BURTON v. RIVERBOAT INN CORPORATION
Filing
63
ORDER granting in part and denying in part 34 Motion in Limine to exclude evidence of medical costs billed. The Court DENIES Defendant's motion insofar as it declines to exclude evidence of medical expenses billed to Plaintiff. Because St anley applies in this matter, the Court GRANTS Defendant's motion insofar as it holds that Defendant is entitled to introduce evidence showing that Plaintiff's medical care providers accepted a lesser amount in full satisfaction of her bills. Signed by Magistrate Judge William G. Hussmann, Jr., on 11/22/2013. (NRN)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
JANET BURTON,
Plaintiff,
v.
RIVERBOAT INN CORPORATION,
Defendant.
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4:12-cv-40-WGH-RLY
ENTRY ON DEFENDANT’S MOTION IN LIMINE TO
EXCLUDE EVIDENCE OF MEDICAL COSTS BILLED
This matter is before the Court on Defendant’s motion in limine (Dkt. 34)
to exclude evidence showing that Plaintiff was billed for medical costs
exceeding the amount paid on her behalf by Medicare. The motion has been
fully briefed, and the Court, having considered the motion, the parties’ filings,
and relevant law, and being duly advised, hereby DENIES the motion in part
and GRANTS it in part.
I.
Background
This matter is set for a jury trial to determine Defendant’s liability for
injuries Plaintiff claims to have suffered after falling down a staircase at
Defendant’s hotel. Plaintiff, a Medicare beneficiary, seeks compensation for the
reasonable and necessary value of her medical costs. The parties agree that
Plaintiff’s medical care providers billed her for $237,398.46 in medical
expenses but accepted a payment of $56,100.09 from Medicare in complete
satisfaction of those charges. (Dkt. 34-1 at 2; Dkt. 36 at 1). Defendant now
asks the Court to order that no party or witness may refer at trial to any
medical expense but the $56,100.09 accepted from Medicare. (Dkt. 34 at 1).
II.
Discussion
Indiana Evidence Rule 413 and the Indiana Supreme Court’s opinion in
Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009), speak directly to the
admissibility of a plaintiff’s medical bills. Accordingly, the Court must answer
three questions to resolve Defendant’s motion. First, do Rule 413 and Stanley
apply in this federal action? Second, if they apply at all, how do Rule 413 and
Stanley treat the facts before the Court? Finally, does any other source of law
override Rule 413 and Stanley and support Defendant’s motion? The Court
addresses each question in turn.
A. Indiana Evidence Rule 413 and Stanley v. Walker apply to this
case.
Indiana Evidence Rule 413 and the Indiana Supreme Court’s treatment
of that rule in Stanley speak directly to the question before the Court. Before
applying these authorities, however, the Court must determine the extent to
which they apply in this federal action.
This matter is before the Court on diversity jurisdiction. (See Dkt. 1 at
¶¶ 3–4). Therefore, Indiana tort law will decide the merits of Plaintiff’s claim,
but federal law—subject to a few exceptions—controls the admissibility of
evidence. See Fed. R. Evid. 1101(a)–(b); see also Schrott v. Bristol-Meyers
Squibb Co., 403 F.3d 940, 943 (7th Cir. 2005). For this reason, Indiana Rule
413 and Stanley apply to this case only if either (a) they are not evidence rules
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at all but, rather, statements of substantive state law that control in a diversity
action; or (b) to the extent they are evidence rules, they are exceptional state
evidence rules that apply in federal court despite Federal Rule 1101. The
Court finds that Indiana Rule 413 and Stanley apply under either rationale.
1. Under Rule 413 and Stanley, both evidence of amounts
billed and evidence of negotiated payments should be
admitted.
Indiana Evidence Rule 413 states that “[s]tatements of charges for
medical, hospital or other health care expenses for diagnosis or treatment
occasioned by an injury are admissible into evidence. Such statements shall
constitute prima facia evidence that the charges are reasonable.” The second
sentence of Rule 413 is particularly important because, since before it was
adopted in 1994, tort victims have been entitled to recover compensation for
medical expenses that are “both reasonable and necessary.” See, e.g., Smith v.
