Scholle v. Ehrichs

546 P.3d 1170

2024 CO 22

Susan Ann SCHOLLE as personal representative for the Estate of Daniel B. Scholle, Petitioner,

v.Edward EHRICHS, M.D.; Michael Rauzzino, M.D.; and HCA-HealthONE, LLC., Respondents.

Supreme Court Case No. 22SC639

Supreme Court of Colorado.

April 22, 2024

Certiorari to the Colorado Court of Appeals, Court of Appeals Case No. 20CA2051

Attorneys for Petitioner: Connelly Law, LLC, Sean Connelly, Denver, Colorado, Thomas Keel & Laird, LLC, Isobel S. Thomas, Jennifer L. Marshall, Matthew R. Laird, Denver, Colorado

Attorneys for Respondent Michael Rauzzino, M.D.: Davis Graham & Stubbs LLP, Theresa Wardon Benz, Kristin L. Arthur, Denver, Colorado, Wheeler Trigg O’Donnell, LLP, Kevin Kuhn, Meghan Berglind, Denver, Colorado

Attorneys for Respondent Edward Ehrichs, M.D.: Hershey Decker PLLC, Christopher Todd Drake, Lone Tree, Colorado

Attorneys for Respondent HCA-HealthONE, LLC: Sharuzi Law Group, Ltd., Jacqueline B. Sharuzi-Brown, Theodore C. Hosna, Denver, Colorado

Attorneys for Amicus Curiae Coloradans Protecting Patient Access: Lewis Roca Rothgerber Christie LLP, Kendra N. Beckwith, Denver, Colorado

Attorneys for Amici Curiae Colorado Defense Lawyers Association and Colorado Civil Justice League: Holland & Hart LLP,

Christopher M. Jackson, Adrianne K. Rosenbluth, Denver, Colorado

Attorneys for Amici Curiae Colorado Medical Society and American Medical Association: Shook, Hardy, & Bacon LLP, Mariham Yaft, Denver, Colorado

Attorneys for Amicus Curiae Colorado Trial Lawyers Association: Leventhal Puga Braley P.C., Julia T. Thompson, Timothy J. Luetkemeyer, Denver, Colorado, Levin Sitcoff Waneka PC, Robyn Levin, Denver, Colorado

En Banc

JUSTICE BERKENKOTTER delivered the Opinion of the Court, in which JUSTICE HOOD, JUSTICE GABRIEL, and JUSTICE SAMOUR joined.

JUSTICE BERKENKOTTER delivered the Opinion of the Court.

¶1 In this medical malpractice case, we consider the interrelationship between the collateral source statute, § 13-21-111.6, C.R.S. (2023), and the Health Care Availability Act ("HCAA"), §§ 13-64-101 to -503, C.R.S. (2023). The specific question presented is whether the contract exception to the collateral source statute applies in a postverdict proceeding under the HCAA seeking to reduce a jury’s damages award in a medical malpractice action. A split division of the court of appeals answered this question no, holding that a trial court may properly consider collateral source evidence when determining whether good cause exists to allow a prevailing plaintiff in a medical malpractice case to exceed—as unfair—the $1 million statutory damages cap set forth in section 13-64-302(1)(b), C.R.S. (2023), of the HCAA.

¶2 We conclude that the contract exception to the collateral source statute prohibits a trial court from considering this type of evidence regarding a plaintiff’s insurance contract liabilities¹ in making its good cause determination under the HCAA and that section 13-64-402, C.R.S. (2023), does not compel a different result Therefore, we reverse the portion of the division majority’s opinion holding that a trial court may properly consider a prevailing plaintiff’s insurance contract liabilities as part of the court’s good cause and unfairness determinations under the HCAA Scholle v. Ehrichs, 2022 COA 87M, ¶¶ 124–26, 519 P.3d 1093, 1115–16. We affirm the rest of the division majority’s judgment and remand for the trial court to recalculate interest and enter judgment accordingly. On remand, a new good cause determination is unnecessary because (1) the trial court properly declined to consider Scholle’s insurance contract liabilities; and (2) as the division majority concluded, the record supports the trial court’s application of the five remaining factors, id. at ¶¶ 112–13, 519 P.3d at 1113.

I. Facts and Procedural History

¶3 In August 2015, Daniel B. Scholle² underwent elective back surgery at HCA-HealthONE, LLC, d/b/a Sky Ridge Medical Center ("the Hospital"). Drs. Ehrichs and Rauzzino performed Scholle’s surgery. During surgery, Scholle’s iliac vein was severed, resulting in extensive bleeding, and causing Scholle to go into cardiac arrest. The doctors eventually revived Scholle, repaired the severed vein by placing a stent, and finished the procedure. Scholle was then sent to the intensive care unit ("ICU"), where he remained for the next 100 days due to serious complications from the surgery, including an infection at the surgical site, which progressed to sepsis; injuries to his kidneys; an abdominal abscess; peritonitis; colon perforation; respiratory distress; stroke; foot drop; and gangrene in his toes requiring amputation. All parties agree Scholle’s injuries were "catastrophic."

