judgment the employee might obtain from the tortfeasor. After the employee obtains a
settlement or judgment, the employee reimburses the workers’ compensation carrier for benefits
paid (sometimes negotiated downward for various reasons including to account for a
proportionate share of the employee’s litigation costs).
Here, however, PMI did not wait for Ms. Lebsack’s case against the defendants to run its
course. Rather, it filed a state court suit directly against the defendants seeking reimbursement
of the benefits it paid to or on behalf of Ms. Lebsack and then settled that claim. The terms of
that settlement have not been revealed, but presumably defendants paid less than 100% of the
benefits for which PMI sought reimbursement. While defendants agree that initially both PMI
and Ms. Lebsack had the right to pursue claims against defendants for the amount that PMI paid
on Ms. Lebsack’s behalf, they argue that after PMI settled with defendants both PMI’s and Ms.
Lebsack’s claims were extinguished. Ms. Lebsack, in contrast, argues that the timing of
defendants’ settlement with PMI was a strategic “trick” hatched by defendants to reduce her

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The relevant statute, Section 8-41-203(1)(b), provides:
The payment of compensation pursuant to articles 40 to 47 of this title shall operate as
and be an assignment of the cause of action against such other person to . . . . the person,
association, corporation, or insurance carrier liable for the payment of such
compensation. Said insurance carrier shall not be entitled to recover any sum in excess of
the amount of compensation for which said carrier is liable under said articles to the
injured employee, but to that extent said carrier shall be subrogated to the rights of the
injured employee against said third party causing the injury.

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potential damage recovery, and that it contravened established law. ECF No. 21 at 10 (“It is a
trick to manipulate one measure of Lebsack’s damages in a manner that the Colorado state and
federal courts have disapproved.”).
The established law to which she refers is the “collateral source rule.” Under that rule,
codified at C.R.S. § 13-21-111.6, a plaintiff’s damage claim must be reduced by the amount by
which she has been compensated by a third party unless the third party payment was the result of
a contract entered into and paid for by the plaintiff. Thus, if an injured plaintiff’s medical
expenses were paid by her own health insurance carrier, her claim against the tortfeasor who
caused her injuries is not reduced by her insurer’s payment of those expenses. Moreover, the
plaintiff may recover the full amount of the medical expenses billed by the healthcare providers,
not the discounted amount to which the providers agreed as a result of negotiations with
plaintiff’s health insurer. See Volunteers of America Colorado Branch v. Gardenswartz, 242
P.3d 1080, 1085-88 (Colo. 2010). Indeed, the amount actually paid by her health insurer to settle
the bills of the healthcare provider is not even admissible in evidence. Wal-Mart Stores, Inc.,
276 P.3d 562, 566-68 (Colo. 2012). Plaintiff posits that workers’ compensation benefits are
treated like one’s own health insurance benefits for purposes of the collateral source rule, see
ECF No. 21 at 6, n.1, and I will assume, without deciding, that that is so.
Nevertheless, I agree with defendants. PMI stepped into Ms. Lebsack’s shoes to the
extent of the benefits it paid to her or on her behalf. It thus obtained the right, as subrogee, to
pursue a claim for reimbursement of those benefits directly against the defendants whose tortious
conduct allegedly caused the injuries and losses. In effect, it was pursuing the claim that Ms.
Lebsack otherwise would have had against the defendants. Thus, when defendants settled PMI’s

