Colorado Supreme Court Clarifies Questions in Workers’ Comp Cases

An airplane sits on the tarmac with luggage tugs nearby
The Colorado Supreme Court ruled on a case involving workers’ compensation for an injured airline worker, but some justices say the legislature should clarify the issue

A dissent in an April 12 Colorado Supreme Court opinion asks the legislature to clarify an issue within Colorado’s Workers’ Compensation Act.

The court, in a 4-3 decision, concluded an injured worker may not recover damages for past medical bills from a tortfeasor if workers’ compensation insurance has already covered the medical bills and settled its subrogation claim with the tortfeasor. The dissenting justices, however, wrote that the decision leaves open the door for more litigation and contradicts precedent and the legislature’s policy goals.

In the incident that led to the case before the court, United Airlines employee William Scholle was driving a luggage tug at work when he was injured in a collision with a Delta Air Lines employee who was also driving a luggage tug. United paid Scholle’s medical expenses and some of his lost wages under workers’ compensation, and Delta later settled with United to cover the latter’s payout to its employee.

Scholle sued Delta over his injuries. The airline admitted liability but disagreed with Scholle about how much of his medical bills it should pay. Scholle argued the full amount he was billed by his health care providers should be admissible at trial, rather than the lower amount paid by workers’ compensation, citing the state’s collateral source rule.

The collateral source rule bars evidence of a plaintiff’s payout from an insurance company or other “collateral source” because it might lead a judge or jury to reduce the amount a plaintiff recovers in damages. According to a division of the Colorado Court of Appeals, which ruled in favor of Scholle, the rule’s purpose is to prevent a tortfeasor from benefiting from a plaintiff’s insurance contract or other third-party benefits.

“If Scholle had not been insured, he would have been liable for all expenses normally billed. Delta may not step into his shoes to enjoy the benefit of the reduced rates occasioned by the insurance,” the Court of Appeals said in its decision.

A majority of the Supreme Court disagreed, finding that when a workers’ compensation insurer settles its subrogation claim for reimbursement of medical expenses with a third-party tortfeasor, “the injured employee’s claim for past medical expenses is extinguished completely.” Because the employee’s claim is extinguished, the majority said, the collateral source rule does not apply.

Citing a section of the WCA’s subrogation statute, Scholle argued United’s subrogation right extended only to the amount the airline paid, and he retained a claim for medical expenses in excess of that amount. But the majority disagreed with that interpretation, finding “there is no separate claim for the difference between amounts billed and amounts paid that can be decoupled from the underlying claim for recovery of medical expenses.”

Additionally, the majority said, the WCA makes it unlawful for a medical provider to charge in excess of the WCA fee schedule. “If any bill for medical services in excess of what United paid — and then settled — would be void under the Act,” states the opinion written by Justice Melissa Hart, “it makes little sense to conclude that Scholle retained any claim to damages for medical expenses that survived United’s settlement with Delta.”

In amicus briefs supporting Delta, defense attorneys, tort reform advocates and health care groups said awarding plaintiffs “phantom” or “theoretical” charges the plaintiff never incurred is improperly punitive and contributes to rising medical and insurance costs.

The Colorado Defense Lawyers Association argued in an amicus brief that awarding damages based on the “unlawfully billed amounts” is a violation of Colorado’s laws on punitive damages, which are only permitted in cases of fraudulent, malicious or willful and wanton misconduct.

Coloradans Protecting Patient Access, a coalition of health care providers, argued that awarding “theoretical damages” for costs the plaintiff never actually incurred is not only punitive toward defendants but has a harmful effect on health care costs. “In the healthcare context, as damages awards are permitted to expand to ever-increasingly large amounts, the premium costs of insurance (both for medical providers and for consumers) increases as well,” the coalition states in its amicus brief.


The court was closely divided in the case. In a dissent joined by justices William Hood and Maria Berkenkotter, Justice Richard Gabriel said he believes the collateral source rule does apply and evidence of the “reasonable value” of medical services provided to Scholle should be admissible.

“I do not agree with the majority that United’s settlement extinguished Scholle’s entire claim for past medical expenses,” Gabriel wrote. “Rather, it extinguished Scholle’s claim only up to the amount of benefits that United paid him.”

Gabriel said the majority’s decision implicates “a number of significant policy concerns.” First, it undermines “decades of settled precedent” on the collateral source rule, the dissent states, which could generate “significant litigation.”

The decision could also result in workers’ compensation insurers and tortfeasors “racing to settle the insurers’ subrogated interests,” according to Gabriel, “for the sole purpose of limiting injured parties’ recovery.” He added that this is contrary to what the legislature intended when it “expressly provided for dual claims, one owned by the employee and one owned by the insurance carrier.”

“In any event, this case highlights for me the need for legislative clarification as to the nature of workers’ compensation carriers’ subrogated interests and the claims that injured workers retain when they accept workers’ compensation benefits and then separately pursue claims against tortfeasors,” Gabriel wrote. “I respectfully urge the legislature to take up this issue.”

“This controversial 4-3 decision, I believe, misinterpreted the underlying statutes and dealt a major blow to many injured workers in Colorado. I trust the legislature will right the ship during their next session,” Marco Bendinelli, who represented Scholle, said in an e-mail.

“Justice Gabriel’s dissent is consistent with 50 years of Colorado precedent,” said Ogborn Mihm partner Thomas Neville. He agreed that the issue requires a legislative fix. The workers’ compensation system “is not designed to fully get [a worker] back to 100% health — it’s designed to get them back to work,” said Neville, who co-authored a Colorado Trial Lawyers Association amicus brief supporting Scholle. Colorado’s system was meant to incentivize workers to sue tortfeasors to recover damages, he added, but the Scholle decision means injured workers, who are not made whole by workers’ compensation, will lose out on recovering past medical bills if the subrogation claim has been settled.

“The opinion does damage to the policies that the workers’ comp act purports to advance,” Neville said, adding that “we’ve now created a powerful disincentive for injured people to ensure that the bad actor is the one who bears the financial and economic costs that they create.”

Another problem, according to Neville, is that attorneys who represent injured workers often spend a lot of money to hire medical experts and build a case — costs the client typically has to bear. “And then, on the eve of trial, the worker’s comp carrier settles that case out from underneath you, and you can no longer introduce the past medical bills,” Neville said. That creates a lot of uncertainty for personal injury litigation, he said, and some attorneys he has spoken to have said they will no longer take cases involving workers’ compensation and large damages due to the decision.

“If that’s the case, it doesn’t benefit anybody but insurance companies,” Neville said. “It certainly doesn’t benefit injured people.”

The high court was similarly split in its opinion in a companion case, Gill v. Waltz, also decided last week. The majority found Joseph Gill’s claim to recover past medical expenses was extinguished when a workers’ compensation insurer settled with the third-party tortfeasor, while Gabriel, Hood and Berkenkotter dissented.

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