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Court of Appeal, Sixth District, California.

Margaret McCALL, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD and Airborne Freight Corp. & National Union Fire Insurance, Respondents.


Decided: April 29, 1986

Robert T. Bledsoe, Beauzay, Ezgar, Bledsoe, Levin & O'Laughlin, San Jose, for petitioner. William B. Donohoe, Richard W. Younkin, Alvin R. Barrett, Charles E. Finster, San Francisco, William F. Clark, Korab, Clark & Johnson, San Jose, for respondents.

 In this case we decide that Civil Code section 3333.1 (a part of the Medical Injury Compensation Reform Act of 1975), does not override the right to credit (Lab. Code, § 3861) of the employer of an injured worker as against the employer's liability for workers' compensation benefits to the extent the employee receives compensation for such injury in settlement of a medical malpractice action arising from the same compensable injury.


Applicant sustained an industrial injury to her lower back on November 17, 1981, while employed by Airborne Freight.   Workers' compensation benefits were paid to her by National Union Fire Insurance Co. (National Union), Airborne Freight's insurer.   She was treated at Kaiser Hospital, where her injuries were allegedly negligently diagnosed.   Applicant's condition worsened and she required surgery.

Subsequent medical reports found applicant to be totally disabled and apportioned approximately one-half of the disability to the alleged medical malpractice.   Applicant filed an independent malpractice action against Kaiser Hospital which was settled before trial.

A separate action was filed by National Union against Kaiser Hospital for reimbursement of workers' compensation benefits furnished to applicant as a result of the alleged negligent treatment.   That action remains pending.

Upon applicant's settlement of her medical negligence action, National Union ceased payment of temporary disability benefits due applicant, claiming a right to credit under Labor Code section 3861, which provides:  “The appeals board is empowered to and shall allow, as a credit to the employer to be applied against his liability for compensation, such amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to the payment of expenses or attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer.”

Applicant requested a hearing before respondent board, arguing that Civil Code section 3333.1 precluded the carrier from obtaining such a credit.   Section 3333.1 provides in part:  “(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 [fn. omitted], 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. [¶] (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.”

On January 30, 1985, the workers' compensation judge ruled that the employer had no right to assert a credit against applicant's recovery by settlement of the medical malpractice claim because of section 3333.1, and Barme v. Wood (1984) 37 Cal.3d 174, 207 Cal.Rptr. 816, 689 P.2d 446.

National Union petitioned for reconsideration, arguing that section 3333.1 does not preclude it from asserting a credit against workers' compensation benefits after a medical malpractice claim has been settled, as the code section operates only as a rule of evidence, citing Fein v. Permanente Med. Group (1985) 38 Cal.3d 137, 211 Cal.Rptr. 368, 695 P.2d 665.   On March 29, 1985, the board granted reconsideration.   On May 17, 1985, the board filed its opinion and decision after reconsideration, finding that the employer's right to a credit was not, under the circumstances, precluded by section 3333.1.

In her petition to this court, applicant argues that her medical malpractice settlement was arrived at with due consideration given by the parties to section 3333.1, and thus the employer no longer had a right to credit from the medical malpractice award.


 Under the traditional collateral source rule, a jury, in calculating a plaintiff's damages in a tort action, may not consider plaintiff's entitlement to other benefits payable to plaintiff as a result of the injury such as medical insurance or disability payments.  Section 3333.1, subdivision (a), alters this rule in medical malpractice cases by allowing a defendant to introduce evidence of such collateral source benefits received by or payable to the plaintiff.  “[S]ubdivision (a) simply adds a new category of evidence that is admissible in a medical malpractice action, ․”  (Fein, supra, 38 Cal.3d at p. 166, 211 Cal.Rptr. 368, 695 P.2d 665.)

Although section 3333.1 does not specify how the trier of fact should use such evidence, the Legislature apparently assumed that the trier of fact would reduce any damage award by the amount payable to plaintiff from such collateral sources.   That is, section 3333.1 allows for the reduction of damages on the basis of collateral source benefits, but does not mandate such a reduction.  (Fein, supra, 38 Cal.3d at p. 165, fn. 21, 211 Cal.Rptr. 368, 695 P.2d 665.) 1

Section 3333.1, subdivision (b), provides that whenever such collateral source evidence is introduced, the payor of those benefits is precluded from obtaining reimbursement either from the plaintiff or from the medical malpractice defendant.   Thus, because the jury that has learned of such benefits may reduce plaintiff's tort award by virtue of workers' compensation benefits payable, the Legislature eliminated any right the collateral source may have had to reimbursement under Labor Code section 3852.  (Miller v. Sciaroni (1985) 172 Cal.App.3d 306, 218 Cal.Rptr. 219.)

