Personal injury attorneys have been anxiously awaiting for the California Supreme Court's decision in Howell v. Hamilton Meats & Provisions, Inc. (2011), No. S179115. That decision arrived on August 17, 2011 and the collective groans of plaintiff's attorneys could be heard across the state.
The issue in Howell was whether an injured person may recover an undiscounted amount in a medical bill as economic damages where the provider accepts less than full payment pursuant to a preexisting contract with the injured person's health insurer. Under the collateral source rule, the plaintiff may recover the amounts her insurer actually paid. The court held that the collateral source rule does not apply to preclude economic damages which the plaintiff never incurred or were never paid to the providers.
Here are a few snippets:
1. The Court agreed with the Hanif court that a plaintiff may recover as economic damages no more than the reasonable value of the medical services and is not entitled to recover the reasonable value if the actual loss was less. Damages must be both reasonable and incurred, and this rule applies in the context of situations where plaintiff's health insurer has obtained a discount for the services or payments made. Thus, the plaintiff is entitled to recover the lesser amount of (1) the amount paid or incurred for medical services, and (2) the reasonable value of the services.
2. Plaintiff did not "incur" liability for the full amount of the medical bills because the discounts were in place pursuant to a pre-existing agreement that existed prior to plaintiff's injury. Since the plaintiff never incurred the full bill, plaintiff should not recover it as an economic loss. (The result would be different if the plaintiff incurred the full liability but it was reduced as a gratuitious undertaking.)
3. The court discussed the pricing of medical services, noting that even the "full" price does not necessarily reflect the real value of these services. It concluded that the tortfeasor's payment of the amounts actually paid will not result in a windfall to the tortfeasor nor will it deter a tortfeasor from engaging in risky conduct.
4. The plaintiff still will receive the benefit of her foresight in obtaining insurance coverage and in paying premiums. Had she been uninsured, she would have had to pay the higher amount, but because her insurer had the power to negotiate a lower sum, she benefited from it. The "negotiation" was not done as a result of her injuries caused by the tortfeasor, but as the result of the insurer's commercial advantage and way of doing business. In fact, it is the insurance company, and not the plaintiff, who benefits from the negotiated price differential.
5. The court concluded by stating it was not altering the collateral source rule as articulated in Helfend and the Restatement. The court concluded the situation involved in Howell does not come within the collateral source rule.
6. The premiums paid by the plaintiff are inadmissible at trial.
7. If the jury hears evidence of the amount accepted as full payment by the medical provider but awards a greater sum as damages for past medical expenses, the defendant can move for a new trial on the grounds of excessive damages. In granting the new trial motion, the trial court may permit the plaintiff to choose between accepted the reduced damages or having a new trial.
Justice Klein dissented, concluding that Howell should be allowed to recover the reasonable value or market value of medical services, as determined by an expert, putting her in the same situation as an uninsured plaintiff or in cases where the medical services had been donated. She argued that "Howell is left in a worse postiion than an ininsured individual or one who was a donee of medical sercies, persons who are entitled to recover the full reasonable value of their medical care." She also opined that Howell obtained the benefit of coverage by virtue of her payment of premiums and she was entitled to that benefit. As has been argued in the past, Justice Klein also believes that the majority rule represents a windfall to the torfeasor, who is underdeterred in his or her future conduct. Conversely, the plaintiff would not obtain a windfall as recovery was limited to the reasonable cost of care.
The opinion suggests that only uninsured persons pay the full amount of medical bills, while some others may receive a "gift" after injury. Those persons may be entitled to receive the full amount of the hospital bills; however, their recovery would be limited by the reasonableness of those costs. In addition, uninsured persons who were unsuccessful at trial would ultimately pay the highest bill without redress.
Justice Klein also notes that California has aligned itself with the minority view in the United States. She notes that the majority of courts allow a plaintiff to recover the reasonable value of their expenses without limitation to the amount they pay or that third parties pay on their behalf. (Rest. 2d Torts, sec. 924.)
The opinion is rather long and covers a lot of territory. I have tried to summarize some of the principles here, but perhaps anyone practicing in this area should take the time to read Howell.