¶4 The Hospital billed Scholle roughly $4.1 million for his care. At the time of his injuries, Scholle had insurance coverage from three different sources. The first was from his twenty years of service in the United States military, during which he paid for benefits through the Veterans Administration/ Tricare insurance program. After Scholle was honorably discharged from the military, he began working at Southwest Airlines—where he was working at the time of his injuries—during which he contributed to a self-funded Employee Retirement Income Security Act ("ERISA") program. His third source of, insurance came from Medicare based on his payment of federal Social Security taxes. Together, Scholle’s insurers paid the Hospital roughly $1.2 million, negotiating a nearly $3 million dollar discount to fully settle the amounts billed.

¶5 Based on his injuries, Scholle sued Dr. Ehrichs, Dr. Rauzzino, and the Hospital (collectively, "Respondents"), alleging medical negligence. Within two months of filing the lawsuit, Scholle notified his insurers as required in medical malpractice actions under section 13-64-402(1) of the HCAA. None of his insurers filed notices of subrogation into the lawsuit. See § 13-64-402(2) (If a third party payer or provider has a right, of subrogation; "[f]ailure to file such written notice shall constitute a waiver of such right of subrogation as to such action.").

¶6 After a five-week trial, a jury found Respondents negligent, apportioning 45% of the fault to Dr. Rauzzino, 40% to Dr. Ehrichs, and 15% to the Hospital. The jury awarded Scholle $9,292,887 in economic damages, $6 million of which it attributed to Scholle’s past medical expenses.

¶7 Scholle moved to exceed the damages cap set forth in section 13-64-302(1)(b) of the HCAA, which generally limits the amount a prevailing plaintiff in a medical malpractice case may recover to $1 million. See § 13-64-302(1)(b). This provision of the HCAA affords a trial court broad discretion to award damages in excess of that limit if the plaintiff shows good cause that imposing the cap would be unfair. Id. Respondents argued that Scholle couldn’t establish good cause, instead urging the court to substantially reduce the jury’s award.

¶8 The trial court found that, under the totality of the circumstances, Scholle had shown good cause for lifting the cap. Specifically, the court found that:

• "credible, unrefuted evidence at trial" supported the $6 million awarded for Scholle’s past medical expenses;

• it would be "fundamentally unfair" to limit Scholle’s damages due to the "calamity" that occurred;

• Scholle’s past medical costs imposed a "significant financial burden" on his family, as he was the primary earner and supported two minor children at home;

• as a result of his permanent injuries, Scholle was forced to take an early medical retirement and would be unable to ever work again;

• Scholle could expect to see escalating medical costs throughout his life; and

• Scholle and his family "lack[ed] the means to earn sufficient income to repay his already-incurred medical costs."

Additionally, the court observed that Scholle spent 100 days in the ICU following his surgery and was comatose during some of this time. The court also noted that Scholle was still under regular care for injuries he sustained from the surgery, including having undergone approximately twenty additional surgeries.

¶9 Respondents objected to the trial court’s last finding, arguing that the court should have considered what amount of Scholle’s already-incurred $6 million in medical costs he was actually going to have to pay given his insurance coverage. First, they pointed to the difference between the amount the Hospital billed Scholle, which was $4.1 million, and the amount his insurers ultimately paid on his behalf, which was just over $1.2 million. The nearly $3 million difference between the billed and paid amounts, Respondents asserted, shouldn’t have been awarded to Scholle because he would never have to pay that amount.

¶10 Second, Respondents argued that the trial court erred in failing to analyze the impact of the HCAA’s subrogation provision, § 13-64-402, on Scholle’s obligation to repay his insurers. In Respondents’ view, Scholle’s insurers waived their subrogation rights when they failed to file notices of subrogation into Scholle’s case. This meant, they claimed, that Scholle wasn’t going to be responsible for paying any of the $4.1 million the Hospital billed him, and this weighed against exceeding the HCAA’s $1 million cap.

¶11 The trial court rejected the Respondents’ arguments, concluding that "a deduction in the amounts paid by collateral sources from the jury’s judgment is not allowed under the contract exception to the collateral source rule," which prohibits courts from reducing verdict amounts where a plaintiff has been separately compensated because of a contract. § 13-21-111.6. Further, the court explained, section 13-64-402 did not apply, given that "no third-party payors, that is collateral sources, filed the statutorily contemplated notices in this case." Thus, the court had no "obligat[ion] to determine the value of any subrogated interests which may or may not exist." Calculating interest at just over $5 million, the court entered judgment...