BARME v. WOOD

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Court of Appeal, Second District, Division 1, California.

Warren H. BARME, Jr., et al., Plaintiffs, v. Gaynee WOOD, R. N., et al., Defendants in Intervention and Respondents.

Civ. 58673.

Decided: August 07, 1981

Kegel & Tobin and Clinton M. Hodges, Santa Ana, for plaintiff in intervention and appellant. Shield & Smith, Los Angeles, Home & Clifford, North Hollywood, Ball, Hunt, Hart, Brown & Baerwitz, Los Angeles, Horvitz & Greines and Irving H. Greines and John L. Klein, Encino, for defendants in intervention and respondents. Burke, Williams & Sorensen and Brian A. Pierik, Los Angeles, as amici curiae on behalf of plaintiff in intervention and appellant.

Plaintiffs Warren H. Barme, Jr., by his wife and conservator Eileen Barme, and Eileen Barme sought damages for medical malpractice from defendants Oddvar A. Myhre, M.D., Oddvar A. Myhre, M.D. Inc., a professional corporation, Charles H. Klieman, M.D., Charles H. Klieman, M.D. Inc., a professional corporation, John P. Lombardi, M.D., Eugene Wagner, M.D., Stephen Berberich, M.D., Cardio Medical Group of Lynwood, a professional corporation, Gayanne Wood, R.N., St. Francis Hospital of Lynwood and various Does. The complaint was framed in four causes of action, including two causes of action alleging loss of consortium by Eileen Barme.1

Subsequently plaintiff in intervention, City of Huntington Park, filed its complaint against defendants, alleging similar medical malpractice by defendants against plaintiff Warren Barme, and seeking reimbursement from them for medical expenses of $72,742.11 and disability indemnity of $6,304.90 paid by the City to or on behalf of plaintiff Warren Barme; City also asked for “all further amounts intervenor may be required to pay or may become due the injured plaintiff ” It is estimated that ultimately the total amount which will be expended by City for Barme's injuries will be $150,000.

Defendants,2 filed motions for judgment on the pleadings as to the complaint in intervention, claiming that City was barred from recovering any amount from defendant health providers by Civil Code section 3333.1, subdivision (b).3

The motions were denied without prejudice until such time as defendants had made their elections regarding the introduction of collateral source evidence and had refiled their motions. Defendants elected to introduce collateral source evidence and filed motions for summary judgment. The motions were opposed on the ground that Civil Code section 3333.1, subdivision (b) was unconstitutional.

Finding “no constitutional grounds for infirmity,” the trial court awarded defendants summary judgments against plaintiff City. After entry of the judgments, plaintiff City took this appeal.

Plaintiff City makes three contentions in this court challenging the constitutionality of Civil Code section 3333.1, subdivision (b): (1) the statute violates the equal protection clause of the United States Constitution (Fourteenth Amendment) and the California Constitution, which affords similar protection, (2) the statute violates the due process clause of the United States Constitution (Fifth Amendment) and the California Constitution and (3) the statute cannot be harmonized with either federal or state statutes providing rights of subrogation to collateral sources who provide benefits of various kinds to persons injured through the negligence of others.

Defendants urge us to uphold section 3333.1, subdivision (b) as an appropriate and justifiable expression of the legislative intent which caused the enactment of MICRA in 1975, one which does not offend either due process or equal protection principles.

BACKGROUND

Discussion

It has long been well established in California that our system of tort recovery is based upon the principle set forth in Civil Code section 1714, i. e., namely that “ ‘(e)very one is responsible for any injury occasioned to another by his want of ordinary care or skill in the management of his property or person ’ ” (Rowland v. Christian (1968) 69 Cal.2d 108, 112, 70 Cal.Rptr. 97, 443 P.2d 561.) Often a person injured as the result of negligence receives initial economic assistance from a variety of sources other than the tortfeasor who caused the injury these “collateral sources” may be governmental or private but ultimately, through subrogation to the injured person's rights, damages flowing from the injury have been the responsibility of the negligent party.

In the instant case, the initial provider of benefits to Barme was his employer, City, self-insured to meet the broad and immediate obligation imposed by law to provide economic and medical assistance to its injured employee pursuant to California's worker's compensation system. Subrogation rights against a negligent third person are provided to the employer by Labor Code section 3852, which was not amended at the time MICRA was enacted and which still provides: “The claim of an employee for (worker's) compensation does not affect his claim or right of action for all damages proximately resulting from such injury or death against any person other than the employer. Any employer who pays, or who becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation, may likewise make a claim or bring an action against such third person. In the latter event, the employer may recover in the same suit, in addition to the total amount of compensation, damages for which he was liable including all salary, wage, pension, or other emolument paid to the employee or to his dependents.” (Stats.1937, ch. 90, s 3852, p. 273. Amended by Stats.1939, ch. 902, s 2, p. 2519; Stats.1970, ch. 242, s 2, p. 502.)