Syd’s, Inc., 598 N.E.2d 1065, 1066 (Ind. 1992). As written, Rule 413 allows a
tort plaintiff to establish the reasonable value of medical expenses—subject to
the defendant’s rebuttal—by introducing a bill.
In Stanley, the Indiana Supreme Court heard the appeal of a tortfeasor
who sought at trial to introduce evidence showing that the plaintiff’s medical
care providers had accepted a discounted payment from his insurer in
complete satisfaction of his bill. 906 N.E.2d at 854. The trial court admitted
evidence showing the total amount billed to the plaintiff—consistent with Rule
413—but found that evidence showing the provider’s acceptance of a lesser
payment by the insurer was barred by Indiana’s collateral source statute. Id.
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The collateral source statute directs trial courts hearing personal injury and
wrongful death cases to admit evidence of collateral source payments toward
medical costs, but it explicitly excepts evidence of payments from “insurance
benefits for which the plaintiff or members of the plaintiff’s family have paid for
directly” and payments made by the state or federal governments or an
“agency, instrumentality, or subdivision” of either. Ind. Code § 43-44-1-2.
The Indiana Supreme Court held that the trial judge’s exclusion of
evidence showing the insurer’s payment was error. Stanley, 906 N.E.2d at
859. The court explained that Indiana Rule 413 makes the amount billed only
prima facie evidence—not dispositive or conclusive evidence—of the reasonable
value of medical expenses. Id. at 856. Indiana case law allows defendants to
introduce competing evidence of reasonableness, including evidence showing
the amount actually paid by the plaintiff. Id. Therefore, it concluded, the
proper measure of medical expenses is neither the amount billed nor the
amount paid; rather, the proper measure is the reasonable value as determined
by the trier of fact, who may consider both figures and settle on either one or
an amount in between. Id. at 856–57.
Despite the collateral source statute, the court held that defendants
could introduce evidence of negotiated payments from collateral sources to
show the reasonable value of medical expenses. Id. at 858. In support of that
holding, the court remarked that the ubiquity of health insurance and the
frequency with which insurers negotiate discounted payments have conceived a
healthcare marketplace in which neither the first bill to the patient nor the
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amount accepted by the provider often reflects the actual value of the products
and services rendered. Id. at 857. Accordingly, to admit evidence showing
providers’ acceptance of lesser payments from patients—but not acceptance of
lesser payments from collateral sources—would create two classes of tort
victims: uninsured plaintiffs for whom partial payments are admissible and
support a lower damages award, and insured plaintiffs for whom partial
payments are inadmissible and support a higher award. Id. at 858.
As its bottom line, the court held that “[t]he collateral source statute does
not bar evidence of discounted amounts in order to determine the reasonable
value of medical services.” Id. at 858. After Stanley, parties may introduce the
total amount billed and the acceptance of a partial payment from any source to
prove reasonableness—so long as they do so without improperly referencing
insurance in violation of other Indiana evidence law. Id.
2. Rule 413 and Stanley articulate substantive Indiana tort
law.
The Court finds that Indiana Evidence Rule 413 and Stanley apply on
diversity jurisdiction because they set forth substantive Indiana tort law and
are not strictly rules governing the admissibility of evidence. In matters heard
on diversity jurisdiction, state law decides the substantive claims and defenses,
but the Federal Rules of Evidence apply in place of their state law
counterparts. See Fed. R. Evid. 1101(a)–(b); see also Schrott, 403 F.3d at 943.
Therefore, Indiana Rule 413 and Stanley apply here if they govern substantive
law and not merely the admissibility of evidence.
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No federal court has considered whether Rule 413 or Stanley controls
substantive law or only admissibility of evidence1, but the Seventh Circuit
examined the distinction at length. “A pure rule of evidence,” it has explained,
“is concerned solely with accuracy and economy in litigation . . . .” Barron v.
Ford Motor Co. of Canada Ltd., 965 F.2d 195, 199 (7th Cir. 1992). Evidence
rules are directed at lawyers and judges and seek to enable them to resolve
claims with “‘accuracy, efficiency, and fair play.’” Thomas v. Guardsmark, LLC,
487 F.3d 531, 537 (7th Cir. 2007) (quoting Michael Lewis Wells, The Impact of
Substantive Interests on the Law of Federal Courts, 30 Wm. & Mary L. Rev.,
499, 504 (1989)). By contrast, “a substantive rule is concerned with the
channeling of behavior outside the courtroom.” Barron, 965 F.2d at 199.
