Setoff

In Segovia vs. Romero the first district appellate court clarified what money a defendant may set off against a judgement. The case is somewhat unusual procedurally. The plaintiff in this case was the wife of a State Farm insured. The defendant in the case had driven his car into the rear end of the plaintiff’s vehicle. State Farm paid for her loss pursuant to her husband’s policy in the amount of $10,766.20, itemized as follows:
$5,000 Med Pay
$5,516 Property Damage
$250 Deductible
$10,766.20 Total Payment by State Farm
The defendant had an insurance policy through American Heartland Insurance Company. State Farm sued the defendant as a subrogee. It settled the case for one half the payments it made, $5,383.10. It settled the med pay portion for $2,500 and the property damage portion for $2,883.10
Not only did State Farm sue the defendant, Plaintiff sued defendant too. After a trial a jury returned a verdict for $5,395 for medical expenses, $0 for pain and suffering, and $0 for loss of normal life. Defendant sought an offset of the verdict for $5,000, the med pay portion of the claim that State Farm paid. The trial court denied the motion for set off partly because the plaintiff had no contractual, statutory, or common-law obligation to repay the money to State Farm. She had not sign a release and did not have her own policy through State Farm. The trial court noted that State Farm could have made her sign a release. However, it failed to do so.
The appellate court disagreed with the trial court. It discussed the application of the collateral source rule. The collateral source rule has both evidentiary and substantive components. As a rule of evidence, it prevents the jury from learning anything about the collateral source. From substantive standpoint it means the payments made to the injured party from other sources does not diminish damages otherwise recoverable. Collateral payments do not reduce defendants’ liability, even though they reduce plaintiffs’ loss. The court noted that the defendant was not seeking a set off for the medical payments State Farm made to plaintiff. Instead, he sought set off for what American Heartland paid to settle State Farm’s subrogation action against him for the benefits State Farm paid. The defendant sought a $5000 settle set off, despite the fact that State Farm settled the med pay portion for $2,500 in the subrogation action.
The appellate court held that defendant is entitled to set off for the entire amount that State Farm paid in medical payment. The appellate court considered the married couple as a single economic unit, because the financial interests of a husband and wife are closely intertwined, if not actually blended. The court felt that plaintiff should not be allowed a double recovery, which would have occurred had she received medical payments from the defendant and from State Farm. The defense got an entire $5000 set off, rather than the $2,500 Heartland paid State Farm for the medical.
Ackerman Law Office is available to help injured injury victims, as well as commercial disputes, on a contingent fee. If you need help with your contingent fee claim, please feel free contact us.