SB 1329, An Act Concerning The Reduction Of Economic Damages In A Personal Injury Or Wrongful Death Action For Collateral Source Payments Made On Behalf Of A Claimant
TESTIMONY OF THE CONNECTICUT HOSPITAL ASSOCIATION
SUBMITTED TO THE JUDICIARY COMMITTEE
Monday, March 3, 2025
The Connecticut Hospital Association (CHA) appreciates this opportunity to submit testimony concerning SB 1329, An Act Concerning The Reduction Of Economic Damages In A Personal Injury Or Wrongful Death Action For Collateral Source Payments Made On Behalf Of A Claimant. CHA supports the bill.
Connecticut hospitals are critical to their communities. They are confronting the challenges posed by a post-pandemic healthcare system with an exemplary healthcare workforce that continues to provide outstanding care. But challenges remain. Hospitals are treating sicker patients, it continues to be challenging to hire and retain staff, and the financial headwinds are grave. Through it all, hospitals are steadfast, providing high-quality 24-hour care for everyone who walks through their doors, focusing on making Connecticut’s healthcare system more equitable, and driving world-class innovation right here in Connecticut.
CHA supports SB 1329 because it will correct a technical flaw in Section 52-225a of the Connecticut General Statutes regarding the reduction of collateral source payments in personal injury or wrongful death cases when there was right of subrogation but some or all of the subrogation right has been resolved. This legislative correction will restore fundamental fairness to the collateral source payment reduction rules applied by courts.
The mechanics of collateral source payments work this way: current law is designed to allow for a reduction in an amount to be paid to a plaintiff when another party outside of the lawsuit (a “collateral source”) has actually paid the damages claimed or listed. The common situation when a collateral source comes into play is when insurance covers some or all of a plaintiff’s medical bills.
For example, a plaintiff had treatment after an accident and the treatment bills totaled $10,000, of which insurance covered $9,500. The plaintiff’s realized damages were really $500, but a trier of fact, often a jury, sees only the full $10,000 amount when examining evidence and determining damages. (Evidence rules are such that the jury does not learn about the insurance coverage and would not know how much the plaintiff paid or had paid by insurance.)
To avoid defendants overpaying for costs and damages that plaintiffs did not actually incur, the collateral source rule as set forth in Section 52-225a creates a process by which the court can deduct collateral source payments, reducing the total amount a defendant is required to pay a plaintiff. This concept of collateral source reduction promotes fundamental fairness and is neither controversial nor at issue in SB 1329.
SB 1329 targets a flaw in one of the more intricate nuances of the collateral source payment law, namely when there is “a right to subrogation.” A right to subrogation is when a third party (collateral source, such as an insurer) has a right to force the plaintiff to repay that same third party. Section 52-225a seeks to achieve fairness in these circumstances by eliminating the collateral source reduction for amounts that a plaintiff may still need to repay to the third-party source. That is a fair concept and seeks to ensure that plaintiffs are reimbursed for their actual, out-of-pocket losses.
Unfortunately, current law fails to address specifically what happens when the plaintiff and third party have agreed to a smaller amount in settlement of the third party’s subrogation claim. Returning to the example set forth above, assume that the collateral source (insurer) has paid $9,500 to the plaintiff and subsequently agreed to accept $1,000 to satisfy its subrogation claim. Under current law, there can be no reduction ($0.00) in the amount to be paid by the defendant to the plaintiff under the collateral source rule, even though fairness and logic dictate that the amount should be reduced by the $8,500 already paid by the insurer to the plaintiff.
This often, if not always, results in a windfall or double recovery for the plaintiff. The plaintiff will incur out-of-pocket expenses totaling $1,500 (the $500 they originally paid and the $1,000 they will pay to the insurer to settle the subrogation claim) but will be allowed to recover a full $10,000 from the defendant, resulting in a windfall of $8,500.
This is neither a fair outcome nor a logical result. CHA does not believe that the interpretation of the law reflects the intentions of the legislature. But, the Connecticut Supreme Court, in Marciano v. Jimenez, 324 Conn. 70 (2016) (Marciano), ruled that the legislature should have been more explicit if it wanted courts to apply that level of fairness and went on to point out that what the legislature intends is of little or no consequence. Rather, the Supreme Court admonished that the exact words of the statute are what count and that the legislature would have needed to use “restrictive and qualifying language” to have the intended effect. The Court found such language was missing from Section 52-225a. SB 1329 contains that missing language.
It is likely that you will hear several arguments in opposition to the enactment of SB 1329. We wish to address some of these arguments below.
- Anticipated Argument in Opposition 1: The bill is an improper attempt to eliminate an integral component of longstanding legislation known as Tort Reform (PA 86-338).
This is not a transgression on previously established tort reform principles. The proposed change embodied in SB 1329 is merely a long-overdue correction to ensure fundamental fairness. - Anticipated Argument in Opposition 2: The Marciano decision affirmed the plain meaning of the statute that “there shall be no reduction for collateral sources where a right of subrogation exists.”
We disagree because the court in Marciano was transparent that it was stuck having to rule based on an obviously flawed law. The bill corrects that flaw to arrive at the only logical way to approach the intersection of subrogation and collateral sources. - Anticipated Argument in Opposition 3: The bill would inequitably alter tort reform by upsetting the “balance of equities.”
Changing the statute in the manner proposed in this bill would restore fairness and equity to the law, by eliminating the possibility that a plaintiff might be paid twice for the same loss. The bill eliminates this double-dipping loophole. - Anticipated Argument in Opposition 4: The bill is an INSURANCE INDUSTRY proposal to the collateral source statute favoring the insurance industry over the victims of wrongful conduct.
The statutory change embodied in SB 1329 is not an insurance industry proposal. It has always been a proposal spearheaded by healthcare providers since the release of the Marciano decision by the Connecticut Supreme Court in 2016. This statutory change has been supported by primary care physicians, eye surgeons, dermatologists, urologists, otolaryngologists, ophthalmologists, orthopedic surgeons, physicians for women’s health, and other medical specialists.
Since the enactment of the original statute in 1986, and the release of the Marciano decision in 2016, the medical liability insurance market has changed dramatically. The presence of commercial health insurance providers in the medical liability insurance market has dramatically decreased, as more healthcare providers have become either self-insured entities or have been compelled to participate in captive insurance arrangements.
According to the Connecticut Insurance Department, as of 2023, commercial insurers represent only 39% of the market. Captive insurers now represent over 50% of the market, and self-insurers about 12% of the market. This bill has direct impact on providers of healthcare in our state.
Passing SB 1329 will restore the fundamental fairness that Section 52-225a was originally designed to provide. We urge the Committee to support SB 1329.
Thank you for your consideration of our position. For additional information, contact CHA Government Relations at (203) 294-7310.