Many rules might fall somewhere between these two poles. Id.
The Court finds Barron instructive. There, the plaintiff sued an
automobile manufacturer for negligent design after she was paralyzed in an
accident. Id. at 196–97. The court considered whether to apply a North
Carolina common law rule excluding from civil actions any evidence showing
that the plaintiff was not wearing a seatbelt. Id. at 197–98. On the one hand,
the court suggested it would be “a rule of evidence if it is motivated by concern
that jurors attach too much weight to a plaintiff’s failure to wear his seatbelt.”
Three judges in our Circuit have, however, assumed Stanley would apply in a
diversity action. See Hale v. Gannon, 2012 WL 4020387 at *1 (S.D. Ind. Sept. 12,
2012); Patel ex rel. Patel v. Menard, Inc., 2011 WL 4729901 at *2 (S.D. Ind. Oct. 6,
2011); Mitkal v. United Parcel Serv. Co., 2011 WL 148405 at *4–5 (N.D. Ill. Jan. 18,
2011).
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Id. at 199. On the other, it would be “a substantive rule if it is designed not to
penalize persons who fail to fasten their seatbelts.” Id.
In the end, the court found the North Carolina rule was substantive. Id.
at 200. Its apparent purpose was to preclude the conclusion that a plaintiff
“failed to take reasonable measures to reduce the severity of the accident if one
occurred.” Id. at 199. The rule was “founded on the desire of the North
Carolina courts not to penalize the failure to fasten one’s seatbelt, because
nonuse is so rampant in the state that the average person could not be thought
careless for failing to fasten his seatbelt.” Id. at 200. In other words, the rule
defined the scope of the plaintiff’s duty of care and necessarily affected the
substance of the claims and defenses in tort actions.
The Court reads Barron and Thomas as counseling that Indiana Rule 413
and Stanley are not strictly evidentiary rules but represent substantive law.
Rule 413 has no federal analogue. It stands apart from Indiana’s remaining
evidence rules (and, for that matter, their federal counterparts) in that it not
only governs admissibility but instructs the trier of fact as to the value of
evidence: A medical bill is admissible, and it is presumed to show the
reasonable value of medical expenses.
The same is true of Stanley. It tells more than what evidence parties may
present to the jury. On the contrary, it tells how to measure the reasonable
value of medical expenses in a tort claim and what evidence the parties may
offer to prove reasonable value. Like the North Carolina rule in Barron defined
a duty of care based on observations of widespread non-use of seatbelts, the
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Indiana Supreme Court used Stanley to define the measure of damages in tort
actions based on observations of murky billing and payment practices. See
Stanley, 906 N.E.2d at 857.
Indiana Rule 413 and Stanley are not mere evidentiary rules that tell
lawyers and judges how to conduct a trial. See Thomas, 487 F.3d at 537.
Rather, they tell litigants and jurors how to determine the proper measure of
damages in a tort action. Like the North Carolina rule at issue in Barron, these
authorities define a substantive element of tort claims and therefore must be
considered when Indiana tort claims are heard on diversity jurisdiction.
3. To the extent Rule 413 and Stanley are evidence rules
otherwise inapplicable on diversity jurisdiction, they
govern a presumption regarding an element of a claim
and therefore apply through Federal Rule 302.
Even if the Court has misapprehended Barron and Thomas and Indiana
Evidence Rule 413 and Stanley are evidence rules as opposed to substantive
law, it still must find that they apply in this case. Federal Rule of Evidence 302
holds that, “[i]n a civil case, state law governs the effect of a presumption
regarding a claim or defense for which state law supplies the rule of decision.”
