Friday, August 19, 2011
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High Court Limits Recovery of Medical Costs by Insured Plaintiffs
Injury Victim Only Entitled to Discounted Amount Where Provider Cuts Billing, Justices Hold
By SHERRI M. OKAMOTO, Staff Writer
The measure of damages for medical costs incurred by an insured plaintiff is the amount actually accepted as payment by the provider, not the higher amount that was billed, the California Supreme Court ruled yesterday.
In a 6-1 decision, the justices said a San Diego-area woman could not recover the full amount billed by the doctors and hospitals which treated her after a car accident, since her medical providers accepted a reduced payment from her insurance company.
The justices said the collateral source rule “does not expand the scope of economic damages to include expenses the plaintiff never incurred,” and so Rebecca Howell was not entitled to recover the $130,000 differential between the amount charged by her caregivers at their usual and customary rates and the discounted amount actually paid by her insurer.
Howell was injured in a 2005 collision with a truck driven by an employee of Hamilton Meats Meats & Provisions Inc., who was making an illegal U-turn. She incurred medical bills totaling $189,978.63, but her insurer settled the bills for $59,691.
After she sued Hamilton, which conceded liability and the necessity of the medical treatment Howell had received, a jury awarded her $189,978.63 as damages for her past medical expenses.
Hamilton then made a post-trial motion to reduce this amounted by $130,286.90, representing the amount “written off” by Howell’s healthcare providers, which San Diego Superior Court Judge Adrienne A. Orfield granted.
The Fourth District Court of Appeal, Div. One, reversed, ruling the “negotiated rate differential” should be awarded to Howell under the collateral source rule. The state high court granted review of the appellate court’s 2009 decision in March and yesterday reversed.
Justice Kathryn M. Werdegar wrote for the court, and explained the differential cannot be recovered “for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.”
Collateral Source Rule
She reasoned the collateral source rule, which precludes deduction of compensation a plaintiff has received from sources independent of the tortfeasor from damages the plaintiff would otherwise collect from the tortfeasor, “has no bearing on amounts that were included in a provider’s bill but for which the plaintiff never incurred liability because the provider, by prior agreement, accepted a lesser amount as full payment.”
Werdegar acknowledged “an element of fortuity to the compensatory damages the defendant pays under the rule we articulate here” since “[a] tortfeasor who injures a member of a managed care organization may pay less in compensation for medical expenses than one who inflicts the same injury on an uninsured person treated at a hospital,” but said “ ‘[f]ortuity is a fact in life and litigation.’”
The justice then went on to conclude that when “an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial.”
Werdegar was joined by Chief Justice Tani Cantil-Sakauye and Justices Marvin Baxter, Ming Chin, Joyce L. Kennard, and Carol Corrigan.
Court of Appeal Presiding Justice Joan Dempsey Klein, of this district’s Div. Three, sat on assignment to the state high court and dissented.
‘Reasonable Value’
The jurist, in an opinion filed on her 87th birthday, agreed that Howell was “not entitled to recover the gross amount of her potentially inflated medical bills,” but argued Howell’s recovery should not be capped at the discounted amount her medical providers agreed to accept as payment in full from her insurer.
Rather, Klein said, the plaintiff should be compensated at “the reasonable value or market value of such services, as determined by expert testimony at trial, just as would be the case if the injured person had not purchased insurance or if the medical services had been donated.”
Michael Alder of AlderLaw PC, president-elect of the Consumer Attorneys Association of Los Angeles, which represents the plaintiffs’ bar, said that yesterday was “a sad day for consumers and for the people of California.’
Under the high court’s ruling, he said, “basically the bad actors and insurance companies have received a huge windfall that is literally paid for by the very premiums of the people who are hurt and did nothing wrong.”
Alder complained the court gave “no credit for innocent people paying premiums, month after month, year after year…but the bad actor gets the benefit of the injured persons premiums without reimbursing them at all for them.” He added that the “abnormality” of this decision is that the uninsured “would actually receive a substantially higher award than people who are well insured, premium paying, ‘responsible’ people according to the insurance companies,” which “makes no sense at all.”
He also said CAALA was “hoping we can convince the leg to reinstate the collateral source rule that has been in existence for decades and decades that was gutted by the Supreme Court.”
President Kim Stone of The Civil Justice Association of California, which supports business interests, said the high court made “absolutely…the right decision.”
Stone said this case “addresses a situation where a plaintiff had health insurance for which a negotiated rate was already agreed upon, so the retail rate is irrelevant and should not apply.” Since the medical providers “were reimbursed appropriately at the negotiated rate” and Hamilton “was compensated for all out-of-pocket costs,” Stone opined the outcome was “fair and prevents an unjustified windfall for plaintiffs’ attorneys.”
Armand Feliciano, vice president of The Association of California Insurance Companies also expressed his agreement with the decision and said this ruling “will ensure that parties receive damages based upon the actual amount paid to a medical provider, instead of a random inflated price that was never paid to anyone.”
Had the case been decided in favor of the plaintiff, Feliciano suggested, “property-casualty insurance companies would have been required to pay damages based on inflated costs that were never incurred and this could have caused auto or homeowners insurance premiums to increase.”
The case is Howell v. Hamilton Meats & Provisions, Inc., 11 S.O.S. 4563.
Copyright 2011, Metropolitan News Company