This right of an employer to reimbursement from a tortfeasor who caused an employee's injuries is not solely a statutory right but is regarded as part of the general common law of torts. (County of San Diego v. Sanfax Corporation (1977) 19 Cal.3d 862, 873-874, 140 Cal.Rptr. 638, 568 P.2d 363.) By judicial decision, the reimbursement right has been limited to situations where the employer's negligence did not contribute to the injury (Witt v. Jackson (1961) 57 Cal.2d 57, 72, 17 Cal.Rptr. 369, 366 P.2d 641), and since the adoption of comparative negligence in this state, an employer may only recover benefits paid which exceed the proportionate share of damages attributable to the employer's negligence, if any. (Arbaugh v. Procter & Gamble Mfg. Co. (1978) 80 Cal.App.3d 500, 145 Cal.Rptr. 608.)

What City sought in the trial court was reimbursement pursuant to the principles discussed above of a portion of the total damages for which defendants were responsible, and defendants successfully contended that Civil Code section 3333.1, subdivision (b) terminated that right.4

The collateral source enactments (as subdivisions (a) and (b) are sometimes called) put an end to subrogation rights conferred by statutory and common law, in any action brought by a party injured by the negligence of a health provider. While it is the duty of a reviewing court to harmonize conflicts in the law if it is possible to do so, it is apparent here that the conflict between the old and the new is inescapable and irreconcilable. Civil Code section 3333.1, subdivision (a), as the statute most recently enacted has precedence over preexisting law (Fuentes v. Worker's Comp. Appeals Bd. (1976) 16 Cal.3d 1, 7, 128 Cal.Rptr. 673, 547 P.2d 449) unless it is constitutionally defective.

EQUAL PROTECTION

Both the federal and state constitutions mandate that “no state may ‘deny to any person within its jurisdiction the equal protection of the laws.’ ” (Brown v. Merlo (1973) 8 Cal.3d 855, 861, 106 Cal.Rptr. 388, 506 P.2d 212.) Brown emphasizes, however, that “(t)his principle of ‘equal protection’ ‘does not preclude the state from drawing any distinctions between different groups of individuals' (citation), but it does require that, at a minimum ‘persons similarly situated with respect to the legitimate purpose of the law receive like treatment.’ ” (Ibid.)

The Legislature often fashions classifications of groups or individuals to achieve a legislative goal. The principle of equal protection requires that “A classification ‘must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.’ ” (8 Cal.3d at p. 861, 106 Cal.Rptr. 388, 506 P.2d 212; original emphasis.)

The proper standard of review when a statute is challenged as violative of equal protection has been described as follows: “There are two such tests which are applied by the courts of this state and the United States Supreme Court. The first is the basic and conventional standard for reviewing economic and social welfare legislation in which there is a ‘discrimination’ or differentiation of treatment between classes or individuals. It manifests restraint by the judiciary in relation to the discretionary act of a co-equal branch of government; in so doing it invests legislation involving such differentiated treatment with a presumption of constitutionality and ‘requir(es) merely that distinctions drawn by a challenged statute bear some rational relationship to a conceivable legitimate state purpose.’ (Citation.) A more stringent test is applied, however, in cases involving ‘suspect classifications' or touching on ‘fundamental interests.’ Here the courts adopt ‘an attitude of active and critical analysis, subjecting the classification to strict scrutiny.’ ” (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 16-17, 112 Cal.Rptr. 786, 520 P.2d 10.)

The Brown v. Merlo opinion expressed the view that the right to sue for negligently inflicted injuries is not fundamental, in the sense that it triggers judicial responsibility to subject a statute limiting that right to “strict scrutiny.” (8 Cal.3d at p. 862, fn. 2, 106 Cal.Rptr. 388, 506 P.2d 212.) Since an injured plaintiff's rights are not regarded as fundamental, the rights of those subrogated, dependent as they are on the plaintiff's entitlement, are not “fundamental” in the constitutional sense either.