So far as the Court is aware, no court has questioned whether Indiana Rule
413 or Stanley falls within the ambit of Federal Rule 302. In fact, the Court
can locate only three cases from our Circuit where Rule 302 has been applied
at all. See Estate of Davis v. Johnson, 745 F.2d 1066, 1074 n.2 (7th Cir. 1984)
(applying Illinois case law holding that a minor child surviving a parent is
rebuttably presumed to have suffered pecuniary injury for loss of society); Flis
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v. Kia Motors Corp., 2005 WL 1528227 at *6 (S.D. Ind. June 20, 2005) (applying
Indiana pattern jury instruction on presumption of negligent design); Maynard
by Maynard v. Indiana Harbor Belt R.R. Co., 997 F. Supp. 1128, 1132–36 (N.D.
Ind. 1998) (finding no Indiana presumption as to child’s capacity to exercise
care and discretion). Even so, the Court is confident in applying Rule 413 and
Stanley here.
Federal Rule 302 grew out of a series of U.S. Supreme Court cases
applying state law to determine burdens of proof in federal actions heard on
diversity jurisdiction. Fed. R. Evid. 302 advisory committee’s note. See also
Dick v. New York Life Ins. Co., 359 U.S. 437, 446–47 (1959) (applying North
Dakota burden for proving death was not accidental); Palmer v. Hoffman, 318
U.S. 109, 116–17 (1943) (applying Massachusetts burden for proving
contributory negligence); Cities Service Oil Co. v. Dunlap, 380 U.S. 208, 210–12
(1939) (applying Texas burden for proving status as bona fide purchaser).
Because state law controls the substance of claims heard on diversity
jurisdiction, state law also controls the burden of proving “a substantive
element of the claim or defense.” See Fed. R. Evid. 302 advisory committee
note.
Like the Illinois rule at question in Estate of Davis, Indiana Rule 413 and
Stanley govern the burden of proving damages, which are an essential element
of negligence claims like Plaintiff’s. See, e.g., Hellums v. Raber, 853 N.E.2d
143, 145–46 (Ind. Ct. App. 2006) (“The elements of negligence are duty, breach
of duty, and damages proximately caused by the breach”). In Indiana, “[p]rima
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facie evidence means such evidence as is sufficient to establish a given fact and
remains sufficient if uncontradicted.” Ramsey v. Madison Cnty. Dep’t of Family
& Children, 707 N.E.2d 814, 816 (Ind. Ct. App. 1999). Indiana Rule 413
entitles tort plaintiffs to presumptively establish the reasonableness of medical
costs by introducing a bill and then shifts to defendants the burden of
contradicting that presumption. Stanley’s rule entitles defendants to rebut the
presumptive reasonableness of a billed amount by introducing evidence of a
payment negotiated by the provider and a collateral source. Together, they
govern the effect of a presumption for proving damages in Indiana tort actions,
so they must apply through Federal Rule 302 in actions applying Indiana law
on diversity jurisdiction.
B. Under Rule 413 and Stanley, the full amount billed to Plaintiff is
admissible.
Having found that Indiana Evidence Rule 413 and Stanley apply in this
matter, the Court also must find that Plaintiff is entitled to present evidence
showing the full amount she was billed for medical expenses. Rule 413 plainly
calls for this evidence to be admitted and presumes it shows the reasonable
value of Plaintiff’s medical expenses until Defendant offers evidence to
contradict it. By its text alone, Rule 413 defeats Defendant’s motion.
The Court does not interpret Stanley as changing this result. The
Indiana Supreme Court did not expressly abrogate Rule 413 in Stanley, and
neither party has presented any authority that would support such a
conclusion. Instead, the Court reads Stanley as reiterating the common law
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rule that reasonableness (not any one amount presented to the jury) is the
measure of compensable medical expenses and as endowing defendants with a
tool for contradicting Rule 413’s presumption that the amount billed is
reasonable. See 906 N.E.2d at 856–57. The Court finds that Stanley’s bottom
line is that courts should allow the parties to show jurors both figures—the
amount billed and the amount accepted for payment, irrespective of who paid
it—and allow them to determine where in that spectrum the reasonable value
lies. Id. Consequently, the Court cannot grant Defendant’s motion to exclude
evidence of amounts billed unless presented with some other authority
negating Indiana Rule 413.
C. No other source of law renders the full amount billed to Plaintiff
inadmissible.
Having found that Indiana Evidence Rule 413 and Stanley discredit
Defendant’s motion, the Court may grant Defendant’s request and exclude
evidence of amounts billed only if some other source of law supersedes or
contradicts the plain holdings of Rule 413 and Stanley. Defendant offers two
arguments of this nature, but the Court must reject both.
