An 'IDEA' for Collateral Source Offsets:
Services Provided by Federal Legislation

By Barbara D. Goldberg

Under the federal legislation known as the Individuals With Disabilities Education Act (IDEA), disabled children are entitled to a "free appropriate public education" in the "least restrictive setting." Where necessary to accomplish this goal, the school district must provide a potentially broad range of physical, occupational and speech therapy and other services pursuant to an "individualized education program" (IEP). This may include not only therapies, but also special transportation and even residential placement, if necessary. Thus, infant plaintiffs in cases involving claims of severe disability may be receiving, free of charge, services that would otherwise cost hundreds of thousands of dollars in the market, and that, if construed as "collateral sources," could result in a significant reduction of the plaintiff's recovery.

Part 1 of this article will discuss the pertinent provisions and objectives of the IDEA. Part 2 will discuss New York's collateral source statute, Civil Practice Law And Rules (CPLR) § 4545, and use it as an example of how the services provided under the IDEA may potentially qualify as collateral source offsets. Part 2 will also suggest responses to the objections that are likely to be raised by plaintiffs' attorneys, and possible grounds for distinguishing trial court decisions that have declined to treat IDEA benefits as collateral sources.

Collateral Source Statutes

At common law, the "collateral source rule" precluded the reduction of a personal injury award by the amount of any benefits received by the plaintiff from a "collateral source," such as insurance. The rationale was that a wrongdoer who injured the plaintiff should not benefit because the plaintiff had the foresight to obtain insurance.

Many states have enacted legislation abrogating the effect of the collateral source rule. These statutes typically allow payments received from sources such as insurance or Social Security to be set off against the plaintiffs recovery.

For example, California Civil Code § 3333.1(a) partially abolishes the collateral source rule in actions against a medical provider by allowing the defendant to introduce evidence of a collateral source such as health or disability insurance benefits. In such cases the trier of fact may consider the alternative source of recovery in computing the damages to be awarded the plaintiff.

New York's CPLR § 4545(a)-(c) is applicable to all actions for personal injury or wrongful death. It provides for the reduction of the verdict by collateral source recoveries "such as insurance ... social security ... workers' compensation or employee benefit programs." Only life insurance, Medicare and collateral sources entitled by law to a lien against the plaintiff's recovery are specifically excluded. Similarly, New Jersey's collateral source statute permits the court to deduct any duplicative award from a plaintiff's recovery. See N.J. Stat. Ann. § 2A:15-97.

The underlying legislative intent of such provisions is to eliminate duplicative recoveries and, at the same time, reduce the cost of insurance premiums. For example, a New York court described the purpose of CPLR § 4545 as follows:

CPLR 4545 and its predecessor, CPLR former 4010, were passed to "eliminate double and triple recoveries for the same damages in medical malpractice actions" and, by subsequent amendment, in all personal injury actions (see Mem. of Assemblyman Tallon, 1981 NY Legis. Ann., at 153)....[T]he Governor and Legislature recognized that this would have the effect of reducing medical malpractice liability insurance premiums (see Governor's Mem., 1981 NY Legis. Ann., at 154-155; Governor's Prog. Mem., 1986 N.Y. Legis. Ann., at 135-136). Berry v. St. Peter's Hospital of the City of Albany, 173 Misc. 2d 214, 660 N.Y.S.2d 795, 800 (N.Y. Sup. Ct., Albany Cty. 1997).

Collateral source offsets under these and similar provisions typically consist of payments to the plaintiff. In certain cases, however, the therapies and other "related services" provided under the IDEA may potentially qualify as well. Whether, and to what extent, an offset will be available will depend on the particular state's collateral source statute and the particular benefits provided under the IDEA, but in any case involving a severely handicapped child, the possibility should be seriously considered.

The IDEA

Originally enacted in 1975 as the Education of the Handicapped Act, the IDEA (20 U.S.C. §§ 1400-1491o) is the primary source of federal aid to state and local school systems for instructional and support services to children with disabilities. It mandates that states receiving federal funding provide disabled children with a "free appropriate public education." The broad purpose of the act is:

to assure that all children with dis-abilities have available to them ... a free appropriate public education which emphasizes special education and related services designed to meet their unique needs.

20 U.S.C. § 1400(c).

Some states have enacted parallel legislation and have even imposed more exacting requirements. Massachusetts, for example, requires that an IEP "must be reasonably calculated to assure the child's maximum possible development in the least restrictive environment." Frank S. v. Sch. Comm. of the Dennis-Yarmouth Reg. Sch. Dist., 26 F. Supp. 219, 226 (D. Mass. 1998)(emphasis added).

A "free, appropriate public education" includes elementary and secondary school education services up to the age of 21, together with speech, physical and occupational therapy, if appropriate, and medical services for diagnostic and evaluation purposes. A "free appropriate public education" under the IDEA has been defined as including the following:

[s]pecial education and related services that

1. have been provided at public expense, under public supervision and direction, and without charge,
2. meet the standards of the State educational agency,
3. include an appropriate preschool, elementary, or secondary school education in the State involved, and
4. are provided in conformity with the [IEP] required under section 1414(a)(5) of this title.

