In terms of legislative and judicial decisions, the last few decades have not been kind to people injured by the intentional or negligent acts … or inaction … of others. Insurance companies have been allowed to bargain in bad faith with Plaintiffs injured by their insureds with essentially no repercussions. Employer funded health plans are allowed to deny, delay, or ignore rightful claims while the ill and dying do not even have a right to sue for damages, and people continue to drive in California with only the minimum liability limit of fifteen-thousand dollars. A meaningful visit to the Emergency Room will exhaust that amount in a day or two. Under pressure from well funded insurance company lobbyists, a seemingly endless slew of laws and verdicts have gone against people seeking some measure of redress for the harm inflicted on them.
It was with great pleasure to read that in the last few weeks a rather significant (but probably largely ignored) decision was handed down by the California Court of Appeal. The Fourth Appellate District in Howell v. Hamilton Meats invalidated a particularly insidious line of legal reasoning that has been damaging the field of Plaintiff’s personal injury law for quite some time. Injured parties are allowed to pursue their medical bills at trial. However, what if the injured party had insurance. paid by their premiums? Do the juries get to hear about it?
Well, in California we have a doctrine called the “collateral source rule.” It means that if a Plaintiff has insurance that covered his medical bills after an accident, a Defendant is prohibited from introducing evidence of the existence of insurance. If a Plaintiff has insurance, he typically has no outstanding medical bills by the time of the trial as the health insurance company has typically paid them. Yet, Defendants aren’t allowed to place this information before the jury due to the collateral source rule. If one thinks about it for a moment, the reasoning becomes clear. Why should the Plaintiff, who paid for the insurance (often through premiums for many years), not be allowed to recoup his medical bills simply because he had the foresight to purchase insurance? It would be unfair to allow a jury to assume that the Plaintiff was not economically damaged by the accident simply because he had insurance.
A problem arises in the modern practice of medicine in that insurance companies do not pay the full amount of the medical bills. Typically they negotiate rates with the medical providers. On a $1,000.00 bill, the insurance company may only pay $200.00. Well, which amount does the Plaintiff get to introduce to the jury? The amount of $1,000.00, or $200.00? Until the decision in Howell v. Hamilton Meats, the general practice was that the Plaintiff could provide evidence of the $1,000.00 bill to the jury, BUT he was only allowed to receive the amount of $200.00. However, the Plaintiff does not get a refund of the premiums paid to the insurance company. The justification for this rather strange state of affairs was rationalized in two cases, colloquially referred to in California as the Hanif and Nishihama decisions. I will not mince words: the two decisions were neither well reasoned nor did they reflect a modern understanding of the ongoing hybridization of the medical and insurance fields.
The fact that a Plaintiff could incur medical bills of $1,000.00, yet not be able to receive special damages of $1,000.00, was patently unfair. The entire purpose of the Collateral Source Rule was to prevent Defendants from benefiting from a person’s purchase of insurance. When a medical bill is “reduced” to $200.00 by an insurance company, it is a benefit deriving directly from the purchase of insurance. The reduction was made possible by the fact that a large pool of insureds contributed premiums over many years to an insurance company capable of negotiating on their behalf. Why should a Defendant, who negligently or wrongfully injured someone, get the benefit of a bargaining power paid for by Plaintiff and other similarly situated insureds? Thankfully, in a post-Howell world, individuals who purchase insurance will not see their legal rights reduced by their choice.
The ruling does not change medi-cal rules of reimbursement but if you personally or through your company purchased insurance, you are entitled to the reasonable value of those services as compensation. There is a split in authority in the state right now on this subject so make sure to check with your attorney if you think this is applicable to you.
Michael Bock is a litigation attorney with the firm of Allen, Flatt, Ballidis & Leslie in Southern California.