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Court: Collateral source rule applies in railroad award

Michael W. Hoskins
January 1, 2007
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Contributions from a railroad company to a federal disability fund cannot be used to reduce the amount of a plaintiff's recovery, the Indiana Court of Appeals affirmed today.

In a 30-page decision in CSX Transportation Inc. v. Robert D. Gardner, No. 49A02-0610-CV-917, the court affirmed a trial judge's decision to not allow the railroad company to use its $35,000 annual contributions to a disability and retirement fund to lower the jury-imposed amount of $605,500 in damages for Gardner's injuries.

He was working as a locomotive engineer in May 2003 when he was thrown from the train, injuring his neck, back, and right knee, which impacted his ability to work. He began receiving the $35,000 annual annuity at the end of that year through the Railroad Retirement Act fund. He also filed a complaint against CSX under the Federal Employers' Liability Act alleging negligence and won the jury award.

CSX argued it's entitled to setoff because it is being required to pay twice for Gardner's lost wages, while Gardner argued his disability annuity comes from a "collateral source" and shouldn't be regarded as payment from the railroad company.

In denying the request for setoff, Marion Superior Judge Gerald Zore cited the Supreme Court of the United States decision of Eichel v. New York Cent. R.R. Co., 375 U.S. 253 (1963) as controlling. That ruling held benefits under such a retirement or disability system like the RRA are not directly attributable to the contributions of the employer and can't be considered in mitigation of the damages caused by an employer.

Questions before the appellate judges were whether the RRA disability annuities are from a collateral source, and whether that amount, to the extent that CSX paid taxes to the fund based on Gardner's employment, should be setoff from the jury's FELA award.

The appellate judges looked at an array of caselaw from other states and federal jurisdictions, as well as Congressional intent, in deciding against the railroad company.

"We conclude that the fact that CSX contributed to the RRA Fund because of statutory requirement, and not as a voluntary attempt to insulate itself from liability for its negligence, weighs in favor of concluding that payments Gardner receives from the RRA Fund are from a collateral source," Judge Margret Robb wrote for the panel, which also included Judges Cale Bradford and Nancy Vaidik

The court also considered Congressional action in this area in not addressing setoff because of the RRA, saying, "that gives rise to the inference that Congress is satisfied with the courts' decisions disallowing setoff."

"We recognize that as a result of the trial court disallowing setoff, Gardner has been made more than whole," she wrote. "This situation is common under the collateral source rule, and CSX's argument that such overcompensation is unjust is not persuasive. The solution to overcompensation is not to reduce a negligent employer's liability."
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