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August 2011

California Supreme Court Limits Damages to Those Actually Paid or Owed

Today, the California Supreme Court limited defendants' liability for "medical special" damages.  "We hold ? that 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."  The court rejected plaintiff arguments that defendants are liable for the full "billed" amount, regardless of any discount the insurer may negotiate.  "We hold no such recovery is allowed, for the simple reason that the injured plaintiff did not suffer any economic loss in that amount."  The court's ruling prevents plaintiffs from recovering in damages more than the actual harm incurred.  

In Howell v. Hamilton Meats & Provisions, Ms. Howell was injured in an auto accident.  Her providers billed approximately $174,000, but accepted as payment in full from her insurers about $41,000.  The jury was allowed to hear evidence about the billed amounts.  Pursuant to post-trial motion, the trial court reduced the medical damages award identified in a special verdict to the billed amount.  The court of appeal reversed, but the Supreme Court reversed the court of appeal and remanded for further proceedings.

The court ruled that "when a medical care provider has, by agreement with the plaintiff's private health insurer, accepted as full payment for the plaintiff's care an amount less than the provider's full bill, evidence of that amount is relevant to prove the plaintiff's damages for past medical expenses and, assuming it satisfies other rules of evidence, is admissible at trial."  The court further held that evidence of the higher billed amount was irrelevant "on the issue of past medical expenses," though because the issue was not presented by the defendant in this case, the court expressed "no opinion as to its relevance or admissibility on other issues, such as noneconomic damages or future medical expenses."  Thus, it is still an open question whether plaintiffs can put the higher "billed" amounts in front of a jury – even though Howell recognizes that the bills are irrelevant as to past medical damages, and may even be inadmissible because unduly prejudicial. 

The court rejected plaintiffs' argument that evidence of the amounts actually paid violated the "collateral source" rule, pursuant to which a plaintiff's recoverable damages are not reduced simply because somebody else (e.g., insurance) paid expenses.  "The rule, however, 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.  Such sums are not damages the plaintiff would otherwise have collected from the defendant."  Although the rule is "implicated" where someone else pays a plaintiff's bills, it is also satisfied: "Plaintiff ?  receives the benefits of the health insurance for which she paid premiums:  her medical expenses have been paid per the policy, and those payments are not deducted from her tort recovery." 

This ruling is likely to impact many pending and future personal injury and wrongful death cases in the state. Click here for a copy of the decision.  


Don Willenburg

Commercial Litigation
Environmental/Toxic Tort
Product & General Liability