Medical Insurer’s Negotiated Rate Differential Between the Full Amount of the Medical Provider’s Bills and the Lesser Amount Paid by the Private Health Care Insurer is Subject to Collateral Source

(Howell v. Hamilton Meats & Provisions, Inc., November 23, 2009, 4th Appellate District, Divsion 1, 2009 DJDAR 16478)

A car versus commercial truck motor vehicle accident caused the car driver significant personal injuries resulting in two spinal fusion surgeries. The plaintiff was insured by PacifiCare PPO which paid $59,691.73 of her $189,978.63 medical bills. The remainder was written off and permanently adjusted pursuant to the PacifiCare contract with her health care providers.

At trial, the defense sought a post-trial reduction of plaintiff’s medical special damages from $189,978.63 to the amount paid by her health care provider, $59,691.73. The trial court granted the post-trial motion, but the Fourth Appellate District overturned the trial court allowing the plaintiff to obtain the full amount of her medical expenses, though a significantly lesser sum was actually paid in full satisfaction of the billing.

The Appellate Court started with California Civil Code §3333 which states that in negligence cases, the measure of damages is the amount which compensates for all detriment proximately caused by the injury-producing event. California courts have held that the special damages a plaintiff may recover in a personal injury action for past medical expenses are limited to the reasonable amount paid or incurred, whether by the plaintiff or a collateral source. This analysis set up a dispute as to whether the amount incurred (the full amount billed) versus the amount actually paid (the lesser amount paid by PacifiCare) was recoverable by this plaintiff. This court answered the question by applying the collateral source rule that provides that where an injured party receives some compensation for his injuries from a source independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor. Extending this protective doctrine in favor of the injured plaintiff, the court allowed her to recover the full amount of medical billings, though her health insurance carrier paid but a fraction of them in full satisfaction of all of her bills. The court called upon the legislature to weigh in on a plaintiff’s recovery of full medical billings versus amounts paid by private health insurers.

This case will very likely be reviewed by the California Supreme Court which should once and for all weigh in on the proper measure of medical special damages when a private health care insurer has paid a fraction of the billings pursuant to health care provider contract, and the damages are fully satisfied without further contribution by the injured plaintiff.

Our firm has very strong feelings about the proper way to present this issue to a trial judge and on appeal. Rather than focus on the medical bills, defense attorneys should focus on the CACI jury instructions which provide that the reasonable amount of medical bills is a question of fact for the jury’s determination. That reasonable value can be established any number of ways including but not limited to amounts paid and accepted in full for the services as well as expert testimony utilizing private health care insurance contracts to set the basis for the reasonable value of service.