Legal News

California Supreme Court Limits Recovery of Medical Expenses to Amounts Actually Incurred

The Supreme Court’s much awaited decision in Howell v. Hamilton Meats was issued on August 18, 2011. The question before the court was whether an injured person may recover from a tortfeasor the undiscounted sum stated in a healthcare provider’s bill but never paid by or on behalf of the injured person due to a negotiated rate reduction between the health care provider and the injured party’s insurance company. Further, is whether or not the tortfeasor is entitled to present evidence of the medical costs actually paid or incurred by the injured party.

The Court unequivocally stated that an injured party may not recover the undiscounted sum billed by the healthcare provider but never paid by or on behalf of the injured party “for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.” The Court dismissed the argument that the negotiated rate differential is a benefit recoverable by the injured plaintiffs, stating that negotiated rates inure to the benefit of the negotiating parties, and are not entered into for the benefit of any particular insured or as compensation for plaintiff’s injuries. Thus, the negotiated rate differential is not a collateral payment or benefit subject to the collateral source rule.

Further, the Court found that evidence of the negotiated rate (i.e. – evidence of the costs actually paid or incurred) is admissible, though the identity of who makes the payments on behalf of the injured person is not admissible (in personal injury cases), at trial. Thus, defendants will now be able to introduce evidence at trial of the actual medical costs incurred by plaintiffs (rather than simply accepting the recitation of what was billed) and will not have to bring post-trial motions arguing over what those costs were or might have been for purposes of a reduction in the amount of past medical expenses awarded by the jury. Rather, the Court specifically said that where a jury heard evidence of the amount accepted as full payment by the medical provider but awarded a greater sum for past medical expenses, the defendant may move for a new trial on grounds of excessive damages and then the trial court may permit the plaintiff to choose between accepting reduced damages or undertaking a new trial. This should make post-trial determination of the final judgment more efficient. However, it may mean more pre-trial discovery and utilization of experts to get the evidence properly before the jury without disclosure of the existence of insurance.

The plaintiff/appellant had filed a petition for rehearing in the California Supreme Court and the Court denied the request on November 2, 2011. Thus the decision is now final. However, the medical damages issue is far from settled as far as the plaintiffs’ bar is concerned and there is likely to be a greater push for defendants to stipulate to a total past and future medical damages number.