A South Dakota state court has held that a high school’s purchase of catastrophic insurance was done independently of the financial contributions that the student athlete made to the school.
Thus, the funds that a student athlete would receive if the high school is found liable for her injury would be diminished by the payout she would receive based on the insurance policy.
The impetus for the lawsuit was an accident that occurred on January 22, 2003, when gymnast Andrea Wilson fell during practice, suffering a spinal cord injury and paralysis. Wilson sued the coaches, the school and the training center.
The issue raised by the defendants was “if Wilson receives a judgment against them, that judgment should be reduced by the amount Wilson has received and will receive from a catastrophic injury policy (purchased by the school).” The defendants argued that “the policy was purchased by O’Gorman and therefore defendants are entitled to set-off any judgment against them with the policy proceeds.”
Wilson countered that the insurance proceeds should not act to reduce any damages award “because the proceeds are properly categorized as payments from a collateral source.”
In its analysis, the court noted that Wilson does not dispute that O’Gorman obtained, through the South Dakota High School Athletics Association, catastrophic injury coverage for its student athletes. What Wilson disputes, however, is whether O’Gorman “purchased” or “paid for” the policy.
She argues that “the cost of the policy was passed on to its students and particularly its student athletes, and therefore (she) in effect was the purchaser of the policy. Accordingly, (she) argues that the policy is wholly independent of O’Gorman and its proceeds should be excluded under the collateral source rule.
“In support of her argument that she purchased the policy, Wilson notes that she paid $1,437.50 for each semester of class at O’Gorman and further paid a $100 fee to participate in gymnastics.
The court did not agree.
“Although Wilson paid fees to attend O’Gorman and participate in gymnastics, it does not necessarily follow that she should be credited with purchasing the policy. Under Wilson’s logic, O’Gorman could never purchase insurance in its own right, because as a private institution that insurance could always be traced to the students’ tuition. Wilson provides no authority for this proposition, and the court does not find it to be an accurate statement of the law in South Dakota.
“Further, the court does not find that the $100 gymnastics participation fee paid by Wilson requires this court to find she paid for the policy. Defendants assert the fee was meant to offset expenses unique to gymnastics, such as rental of the All American facility. Defendants assert that the only other sport that requires a student participation fee is soccer. Defendants also assert that this fee is imposed because the sports are relatively new, but that the fee is not used to purchase the catastrophic insurance coverage. The undisputed fact that all student athletes at O’Gorman were covered by the catastrophic injury policy, regardless of whether they participated in a sport that had a separate participation fee, supports defendants’ assertion that the participation fee did not simply act as a conduit for the purchase of the policy. In any event, the policy was not obtained ‘wholly independent’ of the alleged tortfeasor O’Gorman.
“O’Gorman made the decision to obtain insurance for its student athletes through the SDHAA. Under the facts of this case, the court finds that the policy was not obtained ‘wholly independent’ of the alleged wrongdoer, and therefore the court finds the collateral source doctrine inapplicable. Accordingly, the court finds that in the event a judgment is returned against defendants, defendants will be entitled to set-off that judgment to the extent that Wilson has received proceeds from the policy. See Restatement (Second) Torts § 920A cmt. a. Although the court finds that a set-off is appropriate if defendants are found liable, the court will determine the appropriate amount of that set-off subsequent to any determination of defendants’ liability.”
Andrea Wilson v. O’Gorman High School; Shawn Bauer; and Lana Bauer; D.S.D; CIV. 05-4158-KES, 2008 U.S. Dist. LEXIS 49454; 6/26/08
Attorneys of Record: (for plaintiff) Brett Alan Lovrien, Stephen C. Landon, LEAD ATTORNEYS, Cadwell, Sanford, Deibert & Garry, LLP, Sioux Falls, SD. (for defendants) James E. McMahon, Jonathan Allen Kobes, LEAD ATTORNEYS, Murphy Goldammer & Prendergast, LLP, Sioux Falls, SD. (for defendant All American Gymnastics, Inc.) Michael J. Schaffer, LEAD ATTORNEY, Schaffer Law Office, Prof. LLC, Sioux Falls, SD.
