Howell v. HAMILTON MEATS & PROVISIONS, INC.
52 Cal.4th 541, 128 Cal. Rptr. 3d 658, 257 P.3d 81 (2011)
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Rule of Law:
A personal injury plaintiff may not recover economic damages for past medical expenses in an amount greater than what was actually paid or is owed for the services. The difference between the amount billed and the amount accepted as full payment by a medical provider pursuant to a pre-existing agreement with the plaintiff's insurer is not a recoverable damage and does not fall under the collateral source rule.
Facts:
- Rebecca Howell was seriously injured in an automobile accident negligently caused by a driver for Hamilton Meats & Provisions, Inc.
- Howell received medical treatment from Scripps Memorial Hospital and CORE Orthopaedic Medical Center.
- The total amount billed by Howell's medical providers was $189,978.63.
- Howell was covered by a PacifiCare PPO health insurance policy.
- Pursuant to pre-existing agreements between PacifiCare and the medical providers, the providers accepted approximately $59,692 from PacifiCare and Howell as payment in full for the services rendered.
- The providers 'wrote off' the remaining balance of approximately $130,287 and did not seek to collect it from Howell.
Procedural Posture:
- At trial, Hamilton Meats & Provisions, Inc. conceded liability, and the case proceeded on the issue of damages.
- The jury in the trial court returned a verdict awarding Howell $189,978.63, the full amount billed, for past medical expenses.
- Following the verdict, Hamilton Meats filed a post-trial motion to reduce the award to the amount actually paid.
- The trial court granted the motion, reducing the judgment by $130,286.90.
- Howell, as appellant, appealed the reduction to the Court of Appeal.
- The Court of Appeal reversed the trial court's order, holding that the reduction violated the collateral source rule.
- Hamilton Meats, as petitioner, was granted review by the Supreme Court of California.
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Issue:
Does the collateral source rule permit a personal injury plaintiff to recover as economic damages the full amount billed by medical providers, even when the plaintiff’s insurer paid a lesser, pre-negotiated amount that the providers accepted as payment in full?
Opinions:
Majority - Werdegar, J.
No. The collateral source rule does not permit a plaintiff to recover the undiscounted sum stated in a provider’s bill when a lesser amount was accepted as full payment. Damages are intended to compensate for detriment suffered, which is defined as a loss or harm. Because the providers, by prior agreement, accepted the lesser amount from Howell's insurer as full payment, Howell never incurred liability for the full billed amount. Therefore, she did not suffer an economic loss for the 'negotiated rate differential'—the difference between the billed and paid amounts. The collateral source rule precludes deductions from damages a plaintiff would otherwise collect; it does not expand the scope of damages to include expenses the plaintiff never incurred. The negotiated rate differential is not a benefit to the plaintiff meant to compensate for her injuries but rather a product of commercial negotiations between insurers and providers.
Dissenting - Klein, J.
Yes, to the extent of the reasonable value of the services. The majority's bright-line rule capping recovery at the amount paid penalizes plaintiffs for having the foresight to purchase insurance, placing them in a worse position than an uninsured plaintiff who could recover the full reasonable value of their care. The negotiated rate differential is a benefit of the insurance policy, purchased with premiums, and should be considered a 'payment by others' (the providers who wrote off a portion of the bill) that falls within the collateral source rule. The proper measure of damages should be the 'reasonable value' of the medical services, a question of fact for the jury, which would prevent a windfall to the tortfeasor and properly serve the deterrent function of tort law.
Analysis:
This decision significantly clarifies the measure of tort damages for medical expenses in California, particularly in the context of managed healthcare. By limiting recovery to the amount actually paid, the court rejects the 'reasonable value' or 'billed amount' approaches favored in many other jurisdictions. This holding creates a clear, predictable rule that reduces the potential economic damages for insured plaintiffs, thereby benefiting defendants and their liability insurers. The ruling effectively shifts the 'benefit' of negotiated healthcare discounts from the insured victim to the tortfeasor, impacting how personal injury cases are valued and litigated.