The question then arises:  If the parties settle the medical malpractice case before trial, does section 3333.1, subdivision (b), come into play?   We conclude that it does not, as the clear wording of the statute indicates it applies only in the limited circumstance of a trial of the medical malpractice action.

As part of the Medical Injury Compensation Reform Act of 1975 (MICRA), section 3333.1 was enacted for the purpose of reducing the cost of medical malpractice insurance.   In Barme v. Wood, supra, the court stated that the Legislature acted within its constitutional authority in enacting the section, even though it may shift some of the cost of medical malpractice from negligent health care providers to innocent employers or insurers and impose a burden on employers who provide benefits to victims of medical malpractice that is not imposed on employers in other situations.  (Id., 37 Cal.3d at pp. 181–182, 207 Cal.Rptr. 816, 689 P.2d 446.)   The provisions of MICRA permissively limit their application to medical malpractice actions even though they implement a reform measure “one step at a time.”  (American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359, 204 Cal.Rptr. 671, 683 P.2d 670.)

Applicant argues that section 3333.1 was also intended to reduce the cost and increase the efficiency of medical malpractice litigation by revising a legal rule applicable to such litigation;  and if the statute is interpreted to require a trial to effectuate the section, it would force the plaintiff and the health care defendant to try the case unless the defendant agrees to pay plaintiff a sufficient sum in settlement of his claim to cover the employer's claim.   As MICRA was intended to reduce costs, the statute should not be interpreted in a manner which discourages settlements.

We readily perceive a possible anomoly and would be persuaded by applicant's argument but for the fact that, under rules of statutory construction, we must give the words their ordinary and plain meaning where the language is clear and unambiguous.  (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 188 Cal.Rptr. 115, 655 P.2d 317.)   The statute literally operates only in the context of trial—“(a) In the event the defendant so elects, in an action for personal injury against a health care provider based on professional negligence, he may introduce evidence of any amounts payable as a benefit to the plaintiff ․ pursuant to the ․ workers' compensation act, ․  [¶] (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.)   The language of subdivision (a) clearly requires an election to introduce evidence of some amount of benefits by such a source before that source is precluded, under subdivision (b) from seeking any recovery against the plaintiff.   Without trial there is no stage for the election and the introduction of evidence required by subdivision (a) before subdivision (b) can come into play.

We can only speculate as to the legislative scheme in restricting the applicability of section 3333.1 to the circumstance of trial.   However, we need not speculate as to the meaning of section 3333.1.   In our view, the Legislature made its intent clear enough.   If the Legislature, for whatever reason, chose to limit its venture into medical injury compensation reform, it would be unconstitutional (Cal. Const., art. III, § 3) for the court to carry the legislative venture a step further, no matter how well that step might seem to complement the current enactment.

There is another point—applicant introduced at the board hearing an offer of proof and declaration of her attorney in the medical malpractice settlement which stated the parties had had the provisions of section 3333.1 in mind in reaching their agreement.   However, the Board determined such fact did not trigger the application of section 3333.1.   We agree that since the Board had no evidence of the amount by which the settlement was so affected it need not have speculated either as to its components or the considerations which influenced it.  (Cf. Evid.Code §§ 1152, 1154.)

Accordingly, the decision of respondent Board is affirmed.


1.   “Earlier drafts of section 3333.1, subdivision (a), required the trier of fact to deduct such collateral source benefits in computing damages, but—as enacted—subdivision (a) simply provides for the admission of evidence of such benefits, apparently leaving to the trier of fact the decision as to how such evidence should affect the assessment of damages.”  (Barme v. Wood, supra, 37 Cal.3d at p. 179, fn. 5, 207 Cal.Rptr. 816, 689 P.2d 446.)

AGLIANO, Presiding Justice.

BRAUER and CHANG, JJ.*, concur.

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