The restrained test described in D'Amico appears to be appropriate here. The analysis required is neither mechanical or formalistic; in assessing economically oriented legislation, “ ‘(a)ll of the formula require the court to conduct ”a serious and genuine judicial inquiry into the correspondence between the classification and the legislative goals.“ ‘ ” (Cooper v. Bray (1978) 21 Cal.3d 841, 848, 148 Cal.Rptr. 148, 582 P.2d 604, original emphasis; see also, Newland v. Board of Governors (1977) 19 Cal.3d 705, 711, 139 Cal.Rptr. 620, 566 P.2d 254.) There must be a reasonable relationship between the classification and a conceivable legislative purpose.

Much material has been presented to us concerning the legislative intent which led to the enactment of MICRA in its entirety but nothing which pertains to the specific provision with which we are concerned here. Insofar as we have been able to discover, there is no legislative material setting forth a more specific legislative intent or purpose than that stated in the act itself. The Legislature, in enacting MICRA, declared that: “The Legislature finds and declares that there is a major health care crisis in the State of California attributable to skyrocketing malpractice premium costs and resulting in a potential breakdown of the health delivery system, severe hardships for the medically indigent, a denial of access for the economically marginal, and depletion of physicians such as to substantially worsen the quality of health care available to citizens of this state. The Legislature, acting within the scope of its police powers, finds the statutory remedy herein provided is intended to provide an adequate and reasonable remedy within the limits of what the foregoing public health and safety considerations permit now and into the foreseeable future.” (Amended by Stats.1975, 2nd Ex.Sess., ch. 2, s 12.5(1) (b).)

The legislative goal was to protect the health delivery system in this state and to maintain that system within the framework of what was affordable in terms of economic cost. The ultimate concern was undoubtedly the best possible medical care for all of our citizens. The Legislature identified the rising cost of medical malpractice insurance as a major threat to our health delivery system, a premise not acceptable to all students of the problem5 but one which the Legislature was entitled to recognize and act upon. The Legislature further reasoned that there was a direct correlation between the “crisis” of 1975 occasioned by the dramatic increase in the amount paid by health providers for medical malpractice insurance and the amounts being awarded by juries in malpractice litigation to plaintiffs injured by the negligence of health providers; the solution adopted was the imposition of some stringent limitations on the rights of plaintiffs so injured to recover for those injuries, based upon the belief that such limitations would reduce the amount of judgments awarded in malpractice litigation, which in turn would ultimately reduce the medical malpractice premiums required of the health providers. In addition to providing economic succor to doctor, and other health providers, the Legislature foresaw benefits to society as a whole.

It would be inappropriate for this court to conduct its own fact-finding expedition or to speculate concerning the possibility of the existence of other more compelling economic dangers to the health delivery system in 1975. Our assessment of the legislation in question here Civil Code section 3333.1, subdivision (b) is limited to the question of whether a rational nexus exists between Civil Code section 3333.1, subdivision (b) and the legislative goals we have identified in this discussion, or is an irrational discrimination against an injured plaintiff's collateral sources.

There is no doubt that the basic premise of MICRA is that medical malpractice litigation must be conducted by a different set of principles than those which have in the past been applied to personal injury recovery in general, and which still apply to injuries sustained in other contexts. All of the participants in medical malpractice litigation are singled out by MICRA for different treatment than those involved in, for example, an automobile accident or use of a defective product. In a sense, MICRA constituted an experiment fashioned by the Legislature to ameliorate an economic crisis by shifting the burden carried by a relatively small group in our society the health providers to society as a whole, i. e., providing a wider base for the cost of the health delivery system. One element of the legislative experiment was that while in theory at least the injured plaintiff in medical malpractice litigation is still made “whole” from a variety of sources, the collateral sources, including City, are not reimbursed by the tortfeasor but must look elsewhere for a method of absorbing the loss. We cannot speculate on what alternatives will be chosen by collateral sources in this regard; if it develops that injured persons find it impossible to obtain adequate initial assistance for an injury occasioned by medical malpractice due to lack of available insurance or other sources, we assume that the Legislature will address itself to the problem.

Because MICRA represents a departure from existing concepts in personal injury litigation, and the economic problem addressed by the Legislature in enacting MICRA appears exceedingly complex, there was little concrete data on how MICRA would ultimately effect the cost of the health delivery system; the California Insurance Commissioner estimated that the collateral source enactments would, possibly and optimistically, result in a savings of “0-2%” in the cost of medical premiums.6 The view has been expressed in some quarters that the actual impact of MICRA's limitations on medical malpractice judgments is obscure because in the past, under the best of circumstances, very little of the collected insurance dollar has found its way to the injured plaintiff and that “ ‘even a wholesale reduction of injured patients' recoveries will have a surprisingly limited impact on premium costs.’ ”7 We have not been provided here with any hard statistical data which reveals whether the gloomy predictions concerning MICRA's effectiveness are well taken; the fact that the situation invites speculation merely emphasizes the experimental nature of the legislative undertaking.

