King v. Willmett: The struggle against Hanif continues

In King v. Willmett, 2010 WL 3096258, the Third District Court of Appeal put another nail in the Hanif controversy, by finding that the collateral source rule precluded the reduction of the jury's award.  In that case, the plaintiff was rear-ended and sued the driver for damages.  After the trial and jury verdict in plaintiff's favor, the trial court reduced the jury's award for past medical expenses to the amount ultimately paid by the defendant's private health insurance company to plaintiff's health care providers.  The court stated, "In light of the public policy conclusions expressed by our state Supreme Court and the Legislature's enactment of specific statutes governing the operation of the collateral source rule in limited kinds of cases, we conclude reduction is inappropriate in this case."  (Id. at p. 1.)  (Hanif v. Housing Authority (1988) 200 Cal.App.3d 635.)

Interestingly enough, the plaintiff is an insurance defense attorney employed as the managing attorney for the Sacramento legal office for Farmers Insurance.  He was rear-ended by defendant Willmett, who wrote a note agreeing to take responsibility for rear-ending the plaintiff.  At the conclusion of the trial, the jury found the defendant was negligent, and awarded plaintiff damages of $169,499.94 for past medical expenses, $20,000 for past wage loss, $75,000 for past non-economic damages, zero for future medical expenses, wage loss, and other benefits, and $50,000 for future non-economic damages, for a total of $314,499.94.  The trial court granted defendant's post-trial motion for reduction of the medical billings, reducing past medical expense to $76,286.32 (rather than $169,499.94).

The defense argued that plaintiff waived his right to challenge the post-verdict reduction because he stipulated to the procedure used by the trial court to address the reduction of damages.  The court of appeal did not agree, finding both parties filed pretrial motions in limine dealing with the issue.  The trial court also ruled it would not permit evidence of any collateral source payments, including health insurance payments, reserving the issue until after the verdict.  The parties entered into an agreement regarding authentication of the bills and that defendant would not challenge the reasonableness or necessity of each bill.  They also agreed to the amounts incurred and paid.  The court did not find a waiver.

The court in King relied on the California Supreme Court decision in Helfend v.  Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, which held that the collateral source rule rewards the individual who has invested in insurance premiums to assure medical care, rather than allowing a tortfeasor to gain the benefits of "his victim's providence."  (Id. at pp. 9-10)  This policy encourages citizens to purchase insurance as a form of investment.  To refuse to acknowledge this investment would put the plaintiff in a position inferior to one who did not buy any insurance because the premiums would have not benefit.

The reviewing court also examined modifications to Civil Code section 3333.1, which provides that in professional negligence actions against health care providers the defendant may elect to introduce benefits paid to a plaintiff in a personal injury action if the plaintiff may also introduce evidence of the amounts paid to obtain such insurance benefits.  Government Code section 985 prohibits the introduction of evidence of collateral source payments at trial, but after a verdict has been reached, the defendant can request a post-trial hearing for a reduction of the judgment against the public entity for collateral source payments "paid or obligated to be paid."  This section also gives the trial court discretion to make a final determination of the reduction.  These exceptions suggest that the trial court should under normal circumstances not reduce the jury's award of damages to reflect  collateral source payments.

The court noted that after Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298 was decided, the defense bar took the position that special damages in tort cases were limited to the cash payments made by private health insurers.  Of course, the plaintiff's bar disagreed with this interpretation and has been fighting this battle for years.  In Nishihama, the court held that the plaintiff was not entitled to the full damages for medical care where she participated in a health  plan that had a contract with a medical center to accept a reduced rate of payment under an employer-sponsored health plan and had filed a lien for the lesser amount.

The court concluded, "Patients who receive medical services incur liability for the cost of such services . . . In the absence of other applicable contractual agreements, statutory provisions or charity, they will be billed for the services."  Thus, those amounts are actually incurred.  (Id. at p. 11.)  The court found the the Supreme Court concluded public policy interests favor the collateral source rule.   It went on to state, "The Legislature has seen fit to alter the collateral source rule in two limited situations, neither of which is applicable here.  We decline to carve out any further limitations of the rule, particularly as acceptance of the reduction imposed by the trial court here would produce a result inconsistent with the apparent rationale behind section 985."  (Id. at p. 12.)