Good for the client; maybe not so good for the case. Also bad for the lawyer who settles without understanding the lien exposure
Your client was working at the time he was injured and those injuries have prevented him from returning to work. Although your client was forced to take an early retirement, his occupation entitles him to receive some form of disability retirement benefits. You want to argue that since he had to retire early, the amount he is entitled to recover in retirement benefits is less than what it would have been had he not been injured and continued to work. This scenario will pose two distinct issues for you leading up to trial and post-verdict.
First, expect the defense to oppose your motion in limine to exclude collateral source payments. The defense will argue that it has the right to question your economist regarding pension benefits that plaintiff is currently receiving or will receive in the future as an offset to any economic wage-loss claim. In turn, the defense will attempt to introduce evidence regarding plaintiff’s receipt of pension payments now and in the future.
Second, you need to be familiar with the different types of retirement systems and the particular subrogation rights of those respective systems. This holds especially true when it comes to statutory lien rights of public pension systems.
The defense will oppose by relying on Rotolo Chevrolet v. Superior Court (2003) 105 Cal.App.4th 242
In Rotolo, the plaintiff’s expert sought to directly determine the reduction in pension payments received by the plaintiff due to his early retirement.
In Rotolo, the plaintiff was a fire captain and sued an automobile dealer for injuries he received due to a defective vehicle. Plaintiff alleged his injuries compelled him to retire. The plaintiff’s motion in limine sought to exclude, on the basis of the collateral source rule, any evidence of payments plaintiff would receive as disability retirement benefits. However, plaintiff also sought to offer evidence of the amount of the loss to the regular retirement pension payments that he lost due to his premature retirement. (Rotolo Chevrolet, supra, 105 Cal.App.4th 242 at 244.)
Defendant opposed the motion, noting that since plaintiff would receive some disability retirement benefits instead, he would suffer a much smaller net loss. The trial court granted the MIL, and defendant brought a writ. (Id. at 244-45.)
The Court of Appeal reversed the trial court’s ruling, holding that, “[Plaintiff] is not entitled to characterize the disability pension payments he receives from his employer as a collateral source replacing regular pension payments that he would have received from his employer.” (Rotolo Chevrolet, supra, 105 Cal.App.4th 242, 246.) The Court considered plaintiff’s request to be a kind of “triple recovery,” permitting “damages based on lost income, additional damages based on his lost ‘regular’ retirement benefits, and his actual disability retirement benefits.” (Id. at 246.) The Court was unwilling to extend the collateral source rule where plaintiff was making a claim for loss to the value of the pension payments. “[Plaintiff] could not receive both a disability pension and a regular pension, and there is no justification for allowing him to claim that he has been ‘damaged’ by the loss of his regular pension when he is actually receiving the disability payments. (Id. at 247.)
How to avoid a trap at trial that allows for the defense to make collateral source arguments under Rotolo
The defendant will attempt to argue that there is an exception to the rule when it comes to pension payments, depending on how you claim those damages leading up to and at trial. You need to carefully construct your economic wage claims early in your case and ensure that your forensic economist properly analyzes the data as the foundation for his opinions. Failing to do this properly could result in your damages being significantly reduced.
The employer’s contribution to the pension is admissible
The employer’s contribution to the pension is admissible and does not affect the application of the collateral source rule. Plaintiff has the right to request compensation for plaintiff’s past and future lost income that plaintiff will lose as a result of the defendant’s negligence. (CACI 3903C.) Loss of income or earnings may be introduced by an expert economist’s opinion testimony. (See, e.g., Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1522 [plaintiff offered opinion of expert economist on plaintiff’s loss of income].)
The term “fringe benefits” refers to various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Fringe benefits may include group insurance (health, dental, life, etc.), disability income protection, and retirement benefits such as a pension, sick leave, and vacation. Economists consider fringe benefits to be part of a worker’s total compensation package.
In California personal-injury cases, economists regularly offer expert testimony calculating a plaintiff’s lost income by adding the wages paid to the worker with the worker’s pension and other fringe benefits. (See, e.g., Hyatt v. Sierra Boat Co. (1978) 79 Cal.App.3d 325, 345 [Court of Appeal approves plaintiff’s Ph.D. economist expert’s testimony calculating plaintiff’s total loss of income by adding wages and fringe benefits; Rodriguez v. McDonnell Douglas Corp. (1978) 87 Cal.App.3d 626, 659 [plaintiff’s economist expert calculated plaintiff’s total loss of income by adding wages and fringe benefits].)
Fringe benefits are part of plaintiff’s income. They are not a set-off and do not negate the application of the collateral source rule. Evidence of fringe benefits as an economic loss may be admitted at trial to establish a plaintiff’s economic losses. Be sure not to claim that plaintiff’s pension payments have suffered a loss as a result of the incident and, thus, the application of the collateral source rule to his current and future pension payments should apply.
The loss in value of the pension payouts to the plaintiff in the future because of the early retirement due to the defendants’ negligence is a loss that can only be calculated by assessing the amount being received now and subtracted from the amount the plaintiff would have received but for the injuries.