20 U.S.C. § 1401(a); 34 CFR § 222-50(2)(ii)(1)-(4).

Parental Input

The IDEA contemplates substantial involvement by the parents of a disabled child in formulating the child's IEP and subsequent modifications. The IDEA, as amended in 1997, requires that parents have an opportunity to participate in meetings with respect to the identification, evaluation and educational placement of the child, and the provision of a "free appropriate public education."

The IEP is developed by a committee composed of the child's parents and representatives of the local educational agency or intermediate educational unit. 20 U.S.C. § 1401(a)(20). One of the pertinent regulations, 34 CFR § 300-533(a)(3), provides that in interpreting evaluation data and in making placement decisions, each public agency shall:

Ensure that the placement decision is made by a group of persons, including persons knowledgeable about the child, the meaning of the evaluation data, and the placement options.

The parents, moreover, are considered to be equal participants, along with the school personnel, in developing, reviewing and revising their child's IEP, and the school is required to keep them informed of the child's progress. Thus, the parents may potentially play a significant role in determining the specific services that are provided under an IEP.

'Related Services' Required Under An IEP Must Be Provided

"Related services" required under an IEP must be provided to a disabled child free of charge. With respect to residential placement, for example, the controlling regulation provides as follows:

if placement in a public or private residential program is necessary to provide special education and related services to a child with a disability, the program, including non-medical care and room and board, must be at no cost to the parents of the child.

34 CFR § 300.302.

The implementing regulations further provide that the related services "must be individually determined in light of each child's unique abilities and needs, to reasonably promote the child's educational success." 34 CFR Pt. 300, App. A. Depending on the circumstances, counseling, therapies, residential placement and even skilled nursing services may be required, although medical services, defined as "services provided by a licensed physician," 34 CFR § 300.13(b)(4), are excluded unless for purposes of diagnosis and evaluation only.

In Cedar Rapids Community School District v. Garret F., 119 S. Ct. 992, 143 L.Ed.2d 154 (1999), the U.S. Supreme Court upheld an administrative determination that a school district was required to provide a ventilator-dependent, quadriplegic student with certain nursing services during school hours. The respondent in Garret F. needed assistance with urinary bladder catheterization, the suctioning of his tracheotomy tube as needed, and occasional ambubagging when his ventilator was checked for proper functioning. He also required assistance with his food and drink at lunchtime, and in getting into a reclining position for five minutes each hour. Finally, he needed someone in attendance who was familiar with his ventilator in the event of a malfunction, and who could perform emergency procedures if he experienced a condition known as autonomic hyperreflexia, characterized by increased blood pressure, sweating and heart rate.

On the record presented, it was undisputed that the respondent required someone capable of performing all these services if he were to remain in school. The Supreme Court concluded, "Under the statute, our precedent, and the purposes of the IDEA, the District must fund such 'related services' in order to help guarantee that students like Garret are integrated into the public schools." 119 S.Ct. at 1000. Thus, the impact of Garret F. is that if a particular item or service is required under a child's IEP, it must be provided free of charge.

IDEA Benefits as Potential Collateral Sources

A service that a disabled child is receiving free of charge, and that must be provided to him or her as a matter of federal law, represents a benefit to the child in the same sense as a payment under an insurance policy or a Social Security disability payment. In addition, such a service may correspond to an item for which the jury compensated the plaintiff. Therefore, to allow an offset for such a service is consistent with the objective of avoiding duplicative recoveries that prompted the enactment of collateral source statutes.

That the IDEA focuses on educational needs, rather than medical needs, should not preclude collateral source treatment. The services provided under the IDEA constitute a benefit to the child regardless of the purpose for which they are intended. Furthermore, in the case of a severely neurologically impaired child, "education" and the therapies necessary to enable the child to perform the activities of daily living are likely to be inseparable, and "educational" goals are likely to include a variety of nonacademic tasks. The courts have recognized that "'[t]he concept of education is necessarily broad with respect to' some severely or profoundly retarded children." Abrahamson v. Hershman, 701 E2d 223, 228 (1st Cir. 1983)(quoting Kruelle v. New Castle County Sch. Dist., 642 F.2d 687, 693 (3d Cir. 1981). In such a case, without intensive speech, occupational and physical therapy, any "educational" goals in a conventional academic sense would likely be impracticable, if not impossible.

The child in Garret F., similarly, could not have attended school without a nurse. As a practical matter, a child such as the Garret F. plaintiff, who is ventilator-dependent, may require nursing care on a full-time basis. Thus, nursing care could represent a specific category of damages in a personal injury or medical malpractice case. Assuming that the jury awarded damages for continuous nursing care, that portion of the award corresponding to the time when the child was in school, and entitled to nursing services under the IDEA, would be duplicative on its face and contrary to the concept of "compensatory" damages. Therefore, if the law of the particular state allows for collateral source offsets, the defendant may be entitled to a corresponding reduction in the plaintiff's award.

In sum, in any case in which a severely disabled child seeks recovery of damages for such items as therapies, nursing services, specialized equipment and the like, defense counsel should request discovery to determine the specific benefits the chdd is receiving or is entitled to receive under the IDEA. Consideration should then be given to whether the IDEA benefits meet the definition of coflateral source reimbursement under the applicable statute. The result may be an offset of several thousand dollars, or possibly even the elimination of a particular category of damages.