Melo v. Allstate Insurance
800 F. Supp. 2d 596
D. Vt.2011Background
- Melo was struck by a vehicle driven by an underinsured motorist; the at-fault driver's policy tendered its limits and Melo seeks additional damages from Allstate (his insurer) for UIM benefits.
- Total medical bills billed by Melo's providers amounted to $149,816.17 as of the motion date; Melo anticipates future surgery and medical expenses.
- Melo operated a dental practice; he was unable to work Oct 4, 2008 to Jan 4, 2009, resulting in claimed lost income of $174,231.00.
- The parties dispute proper valuation of medical services (billed vs. paid) and whether collateral-source payments may be considered; Vermont collateral source rule generally bars such payments from reducing the defendant’s liability.
- Melo argues for value based on the amounts billed by providers; Allstate argues the collateral source rule bars evidence of payments received from third parties and that only amounts actually accepted should be considered or introduced indirectly through other evidence.
- The court applies Vermont law on collateral sources, predicts how Vermont Supreme Court would rule, and addresses whether post-tax lost income evidence is admissible; decision grants in part and denies in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral-source evidence may prove reasonable medical value | Melo: value is the amount billed; collateral source should not reduce value | Allstate: evidence of payments from collateral sources is admissible only to prove value within collateral-source limits | Collateral-source rule bars showing amounts paid; evidence of billed value or other legitimate valuation evidence allowed. |
| What is the proper measure of reasonable medical value in this case | Value should be the amount billed by providers | Value should reflect amounts actually accepted by providers to be paid | Court allows evidence of reasonable value beyond amounts paid, barred from using collateral-source payments to prove value. |
| Whether post-tax lost income is admissible to measure damages | Post-tax lost income should be used | Post-tax lost income should be admissible; jury told damages are not taxable | Post-tax lost income evidence is barred by collateral-source rule; no tax instruction required at this time. |
| Whether jury should be instructed about tax consequences of damages | Not warranted at this time; may be reconsidered if taxation issues arise. |
Key Cases Cited
- My Sister's Place v. City of Burlington, 139 Vt. 602 (Vt. 1981) (collateral source doctrine applies to deny setoff from third-party payments)
- Windsor Sch. Dist. v. State, 2008 VT 27 (Vt. 2008) (collateral source rule applies across damages phases)
- Hall v. Miller, 465 A.2d 222 (Vt. 1983) (collateral source doctrine precludes defendant from credit for third-party payments)
- Leitinger v. DBart, Inc., 2007 WI 84 (Wis. 2007) (collateral source rule bars collateral payments to prove reasonable value of medical services)
- Madrid v. Paquette, (slip op. 2008) (Vt. Super. Ct. 2008) (Beaudin/Madrid align with Leitinger on collateral source payments)
- Coty v. Ramsey Associates, Inc., 149 Vt. 451 (Vt. 1988) (tax benefits are collateral sources; full recovery not reduced by taxes)
- Stowell v. Simpson, 143 Vt. 625 (Vt. 1983) (personal injury awards are not taxable income; no tax instruction required absent issues)
- Smedberg v. Detlef's Custodial Serv., Inc., 2007 VT 99 (Vt. 2007) (damages measured by reasonable value of medical services)