Relates to equalizing the treatment of collateral sources in tort actions; repealer

The bill would standardize the treatment of collateral sources not only by requiring that they be set off as to past and future awards regardless of the identity of the defendant, but in certain other respects as well. Currently, personal injury awards in actions against public defendants are offset under subsection (b) only by collateral sources "provided or paid for, in whole or in part, by the public employer." The offset for collateral sources is reduced in such actions by the amount of any contributions made by the public employee for the collateral source benefit. This treatment would be replaced by the approach taken as to all other defendants under the current subsection (c), which requires an offset for the most common sources of collateral sources, whether or not funded by the employer, and reduces the offset by the amount paid by the plaintiff for premiums for the two year period immediately prior to the accrual of the action. The bill would make clear that Section 4545 applies in wrongful death actions alleging medical malpractice (as it does in all other wrongful death actions). The reference to subsection (c) will be eliminated since it will be the sole remaining provision of Section 4545.

In addition, this bill would repeal subdivisions (d) and (e) of Rule 4111 and amend subdivision (b) of Section 4213. These subdivisions currently differentiate among medical malpractice actions, actions against public employers and other tort actions in prescribing the requirements for itemized verdicts and judicial decisions. With the repeal of subdivisions (a) and (b) of Section 4545, the distinctions among such actions would no longer be necessary.

Justification

This bill is necessary to eliminate an anomaly created by the Court of Appeals' recent decision in IAZZETTI V. CITY OF NEW YORK , 94 N.Y.2d 183 (1999), which interpreted CPLR 4545 to deny a public employer (and no other defendant) the benefit of any collateral source offset, including accident disability pension benefits subsidized by the employer, against future economic damages awarded to employees in tort actions. All other defendants may continue to use employer-subsidized accident disability pensions and similar collateral sources to offset awards for future economic loss.

The various Sections of CPLR 4545 were enacted to eliminate the common law collateral source rule, which prohibited tortfeasors from reducing their obligations to plaintiffs by the amount of benefits the plaintiff receives from other sources, such as insurance. The statute's purpose is to eliminate the windfall of double recoveries to plaintiffs which often resulted from the common-law collateral source rule, while still ensuring that uncompensated losses are fully compensated.

CPLR 4545 has been repeatedly amended to expand its scope. Originally enacted as CPLR 4010, to allow the admissibility of evidence concerning past collateral source payments in medical malpractice cases, it was amended effective July 1, 1981, to make such a reduction mandatory and to give the power to make that reduction to the court. CPLR 4010 was subsequently repealed, and its text transferred to CPLR 4545(q), along with the present text of (b), which extended the class of cases in which such an offset for past collateral sources was mandatory to cases brought against public employers. L. 1984, c. 701. Subdivision (a) of the section was amended by L. 1985 c. 294, extending the scope of the offset to future losses whose replacement or indemnification could be demonstrated "with reasonable certainty." This extension of the scope of the offset was expressly extended to "any action" in L. 1986, c. 220. Each amendment has expanded the applicability of the collateral source doctrine to further the policy determination that it is inequitable to allow a plaintiff double recovery, particularly of public monies.

Notwithstanding the trend to eliminate the windfalls that result from the common law rule, and to safeguard public monies, presently all defendants except public employers may offset against awards for future costs or expenses any amounts that would with reasonable certainty be replaced or indemnified.

Public employers' unique inability to offset future economic loss is a consequence of the Court of Appeals' IAZZETTI decision, which holds that the proper statutory predicate for collateral source reductions in personal injury and wrongful death actions brought by public employees against their employers is CPLR 4545(b), rather than CPLR 4545(c). Section 4545 (b) permits an offset only as to past costs and expenses, in contrast to the subsequently enacted 4545(c), applicable to all other defendants, which requires an offset as to past and future costs and expenses. In IAZZETTI , the Court of Appeals concluded that public employers are governed exclusively by CPLR 4545(b), and therefore are limited to an offset against past economic loss.