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subrogation claim, Ms. Lebsack’s claim for the amounts covered by the workers’ compensation
statute was extinguished. Ferrellgas, Inc. v. Yeiser, 247 P.3d 1022, 1028 (Colo. 2011). The
collateral source rule no longer applied. Id. at 1028 (“The collateral source doctrine is
inapplicable to bar the setoff of payments that are in some way ‘attributable’ to the defendant.”).
While this might have reduced defendants’ ultimate exposure, it was not a “trick.” Rather,
defendants took advantage of existing subrogation law. The fact that the terms of the settlement
have not been revealed is immaterial. The settlement, regardless of the terms, concluded the
dispute with the defendants to the extent of the injuries and losses that were covered under the
workers’ compensation statute.
It is unclear whether plaintiff is suggesting that she should, nevertheless, be entitled to
recover the difference between the amounts billed by her healthcare providers and the amount
paid to them by PMI. If so, I disagree. First, as I have indicated, defendants’ settlement of
PMI’s subrogation claim extinguished her claim for recovery of medical expenses or other
amounts resolved by PMI. Second, as discussed below, the workers’ compensation statute does
not permit healthcare providers to recover more than what is allowed in the workers’
compensation fee schedule. See C.R.S. § 8-42-101(3)(a)(1). Plaintiff could not have been liable
for expenses in excess of what workers’ compensation paid; PMI’s acceptance of liability for
Ms. Lebsack’s medical payments permanently prohibited Ms. Lebsack’s medical providers from
seeking those costs or fees from her. C.R.S. § 8-42-101(4). Plaintiff cannot recover from
defendants amounts that the healthcare providers could not lawfully charge and that she had no
obligation to pay.
Accordingly, I answer the first of the two questions posed by the pending motions in the

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defendants’ favor: Because PMI and defendants settled PMI’s subrogation claim for all benefits
paid to or on behalf of Ms. Lebsack—namely medical treatment costs, lost wages, and physical
impairment from September 7, 2013 until June 2, 2016—Ms. Lebsack no longer has standing to
seek compensation from defendants for these benefits. This holding does not preclude Ms.
Lebsack’s claim to the extent she seeks to recover damages in excess of the compensation
available under the workers’ compensation statute. C.R.S. § 8-41-203.
B. Admissibility of Medical Treatment Cost Evidence.
The parties dispute which numerical figure related to medical costs—the billed amount
versus the amount paid by PMI—should be presented to the jury. This dispute does not concern
whether or not the jury may be apprised of the fact that Ms. Lebsack received compensation
before trial; instead, this debate concerns which number will be presented to the jury for such use
as it might make of it in determining damages not extinguished by the workers’ compensation
claim.
Ms. Lebsack contends that the jury should be presented with evidence of the billed
amount of her medical treatments without mention of the amount PMI actually paid to the
medical providers. ECF No. 21. In Ms. Lebsack’s view, allowing the defendants to introduce
evidence of the amount that was actually paid for her medical treatment would violate the
protections of the collateral source rule because it could “tip off” the jury to the existence of a
collateral source payment. However, as I have said, the collateral source rule does not apply on
the facts of this case.
Under the Colorado workers’ compensation payment scheme, a billed amount in excess
of the fee schedule is “unlawful, void, and unenforceable.” C.R.S. § 8-42-101(3)(1)(a). The

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billed amount therefore does not represent any legitimate numerical figure related to Ms.
Lebsack’s damages. It has no “tendency to make a fact [of consequence in determining the
action] more or less probable than it would be without the evidence.” Fed. R. Evid. 401. I
conclude that evidence of the amounts billed is irrelevant in the context of this case.
But even if the billed amount were relevant in some manner, I would conclude under Fed.
R. Evid. 403 that there is an unjustified risk that the jury might hold defendants liable for
medical bills that are void and unenforceable under Colorado law and that never constituted a
loss to Ms. Lebsack. Presenting evidence of this sort potentially would mislead the jury and,
therefore, would be unfairly prejudicial to the defendants. Defendants do not argue that evidence
of the amount paid the healthcare providers is irrelevant or otherwise inadmissible. Accordingly,
I answer the second question posed by the pending motions that evidence of the amount paid by
PMI to plaintiff’s healthcare providers is admissible, but evidence of any amount billed by those
providers in excess of the workers’ compensation fee schedule is not admissible.
ORDER
Defendants’ motion for a determination of law, ECF No. 20, is GRANTED. Plaintiff’s
motion for a determination of law, ECF No. 21, is DENIED.
DATED this 14th day of November, 2017.

BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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