On August 18, the California Supreme Court ruled in the case of Howell v. Hamilton Meats that personal injury plaintiffs were only entitled to recover the amount of medical expenses actually paid for treatment allegedly incurred as a result of a defendant's actions.  Plaintiffs may not recover for medical expenses billed by the medical provider, but never paid, even if the write-off is part of a discount program negotiated by their insurance company.

Plaintiff Howell contended that she was entitled to recover the full amounts billed by her medical providers, arguing that such was the "reasonable value" of her medical expenses, as reflected in the "usual and customary" rates for those services.  Plaintiff further claimed that the defendant would receive a "windfall" if permitted to benefit from a discount Plaintiff's insurer had negotiated with the medical providers.  Plaintiff also argued that the collateral source rule barred any reference to the amount of money actually paid for her medical services.

The California Supreme Court rejected these arguments.  It first noted that the concept of "reasonable value" as related to recovery for medical expenses was traditionally understood to be a term of limitation, not enhancement, of those expenses.  The Court also rejected Plaintiff's "windfall" argument, holding that fortuity is an element of both life and litigation, and that the extent of a particular plaintiff's medical expense or lost wages, whether large or small, is not a reason to inflate damages for all plaintiffs.  Given the complexities of modern medical billing and pricing, the Court further concluded that there is was little risk of under deterrence or an unfair windfall, and recognized that insurers tend to negotiate discounts for their own reasons.  

The Court also concluded that the collateral source rule simply did not apply, because Plaintiff never incurred any "loss" for an amount that was never truly paid or intended to be paid.  As such, the negotiated discount between insurer and medical provider simply was irrelevant and would not be introduced into evidence at all.  The Court therefore concluded that evidence of the full billed amounts was irrelevant for the purposes of proving past medical expenses, but reserved judgment on whether such evidence would be nonetheless be relevant for demonstrating noneconomic damages or future medical expenses.

This issue has been of significant interest to DRI and DRI members.  DRI was involved in the amicus briefing for the Howell decision, and plans to publish later this year the Collateral Source Compendium, a compilation of the laws of all 50 States on this issue.  The Compendium will arm DRI members nationwide with the tools they need to bring a just and fair rule for recovery of past medical expenses to jurisdictions across the country."

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Categories: Court of Appeals | Insurance Law

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