Three cases, including IAZZETTI , illustrate the harm public entities will be caused by this Court of Appeals' decision. In IAZZETTI , plaintiff, a forty-year-old Department of Sanitation employee, slipped and fell on the floor of the garage where he worked, injuring his back. As a result, he was retired on an Accident Disability Retirement pension, which provides him with three-fourths salary benefits, tax free, for the remainder of his life. Based on plaintiff's life expectancy of 76, he will receive $1,136,150 from his City pension. Then, from his personal injury suit against the City, plaintiff was awarded $1.2 million dollars to compensate him for past and future lost earnings and loss of ordinary pension benefits, the very same loss that the City pension will replace. One million of the $1.2 million was awarded in compensation for future lost earnings and future lost pension benefits. Since plaintiff was found 20% responsible for the happening of the accident, he will receive $800,000 of the $1 million awarded for future economic loss. Thus, as a result of the Court of Appeals' decision in this case, the plaintiff will now receive both $1.1 million in tax-free pension benefits over the remainder of his life, and an $800,000 tax-free jury award meant to compensate him for the same loss.

In CAIAZZO V. CITY OF NEW YORK , plaintiff, a forty-four-year-old Department of Sanitation employee, injured his back and knee due to the condition of the floor in his work area. As a result of his injuries, he was retired on an Accident Disability Retirement of $10,680 annually. He also receives Social Security Disability payments of $12,600 each year. In addition, the jury awarded him $3,565,000 in his personal injury action against the City and allocated $1.1 million, almost one-third of that award, to compensate plaintiff for future economic loss for 31 years. If the City were a private defendant, it would have been entitled to a set-off of $721,680 (combined future pension and social security disability payments over 31 years) against the $1.1 million award for future economic loss, leaving $238,320 in future economic damages to be paid. Under IAZZETTI , the $1.1 million jury award stands unreduced by the $721,680 in tax-free payments plaintiff will receive from his pension and social security disability payments.

In HERRERA V. CITY OF NEW YORK , plaintiff, an NYPD detective, was injured when he was struck by an unmarked police vehicle when he ran out onto the service road of the eastbound Grand Central Parkway in pursuit of robbery suspects fleeing on foot. Following the accident, he was retired on an Accident Disability Retirement pension of $4,359.18 monthly. He also receives monthly Social Security Disability benefits of $1,237. After a reduction by the trial judge, plaintiff recovered a verdict of $3,483,000 in his personal injury action against the City. The future lost earnings award amounted to $750,000 over a 10-year period. The total of future pension benefits and Social Security Disability payments to be paid over the same 10 years would be $690,117. If it were a private defendant, the City would have been liable to pay $59,882. Under IAZZETTI , the HERRERA plaintiff is compensated twice for the same loss and receives an additional $750,000.

As demonstrated above, the Court of Appeals' decision in IAZZETTI will be both unfair and costly. Solely because the defendant is a public employer, plaintiffs receive windfalls by double compensation for the same economic loss. The City pays twice, first through the pension, and then through the personal injury award.

Applying IAZZETTI to only the three cases discussed above results in an increase in costs to the City of $2,271,680. There are approximately 938 cases brought by uniformed service employees currently pending against the City. These cases pose a potential liability of $164 million, a substantial portion of which is for future economic losses that doubly compensate city uniform workers who are also receiving accident disability pensions.

The Court of Appeals' decision in IAZZETTI , by narrowly construing the 1986 amendment to CPLR 4545, has left public employers, and thus the public fisc, in a position inferior to all other defendants. This result is solely attributable to the piecemeal enactment and amendment of this section. The Legislature should correct this anomaly and standardize the treatment of collateral sources.

Legislative history

2007-08, S.4164/A.2989 2005-06, S.1544/A.4354 2003-04, S.622/A.3483. 2001-02, S.2979-A. 2000, S.8037.

Effective date

Immediately.