Although the factual context is dissimilar, the legal issues presented in the case at bench are similar to those involved in Duke Power Co. v. Carolina Env. Study Group (1978) 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595, where the constitutionality of the Price-Anderson Act, which established guidelines for the development of nuclear energy by private companies, was challenged, particularly a provision which limited the liability of private companies for nuclear accidents to $560 million a Congressional “guess,” in view of the unknowns involved in such a possibility. The attack on Price-Anderson was based primarily on asserted violation of the due process clause of the United States Constitution, but an argument was also made that the Act violated equal protection principles. The United States Supreme Court upheld the Act, declaring that “The general rationality of the Price-Anderson Act liability limitations particularly with reference to the important congressional purpose of encouraging private participation in the exploitation of nuclear energy is ample justification for the difference in treatment between those injured in nuclear accidents and those whose injuries are derived from other causes. Speculation regarding other arrangements that might be used to spread the risk of liability in ways different from the Price-Anderson Act is, of course, not pertinent to the equal protection analysis.” (437 U.S. at pp. 93-94, 98 S.Ct. at pp. 2640-2641.)

We find the approach and reasoning of Duke Power applicable here; our Legislature was dealing with economic pressures which had developed over a period of years, and chose to differentiate medical malpractice litigation from other kinds of personal injury litigation in an attempt to resolve a critical situation. We cannot say that the differentiation does not relate to any legitimate legislative objective, and thus City's equal protection challenge must fail. We note that while this appeal was pending, another court of appeal decision was issued upholding the constitutionality of Civil Code section 3333.1, subdivision (b) in the face of equal protection and due process. While that opinion is not yet final we find the discussion therein in point and persuasive here. (See Fein v. Permanente Medical Group, 175 Cal.Rptr. 177 (1981).)

DUE PROCESS

Due process challenges to a statutory provision ordinarily involve the weighing of competing interests, and that is the case here. As explained in Duke Power, supra, 438 U.S. page 84, 98 S.Ct. page 2636, a statutory provision may be upheld so long as it is not “demonstrably arbitrary or irrational.” The Duke Power opinion emphasized that no citizen has a vested interest in any rule of common law, a principle that has application in the case at bench. Viewing Civil Code section 3333.1, subdivision (b) alone or in context with MICRA as a whole, we conclude that barring recovery by collateral sources from the tortfeasor, while a departure from the common law, is not demonstrably arbitrary and offensive to due process of law.

Nor need we engage in speculation as to the outcome of a collision between collateral sources who derive subrogation rights from federal rather than state statutes, and defendants in a medical malpractice action. Whether the supremacy clause of the United States Constitution will be interpreted to preclude the California Legislature's efforts to alter its preexisting medical malpractice law in all or some respects is a question which will be resolved at a more appropriate time.

The judgment is affirmed.

I must respectfully dissent from the ultimate conclusion of my colleagues as expressed in the majority opinion.

Appellant has sought to have this court determine the constitutionality of a single portion of the MICRA legislation, viz., Civil Code section 3333.1, subdivision (b); the only portion of MICRA which resulted in a complete and total abolition of any redress against the health care provider tortfeasor.

Without discussing whether to resolve the potential health care crisis was in fact a reality; or whether the tremendous increase in the cost of medical malpractice insurance premiums could or should have been dealt with in some other fashion, as many appellate and supreme courts of our sister states have done, let us simply assume the Legislature did correctly perceive a real health care crisis was potentially imminent and was in fact the result of the increase cost of medical malpractice insurance premiums, and let us assume further that the amount of awards in malpractice litigation had a direct correlation to the increased cost of such malpractice insurance.

As the majority opinion points out; the test formula to be applied in assessing economically-oriented legislation is, “a serious and genuine judicial inquiry into the correspondence between the classification drawn by the legislature and the legislative goal.” The words “serious” and “genuine” do not comport with what I perceive as casual and somewhat cavalier rhetoric employed in the majority opinion's final assessment, “we cannot say that the differentiation does not relate to any legitimate legislative objective ” (Emphasis added.)

If we are to make a serious and genuine inquiry to determine whether the classification (total abrogation of recovery by the collateral source provider) is reasonable, not arbitrary, and rests on grounds of differences having a fair and substantial relationship to the objective of the legislation, it would appear this was not done in the opinion expressed in the majority decision.