Actual retirement payments received by the plaintiff – particularly where plaintiff is forced into early retirement by his injuries – are protected by the collateral source rule. The value of those payments in the future as an economic loss does not negate the application of the collateral source rule as it relates to those current and ongoing pension payments.
A defendant may not mitigate damages where the plaintiff has been compensated by an independent source, such as insurance, pension, continued wages or disability payment. (Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 17-18.) The collateral source rule operates both as a substantive rule of damages and as a bar on evidence of collateral source payments. (Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 728-29 [prejudicial error to allow evidence of plaintiff’s receipt of medical insurance]; Baroni v. Rosenberg (1930) 209 Cal. 4, 6 [mention of receipt of workers’ compensation benefits inappropriate and prejudicial since “extraneous to the issues” in action by injured employee against third party tortfeasor].)
Pension payments paid to the plaintiff are excluded under the collateral source rule. Courts are “required to exclude evidence of plaintiff’s retirement benefits as a collateral source.” (Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 877, emphasis added.) “[The collateral source doctrine] also covers payments such as pensions paid to a plaintiff who, as a result of his injuries, can no longer work. Like insurance benefits, such payments are considered to have been secured by the plaintiff’s efforts as part of his employment contract, and the tortfeasor is entitled to no credit for them.” (Rotolo Chevrolet v. Superior Court (2003) 105 Cal.App.4th 242, 245, emphasis added, citing, McQuillan v. Southern Pacific Co. (1974) 40 Cal.App.3d 802.)
One of the reasons for the collateral source rule is that the source (e.g., the pension fund) is likely to have a right of subrogation against plaintiff’s recovery. This reduces the likelihood of a double recovery. (Helfend, supra, 2 Cal.3d at pp. 10–11.) However, the collateral source rule applies whether or not the collateral source has a right of subrogation against the plaintiff’s award. “[I]t has not been held essential that the plaintiff have a legal obligation to repay benefits received for the collateral source rule to apply . . . With respect to pension benefits, the justification for the rule is that the plaintiff secured the benefits by his labors, and the fact that he may obtain a double recovery is not relevant.” (Rotolo Chevrolet, supra at 245, emphasis added, citing, Helfend, ibid.)
Thus, you need to establish that the pension benefits are from a collateral source unconnected to the defendants and that the pension system would have a lien in the case if you were to prevail. If successful, pension payments to plaintiff are protected by the collateral source rule. Evidence that the plaintiff has received or will receive a retirement pension is prohibited by the collateral source rule and should not be admissible.
Be aware – Various pension systems have statutory lien rights
The California Public Employees’ Retirement System (CalPERS) is the largest pension fund/plan in California and includes state, school, and public agency employees. CalPERS’ right to recovery is dictated by the language of California Government Code section 20252, which states as follows:
If benefits are payable under this part because of an injury to or the death of a member and the injury or death is the proximate consequence of the act of a person other than his or her employer (the state or the employing contracting agency), the board may on behalf of this system recover from that person an amount that is the lesser of the following:
(1) An amount that is equal to one-half of the actuarial equivalent of the benefits for which this system is liable because of such injury or death.
(2) An amount that is equal to one-half of the remaining balance of the amount recovered after allowance of that amount that the employer or its insurance carrier have paid or become obligated to pay.
The 1937 Act, or County Employees Retirement Law of 1937 (Gov. Code, § 31450 et seq.) (CERL), is the statutory scheme that allows for certain counties to establish and regulate pension systems. Currently, there are 20 counties in California that have retirement systems established under CERL: Alameda, Contra Costa, Fresno, Imperial, Kern, Los Angeles, Marin, Mendocino, Merced, Orange, Sacramento, San Bernardino, San Diego, San Joaquin, San Mateo, Santa Barbara, Sonoma, Stanislaus and Tulare.
The 1937 Act counties have a very similar statutory scheme that controls their recovery rights, Government Code section 31820. Of note, Government Code section 31820(2) allows for potential recovery in “[a]n amount which is equal to one-half of the remaining balance of the amount recovered after allowance of that amount which the employer or its insurance carrier have paid or become obligated to pay. The right shall be determined under the subrogation provisions of any workmen’s compensation law.” (Emphasis added.)
Understand the lien exposure
Once the pension system is served notice of a claim, it will conduct an actuarial based on the disability benefits paid to the injured member (your client). That actuarial will dictate the statutory amount it will claim as reimbursement. The amount of these liens varies based on your client’s occupation, age, years of service, etc., but can very easily total $500,000 or more. Resolving a case without fully understanding the lien exposure could be extremely problematic.
It is likely that you will have to balance these lien rights with the employer’s workers’ compensation lien so it is imperative that you work on assessing the amounts of these liens early in your case. Take particular note that the pension system’s liens are secondary to the workers’ compensation lien and are still subject to the same arguments that apply to either wipe out the workers’ compensation lien, or get a reduction, i.e., employer fault, Labor Code section 3860, subdivision (c), etc.
Conclusion
Pension benefits, in particular public pension systems, can be difficult to navigate and can have significant implications on how you present your damages and, ultimately, the amount you recover. It is important to fully analyze these issues early on and retain experts that are familiar with pension systems and benefits.
