Appellate Panel Finds Collateral Source Rule Does Not Bar Reduction of Jury-Awarded Past Medical Expenses That Were Reasonable and Necessary but Negotiated Down by Plaintiff’s Private Insurance

Posted in: Collateral Source Rule, Medical Damages, Tort Liability by Steven Vartabedian on

During 2010, the California Supreme Court granted review in the Court of Appeal cases of Howell v. Hamilton Meats (4th District), Yanez v. SOMA Environmental Engineering (1st District) and King v. Willmett (3rd District). In a nutshell, those three opinions can be summarized as saying that the award of an injured plaintiff’s medical provider’s full billing of reasonable and necessary charges was compelled because plaintiff’s investment in medical insurance premiums is recompensed as a type of objectively verifiable economic damage under California Civil Code section 1431.2 (b) (1)–actual expense is only part of entitled damages; the fact that plaintiff ‘s insurance negotiated group rate paid to the provider is less does not provide a windfall to plaintiff whose prudence in procuring such insurance should not benefit the tortfeasor.

The 2nd District, Division 8, had the same issue before it in Cabrera v. E. Rojas Properties, Inc. (filed February 8, 2011; certified for publication on February 24, 2011) 2011 DJDAR 2961. There, after the jury had awarded plaintiff damages that included all of her reasonable and necessary medical billings (less 10% due to comparative fault regarding her fall down a staircase on property owned by defendant), the trial court granted defendants post-verdict motion to reduce the past medical damages to include only what was actually paid by her insurer.

The Cabrera court reasoned that under its view of current California law, as explained in Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 and followed by some other pre-2007 Court of Appeal opinions, an injured plaintiff is limited to medical expenses actually paid; to the extent the reasonable amount of those services is greater, there is no entitlement. The court recognized that Hanif concerned medical care paid by Medi-Cal, not private insurance, but other cases relying on Hanif, in the court’s view, have “extended” Hanif to private insurers. The court dutifully recites from the venerable, seminal case of Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, cited frequently in the “Howell trilogy,” which endorses the policy of encouraging people to get insurance; the collateral source rule protects that objective in valuing ones investment in insurance and not allowing the tortfeasor to benefit from the victim’s providence. Interestingly, when evaluating the plaintiff’s argument that the Hanif reduction view should be rejected based on this articulated policy and because it “rejects decades of Supreme Court authority”, the Cabrera court responds there is “no current Supreme Court authority that extends the collateral source rule to include the benefit of a negotiated contract between a medical provider and a medical insurer.”

When I served on the Court of Appeal, Fifth Appellate District, I had the occasion of studying issues related to the collateral source rule, in paticulary when I authored an appellate court opinion in a case that was granted review by the Supreme Court, which issued an opinion in accord with my view on the subject of the impact on the insured of an insurance company’s negotiated rate with a provider (Parnell v. Adventist Health 2005) 35 Cal. 4th 595). It is worth noting that the Supreme Court there expressed no opinion as to whether Hanif applied outside of the Medi-Cal context. It is also of note that, as the Supreme Court did in Parnell, it is not uncommon for California’s high court to grant review of opinions that it ultimately agrees with.

In my present capacity doing private mediations at Dowling, Aaron and Keeler, parties often ask me to evaluate a case based on “reasonable and necessary past medicals”–what is the impact upon the value of a case when past medical bill amounts get discounted as a result of an the insurer’s negotiated rate of actual payment? Until the California Supreme Court ultimately rules, it is hard to say, but we can always try to predict based on what is known. More about this will follow in my next posting.

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