1. The Court cannot bar evidence of amounts billed based on
the collateral source statute and public policy.
The Court rejects Defendant’s argument that logic, public policy, and the
collateral source statute bar Plaintiff from introducing evidence of the total
amount she was billed for medical expenses. (Dkt. 34-1 at 2–6). Defendant
explains that, when a medical care provider accepts a negotiated payment from
Medicare in satisfaction of a plaintiff’s debt, federal law precludes the provider
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from attempting to collect the difference from the plaintiff and effectively caps
the plaintiff’s ultimate liability for medical expenses at the amount paid by
Medicare. (Id. at 3–4 (citing 42 U.S.C. § 1395cc(a)(1)(A)–(B))). Because one of
the purposes of the collateral source statute is to ensure accurate damages
awards and prevent “windfall” recoveries by plaintiffs, Defendant argues,
plaintiffs must be barred from recovering damages for medical expenses that
have been written off and for which they can never be held liable. (Dkt. 34-1 at
5–6 (citing Ind. Code § 34-44-1-1). If amounts billed but not paid cannot be
recovered, then evidence of those amounts is irrelevant and must be excluded.
Sensible as it may be, this argument presents an insufficient basis for
the Court to ignore Rule 413 and Stanley and bar evidence of Plaintiff’s medical
bills. First, assuming for the sake of argument that its purposes are exactly as
Defendant portrays, the collateral source statute nonetheless provides no
authority on which to exclude evidence of an amount billed. Rather, it provides
authority only to admit evidence of amounts paid by certain sources other than
the plaintiff.
Second, the Indiana Supreme Court analyzed the collateral source
statute at length when it issued its opinion in Stanley, and it did not abrogate
Rule 413 or otherwise state that evidence of amounts billed are inadmissible.
The Court is not aware of any subsequent decision in which an Indiana
appellate tribunal has applied the collateral source statute to exclude evidence
of amounts billed from a personal injury action. Persuasive as Defendant’s
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logic and policy arguments may be, the Court cannot contravene the clear
edicts of the Indiana Supreme Court.
The Court also must reject Defendant’s argument that Stanley does not
apply to this case because it dealt with payments from a private insurer and
not Medicare. (See Dkt. 38 at 2–3). The Court finds no such line drawn in the
text of Stanley. In fact, the Stanley court took care to mention both private and
government insurers in its opinion. See 906 N.E.2d 852 at 858 (“We recognize
that the discount of a particular provider generally arises out of a contractual
relationship with health insurers or government agencies . . . ) (emphasis
added). Even if the Court reads too far into that reference, it finds that the
rationale undergirding Stanley—that the prevalence of insurance and
negotiated payments has bred an inability to determine precisely the
reasonable cost of medical services based on either bills or accepted
payments—applies with equal force to both private insurance and Medicare
beneficiaries. Accordingly, the Court finds no reason Stanley should not apply
here. Moreover, even if Stanley was distinguishable, Rule 413 still would
require admission of Plaintiff’s medical bills.
2. Plaintiff is not limited as a matter of law to recovering the
amount Medicare paid for her medical expenses.
Defendant also argues that the Court should exclude evidence of
amounts billed because, as a matter of law, Indiana tort plaintiffs can recover
damages only for medical expenses actually paid. (Dkt. 34-1 at 6–7 (applying
Butler v. Indiana Dep’t of Ins., 875 N.E.2d 235, 240 (Ind. Ct. App. 2007))).
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Indeed, the Indiana Court of Appeals held in Butler that plaintiffs in wrongful
death actions may recover only for medical expenses that actually have been
paid. Butler, 875 N.E.2d at 243. However, the Indiana Supreme Court has
unequivocally limited the reach of that rule to wrongful death actions.
The Indiana Supreme Court unanimously limited Butler’s application to
wrongful death cases when it heard the same case on transfer eighteen months
later. Butler v. Indiana Dep’t of Ins. (Butler II), 904 N.E.2d 198, 203 (Ind. 2009).