The legislative concern in 1975 was that health care providers either could not or would not continue to serve the citizens of this state in view of the overwhelming increased cost of medical malpractice insurance which had escalated 300-plus per cent. Keeping in mind the savings in the premium dollar cost that possibly and optimistically could result from abolishing any right of recovery by the collateral source benefit providers was possibly and optimistically .00-.02 per cent of a premium dollar, it is difficult if not impossible to conclude that there is any fair and or substantial relationship between the provisions of Civil Code section 3333.1, subdivision (b) and the avowed purpose of MICRA to reduce the cost of medical malpractice insurance premiums.

To fail and refuse to recognize the absurd and disproportionate relationship between the resulting sacrifice imposed upon the collateral source benefit providers as compared to the possible miniscule reduction in cost of medical malpractice insurance premiums is to bury one's thinking in the sand of sophistry. I must and do conclude there is no fair, reasonable and/or substantial relationship between the provisions of Civil Code section 3333.1, subdivision (b), and the goal of the MICRA legislation to effect a reduction in the cost of medical malpractice insurance premiums enabling and encouraging health care providers to continue to provide health care services to the citizens of California.

The recent decision of another appellate court, as noted in the majority opinion in addressing and deciding a constitutional attack upon several portions of the MICRA legislation, avoided any serious and genuine judicial inquiry by simply deciding their duty was fulfilled by employing and applying the bare standard, “some rational relationship to a conceivable legitimate state purpose.” (See Fein v. Permanente Medical Group (1981) 175 Cal.Rptr. 177, p. 184.)

FOOTNOTES

1.  Plaintiff Warren Barme suffered a heart attack while on duty as a police officer employed by plaintiff in intervention City; undergoing surgery at St. Francis Hospital, Barme sustained brain damage, allegedly caused by the negligence of the defendants.

2.  The record discloses that only Myhre, Klieman, their corporations, Wood and St. Francis sought judgment below. John P. Lombardi obtained summary judgment upon another, undisclosed ground. The present posture of the case against the others is unknown to us.

3.  Civil Code section 3333.1 was enacted as part of the Medical Injury Compensation Reform Act (MICRA) by Statutes 1975 (2nd Ex.Sess.) chapter 1, section 24.5, and provides in pertinent part as follows: “(a) In the event the defendant so elects, in an action for personal injury against a health care provider based upon professional negligence, he may introduce evidence of any amount payable as a benefit to the plaintiff as a result of the personal injury pursuant to the United States Social Security Act, any state or federal income disability or worker's compensation act, any health, sickness or income- disability insurance, accident insurance that provides health benefits or income-disability coverage, and any contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the cost of medical, hospital, dental, or other health care services. Where the defendant elects to introduce such evidence, the plaintiff may introduce evidence of any amount which the plaintiff has paid or contributed to secure his right to any insurance benefits concerning which the defendant has introduced evidence. (P)(b) No source of collateral benefits introduced pursuant to subdivision (a) shall recover any amount against the plaintiff nor shall it be subrogated to the rights of the plaintiff against a defendant.” (Emphasis added.)

4.  It was also well established, prior to the enactment of section 3333.1, subdivision (a) in 1975 that California followed the collateral source rule which precluded a tortfeasor from deducting from total damages due an injured plaintiff any amounts that plaintiff had received from an independent source (as, for example, payment of medical expenses by a private insurer) as the result of the injury. The rationale for this rule has been that tortfeasors should not benefit from the circumstance that the injured party was sufficiently farsighted to purchase his own insurance and that it was a better social policy to encourage individuals to secure insurance against injuries however caused without penalizing them for doing so. (Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 84 Cal.Rptr. 173, 465 P.2d 61.)We do not address directly the constitutionality of subdivision (a) in this opinion; another court has questioned the constitutionality of the section (see Bolen v. Woo (1979) 96 Cal.App.3d 944, 158 Cal.Rptr. 454). We make reference to subdivision (a) only when it is relevant to an understanding of subdivision (b).

5.  See the exhaustive treatment of this issue in “MICRA and Equal Protection” (1979) 52 Southern California Law Review 846-853.

6.  AB IXX Premium Savings Estimated by the Insurance Commissioner. See, footnote 102, 52 Southern California Law Review, supra, page 846.

7.  Ibid., page 941.

LILLIE, Acting Presiding Justice.

L. THAXTON HANSON, J., concur.