Collateral Source Rule in Personal Injury Cases Clarified by California Supreme Court

Court Rules that Key is Actual Amount Paid, as Opposed to Amount Billed

One of the most important issues in any case is the amount of damages an injured party can recover. In the personal injury context, this issue is central. Over the years, a controversy has raged over how to measure the recoverable amount in a personal injury lawsuit.  Should the inured person’s recovery for medical expenses by measured by the amount billed by a caregiver, or the amount actually paid for treatment?

In Howell v. Hamilton Meats & Provisions, Inc., the California Supreme Court determined that the injured party may recover the costs actually paid to the aregiver, not the amounts billed by the caregiver.

To quote the court:

“When a tortiously injured person receives medical care for his or her injuries, the provider of that care often accepts as full payment, pursuant to a preexisting contract with the injured person’s health insurer, an amount less than that stated in the provider’s bill.  In that circumstance, may the injured person recover from the tortfeasor, as economic damages for past medical expenses, the undiscounted sum stated in the provider’s bill but never paid by or on behalf of the injured person?  We hold no such recovery is allowed, for the simple reason that the injured plaintiff did not suffer any economic loss in that amount. …”

“The collateral source rule, which precludes deduction of compensation the plaintiff has received from sources independent of the tortfeasor from damages the plaintiff ‘would otherwise collect from the tortfeasor’ recover in damages the amounts her insurer paid for her medical care.  The rule, however, has no bearing on amounts that were included in a provider’s bill but for which the plaintiff never incurred liability because the provider, by prior agreement, accepted a lesser amount as full payment.  Such sums are not damages the plaintiff would otherwise have collected from the defendant.  They are neither paid to the providers on the plaintiff’s behalf nor paid to the plaintiff in indemnity of his or her expenses.  Because they do not represent an economic loss for the plaintiff, they are not recoverable in the first instance.  The collateral source rule precludes certain deductions against otherwise recoverable damages, but does not expand the scope of economic damages to include expenses the plaintiff never incurred.”

For your convenience, a complete copy of the court’s opinion is attached.

At Slote & Links, we regularly advise clients about a wide variety of legal issues. Feel free to give us a call if you have questions or issues in this area.