California Supreme Court Rules Against Personal Injury Plaintifs

“As we discussed in a newsletter that we sent out at the end of last year, the California Supreme Court has had before it an issue of great significance in personal injury cases, namely the proper measure of damages for past medical expenses. Unfortunately, the Court has now spoken on the issue and issued a resounding setback for plaintiffs. See Howell v. Hamilton Meats & Provisions, Inc., 2011 DJDAR 12533 (issued August 18, 2011).

The specific issue at hand was whether a plaintiff may recover: (i) the total dollar amount that his providers billed for treating his injuries or (ii) the discounted amount that the providers accepted from the plaintiff’s health insurer (or government program). After earlier Court of Appeal opinions had tilted this issue in favor of defendants, three different Court of Appeal opinions over the past two years had gone the other direction. Obviously, the issue was ripe for decision by the Supreme Court.

Plaintiff’s lawyers had some reason for optimism, as the author of one of the favorable Court of Appeal opinions was recently-appointed Supreme Court Chief Justice, Tani Cantil Sakauye. Unfortunately, however, elevation to the high court has somehow changed the Chief Justice’s views on this subject 180 degrees, as she joined the majority opinion in Howell.

The Court of Appeal in Howell had concluded that the discounted rates negotiated by health insurers are a benefit that plaintiffs pay for with their health insurance premiums, and, therefore, allowing a tortfeasor to benefit from the reduced rates would violate the collateral source rule. The Supreme Court disagreed with this reasoning, concluding that: (i) a plaintiff who is insured never really “incurs” the “full price” for the health care that he obtains to treat his injuries because his insurer has previously negotiated a discounted rate with the providers and (ii) the undiscounted rates charged by health care providers do not reflect the reasonable value of their services because they are routinely reduced, both through agreements with insurers and through voluntary write-offs for uninsured patients. The latter conclusion, while perhaps not intended as such, is an extraordinary indictment of our health care system. According to the highest court of our country’s most populous state, health care providers routinely overcharge for their services.”

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