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By: M. Todd Ratay

Neil, Dymott, Frank, McFall & Trexler APLC

San Diego, CA

On November 23, 2009, the California Court of Appeal, 4th District, in Howell v. Hamilton Meats & Provisions, Inc., 2009 Cal. App. LEXIS 1874, held that a Plaintiff with private health care insurance may recover as economic damages the amount of past medical expenses that health care providers have billed, including the amount which neither the plaintiff nor her health care insurer is obligated to pay. Under the Courts analysis, Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 does not apply to personal injury cases involving private medical insurance. This article explores the 4th Districts holding in Howell, and considers its potential implications.

In Howell, the plaintiff was seriously injured when a truck driven by an employee of Hamilton Meats & Provision, Inc. (Hamilton) negligently struck Howells vehicle while making an illegal U-turn across the lane in which she was travelling. At the time of the accident, Howell maintained private health care insurance through PacifiCare PPO, who agreed to indemnify her for any medical charges covered by her health care plan. As a regular part of its business practice, PacifiCare entered into contractual agreements with hospitals and other healthcare providers to satisfy any bills incurred by its plan members who obtained care from those providers. The parties stipulated that the only issue to be determined at trial was the amount of damages Howell suffered as a result of the accident caused by the admitted negligence of Hamiltons employee.

The jury returned a special verdict which included $189,978.63 for past economic loss, (in essence her medical expenses). The trial court granted Hamiltons post-trial motion under Hanif and its progeny to reduce the jurys special verdict award for Howells past injury-related medical expenses from $189,978.63, the full amount of her medical bills, to $59,691.73, the amount her medical providers Scripps Memorial Hospital Encinitas and CORE Orthopedic Medical Center accepted as payment in full from PacifiCare. The court reasoned Hanif and its progeny precluded Howell from recovering as medical expenses amounts billed but not ultimately paid by PacifiCare. The Court of Appeal disagreed, finding the trial courts post-verdict reduction of the jurys economic damages award for Howells past medical expenses violated the collateral source rule.

Under the collateral source rule in California, plaintiffs in personal injury actions can recover full damages even though they already have received compensation for their injuries from such collateral sources as medical insurance. (Arambula v. Wells (1999) 72 CalApp.4th 1006, 1009). Until Howell, a plaintiffs recovery under the collateral source rule was thought to be limited by Hanif, in which the 3rd District ruled a plaintiff is entitled to recover up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable.

The Howell Court distinguished Hanif, in which the minor plaintiff did not have private health care insurance, lacked the capacity to enter into financial responsibility agreements with his medical providers and incurred no personal liability for the medical charges billed to Medi-Cal. Because Hanif neither paid nor incurred personal liability for the amount of medical charges billed to Medi-Cal, the Hanif court did not address whether, under the collateral source rule, a plaintiff with private health insurance may recover economic damages for charges her health care providers have billed, but which neither she nor her health care insurer is obligated to pay because the providers contracted to accept less than the amount billed as payment in full payments.

Unlike Hanif, the 4th District found Howell had invested insurance premiums to assure her medical care, and that under Californias collateral source rule, she should receive the benefits of her thrift; and Hamilton, as the party liable for Howells injuries, should not garner the benefits of Howells providence. Therefore, Howell was entitled to the total amount of her reasonable medical charges that were billed, rather than the total amount negotiated and paid by her insurer.

Central to the Courts ruling was the fact that the collateral source rule has been abrogated or modified by statute twice before. Government Code section 985 establishes a special procedure to reduce a judgment against a state or local public entity in an action for personal injury or wrongful death. The Medical Injury Compensation Reform Act (MICRA) overrides the collateral source rule in medical malpractice actions. The Court concluded that any further abrogation of the rule is best left to the legislature.

Whether Howell is appealed to the Supreme Court, or whether the 4th District is correct that this issue is best left to the legislature, Howell will perhaps most significantly impact settlement negotiations in the short-term. Even in cases of alleged professional negligence by a health care provider, plaintiffs will undoubtedly seek the full amount of their medical bills in past economic damages, without any offset for the write-off or negotiated rate differential obtained by their private insurer as this is a non-cash benefit of having insurance.

However, Defendants should not be too quick to concede defeat or view Howell as an automatic windfall to plaintiffs in settlement negotiations. Whether it is categorized as past economic damages or not, any compensation over and above actual medical expenses paid by whatever source is money in the plaintiffs pocket, and should be viewed as compensation to make her whole for her injuries. And in actions for professional negligence actions, Howell does not appear to limit health care providers from introducing evidence of benefits payable to the plaintiff under C.C.P. section 3333.1.

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