In Butler II, the supreme court also held that wrongful death plaintiffs—whose
causes of action are purely statutory—may recover only for medical expenses
actually paid. Id. at 202–203. In reaching that conclusion, the court explicitly
acknowledged Rule 413 and the reasonableness standard applicable in other
tort cases. Id. at 201–202. The court clearly distinguished between wrongful
death and causes of action emanating from the common law, and it explained
that its holding was based strictly on language present in Indiana’s wrongful
death statute but not in the common law governing other tort claims. Id. at
202. In short, it unmistakably confined the rule Defendant advocates to the
realm of wrongful death actions, leaving Rule 413 and the common law
reasonableness standard to govern other torts.
Furthermore, the Indiana Supreme Court declined to extend Butler’s
reach into personal injury cases through Stanley. Both iterations of Butler
were issued before the court decided Stanley. Indeed, the court even cited
Butler II in Stanley. See 906 N.E.2d at 866 (Dickson, J., dissenting). Instead of
applying Butler’s recovery cap, however, the supreme court supplemented the
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common law rule of reasonableness by establishing that, despite the collateral
source statute, evidence of negotiated payments is admissible. Id. at 858. The
Court infers that, had the Indiana Supreme Court desired instead to eliminate
the common law rule of reasonableness, limit recovery to amounts paid, and
render evidence of amounts billed inadmissible despite Rule 413, it would have
done so. It did not, and the Court cannot now impose a rule the Indiana
Supreme Court has consciously rejected.
Finally, the Court acknowledges Defendant’s reference to Brumfiel v.
United States, in which Judge Tinder applied the collateral source statute to
limit recovery in a Federal Tort Claims Act action heard in our District. See
2005 WL 4889255 at *9–10 (S.D. Ind. Oct. 25, 2005). The Court further
acknowledges that the Indiana Court of Appeals relied in part on Brumfiel when
it limited recovery to amounts paid in Butler. See 875 N.E.2d at 242–43. Still,
the Indiana Supreme Court subsequently rejected Defendant’s argument that
Butler’s rule applies outside the wrongful death context—not once, but twice—
expressly in Butler II, and tacitly in Stanley. Indiana law controls resolution of
Defendant’s motion, and the Indiana Supreme Court laid down the applicable
rule when it decided Stanley.2
The Court finds that Judge Tinder’s approach in Brumfiel is well-reasoned and would
apply just as soundly to these facts. Regardless, Indiana law governs the substance of
this case, and the Indiana Supreme Court—not the Court of Appeals, and not our
District—has the last word on Indiana law. Accordingly, the Court must apply the
supreme court’s later decisions in Butler II, which explicitly confined the recovery limit
to actions brought under the wrongful death statute, and Stanley, which exhibited no
intent to extend Defendant’s rule to common law tort claims like Plaintiff’s.
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III.
Conclusion
For the foregoing reasons, the Court DENIES Defendant’s motion insofar
as it declines to exclude evidence of medical expenses billed to Plaintiff.
Because Stanley applies in this matter, the Court GRANTS Defendant’s motion
insofar as it holds that Defendant is entitled to introduce evidence showing
that Plaintiff’s medical care providers accepted a lesser amount in full
satisfaction of her bills.3
Like most rulings on motions in limine, the Court’s ruling here is
conditional. Although unlikely in this particular matter, should evidence
actually admitted at trial substantially change the posture of this ruling, the
Court may nevertheless admit evidence at trial that would violate this order.
However, no party may mention such evidence in opening statements, nor may
any party offer such evidence without first gaining the Court’s express
permission. The parties also should be prepared to present offers of proof
outside the presence of the jury if deemed necessary by counsel to protect their
record.
SO ORDERED the 22nd day of November, 2013.
__________________________
William G. Hussmann, Jr.
United States Magistrate Judge
Southern District of Indiana
Served electronically on all ECF-registered counsel of record.
The Court reads Stanley as holding that Defendant may introduce evidence of a
negotiated payment but may not reveal the source of that payment. See 906 N.E.2d at
858. In other words, Defendant may introduce evidence showing that Plaintiff’s
medical care providers accepted a partial payment in full satisfaction of her bills, but
it may not reveal that such payment was issued by Medicare or even that Plaintiff is a
Medicare beneficiary.
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