Cassiday Schade LLP is one of the first defense firms to have an appellate decision reducing a medical malpractice verdict by nearly 33%, pursuant to 735 ILCS 5/2-1205. This is an important ruling for medical malpractice defendants with respect to a statute that is rarely used. The decision in Perkey v. Portes, 2013 IL App (2d) 120470 is now final as the Illinois Supreme Court recently rejected plaintiff’s Petition for Leave to Appeal. The Appellate Court found that 735 ILCS 5/2-1205 restricts the collateral source rule in medical malpractice cases and specifically allows hospitals and physicians to seek a reduction of a judgment for amounts paid by third parties for medical expenses and lost wages that do not have to be reimbursed to that third party. The reduction cannot exceed 50% of the judgment. The purpose of this statute is to prevent a double recovery to the plaintiff and to reduce the cost of malpractice actions.
In Perkey, plaintiff filed a wrongful death case alleging that the defendant physician failed to diagnose and treat pancreatic cancer. At trial, the parties stipulated that the medical expenses totaled $310,000. The plaintiff obtained a judgment for $600,000 including a line item of $310,000 for medical expenses. During discovery the plaintiff had answered interrogatories that all of the medical expenses had been paid by Blue Cross/Blue Shield (BCBS). BCBS had not asserted a lien to any amount before the verdict was rendered. The day after the judgment was entered, the defendant filed a motion to reduce the judgment by $300,000, pursuant to 2-1205.
Section 2-1205 provides in relevant part that: “100% of the benefits provided for medical charges . . . which have been paid, or which have become payable to the injured person by any other person, corporation, insurance company or fund in relation to a particular injury, shall be deducted from any judgment in an action to recover for that injury based on an allegation of negligence, or other wrongful act, not including intentional torts, on the part of a licensed hospital or physician, provided, however, that: . . . such reduction shall not apply to the extent that there is a right of recoupment through subrogation, trust agreement, lien or otherwise; and the reduction shall not reduce the judgment by more that 50% of the total amount of the judgment entered on the verdict.”
After the motion was filed, plaintiff disclosed that BCBS had asserted a right of reimbursement to approximately $135,000 of the $310,000 paid in medical expenses. Therefore, defendant amended his request and sought a reduction of $175,000 of the judgment (100% of the medical bills paid not subject to reimbursement). The plaintiff argued that because BCBS had “a right of recoupment,” it didn’t matter how much it sought to recoup, the defendant was not entitled to any reduction. Quite simply, plaintiff argued that “to the extent there is right of recoupment” should be read as “if there is a right of recoupment.” The trial court agreed and denied defendant’s motion.
The Appellate Court reversed, finding that the plaintiff’s interpretation ignored the “to the extent that” language of the statute, and such an interpretation would disallow any reduction even if the insurer’s right of recoupment was limited to one cent which ran counter to the purpose of the statute. The Appellate Court found that “the plain language of the statute advances the goal of reducing the costs of medical malpractice actions by eliminating duplicative recoveries while not subjecting the plaintiff to an uncompensated loss for medical expenses if an insurer exercises its right to recover medical payments.” The Appellate Court concluded that the trial court erred in denying defendant’s motion to reduce the judgment and found that it should be reduced by $175,000, i.e., the extent to which there was no right of recoupment.
It is important to note that 2-1205 also provides for a reduction of a medical malpractice judgment for benefits paid by a third party for lost wages. This was not an element of damages in the Perkey case so it was not addressed. However, the same analysis would apply. The reduction however is limited to 50% of the benefits paid that are not subject to reimbursement. Importantly, such a motion must be filed within 30 days of the judgment, and the reduction cannot reduce the judgment by more than 50%. Additionally, it is the defendant’s burden to establish that the judgment should be reduced and the amount by which it should be reduced. Early discovery, during the pendency of the case, to seek information with respect to collateral benefits and amounts not subject to reimbursement can elicit the necessary information. This information will be crucial not only to efforts to reduce a judgment, but also to any settlement negotiations.
Tami Reding is a partner in the firm's Libertyville and Chicago offices where she focuses her practice primarily on medical malpractice defense litigation and has a substantial practice in employment litigation matters and civil and commercial litigation.