Railroad not entitled to offset amounts received by injured employee under supplemental sickness benefits plan

Law Reporter, Jun 2004

Kansas City S. Ry. Co. v. Nussbeck, ___ S.W.3d ___, No. 07-02-0279-CV, 2004 WL 384188 (Tex. Ct. App. Feb. 27, 2004).

A Texas appeals court held that where a railroad employee who paid the premiums for a supplemental sickness benefits plan prevails in a suit against his employer under the Federal Employers' Liability Act (PELA), 45 U.S.C. §§ 51-60, the railroad is not entitled to offset amounts received by the employee under the plan.

Here, Nussbcck was a foreman for the Kansas City Southern Railway Company (KCS). Under an agreement between the union to which Nussbcck belonged and KCS, the railway members were eligible for a supplemental sickness benefit plan. While the railroad paid the premiums for the plan for most employees, supervisory employees such as Nussbeck paid their own plan premiums.

Nussbeck was injured on the job and sued the railroad under FELA. The railroad settled the suit. The railroad then asserted that it was entitled to set off benefits that Nussbeck had received under the supplemental sickness benefit plan. The trial court denied the setoff and the railroad appealed.

Affirming, the appellate court noted that § 55 of FELA provides that in an action under the act, the railroad may set off amounts it has contributed or paid to insurance or similar benefits paid to the injured employee on account of the injury. Under the collateral source rule, however, where the employee receives benefits from an independent source, the benefits are to be ignored in calculating the employee's recovery against his employer. Here, plaintiff argued that because he paid the premiums for the benefit plan himself, sums paid under the plan arise from a collateral source.

The court rejected defendant's argument that in determining whether benefits are regarded as emanating from the employer or from a collateral source, courts should not look to the source of the premiums, but to the purpose and nature of the fund payments. The court also rejected defendant's claim that because the supplemental sickness benefit plan was overwhelmingly funded by the employer, the employer thereby subsidized plaintifPs premiums, resulting in a benefit to him. Such an unquantified benefit does not render the payments made to plaintiff "sums or benefits contributed or paid by the employer," the court reasoned.

Accordingly, the court affirmed.

Plaintiff's Counsel

* Michael H. Hennen, Friendswood, Tex.

* Arthur Sadin, Friendswood, Tex.