The Howell Decision

For years, California litigants have argued over what an injured plaintiff may recover as economic damages in lawsuits where a portion of the plaintiff’s medical bills were paid for by insurance and another portion was adjusted or written-off pursuant to an agreement between the plaintiff’s health care provider and the plaintiff’s health insurer. Injured plaintiffs argued that the unpaid portion was a collateral source benefit which should be recoverable. Defendants argued that allowing injured plaintiffs to recover for unpaid medical bills created an unacceptable windfall. A split in California authorities did not help the situation.

On August 18, 2011, the California Supreme Court published its much anticipated opinion in Howell v. Hamilton Meats & Provisions, Inc. (August 18, 2011) 52 Cal. 4th 541, which addressed the issue described above. In Howell, the California Supreme Court held that “an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial.” It was hoped that the Howell decision would finally put to rest the longstanding debate over what economic damages are recoverable in personal injury lawsuits where portions of the medical bills are unpaid. Unfortunately, important questions remain unanswered in the wake of the decision, including: (1) Will an injured plaintiff be able to present evidence of the total amount of medical charges at trial for some other purpose?; and (2) Will an injured plaintiff be able to recover the full amount of anticipated future medical charges?

Unanswered Questions

The Howell Court observed that issues remained to be decided concerning whether evidence of the full amount of medical charges, including unpaid charges, would be admissible at trial. “[W]hen a medical care provider has … accepted as full payment for the plaintiff’s care an amount less than the provider’s full bill, evidence of that amount is relevant to prove the plaintiff’s damages for past medical expenses …. Evidence that such payments were made in whole or in part by an insurer remains, however, generally inadmissible under the evidentiary aspect of the collateral source rule… Where the provider has, by prior agreement, accepted less than a billed amount as full payment, evidence of the full billed amount is not itself relevant on the issue of past medical expenses. We express no opinion as to its relevance or admissibility on other issues, such as noneconomic damages or future medical expenses…. Where a trial jury has heard evidence of the amount accepted as full payment by the medical provider but has awarded a greater sum as damages for past medical expenses, the defendant may move for a new trial on grounds of excessive damages.”

It is Clear that the Plaintiff Cannot Recover for the Unpaid Amounts, but is the Total Amount of the Charges, which Includes Unpaid Amounts, Admissible at Trial?

Because the Howell Court stated that it was not addressing the issue of whether the full amount of medical charges would be admissible at trial, the issue is open for debate, and is guaranteed to be a hot topic during settlement discussions, as the issue, depending on which way it is decided, may significantly alter the value of any given case.

An injured plaintiff is presented with a dilemma when it comes to the issue of whether evidence of the full amount of medical charges should be presented at trial. On the one hand, an injured plaintiff would not normally wish to introduce evidence that an insurance company paid a portion of his/her medical charges to the jury, but would rather use the collateral source rule to prevent the jury from learning of the existence of insurance benefits. On the other hand, an injured plaintiff would want to introduce evidence of the entire amount of past medical charges in order to impress the jury with the seriousness of the injury, and thus increase his/her damages. However, it does not appear that an injured plaintiff can introduce evidence of the total amount of the medical charges to a jury without abrogating the collateral source rule. This is because the jury would have to be informed, in order to avoid an award that could lead to a new trial for excessive damages, that some of the bills were paid while others were written off pursuant to an agreement between the health care provider and the insurer. Therefore, it can be argued that allowing introduction of the total amount of medical charges will result in a violation of the collateral source rule. If the plaintiff wishes to introduce the total amount of medical charges to the jury, the jury must also be informed that the plaintiff had insurance which paid for the medical charges.

Moreover, since the unpaid amount of the medical charges is not recoverable, it can be argued that the total amount of medical charges is irrelevant under California Evidence Code Sections 210 and 350. Although many lawyers and insurance professionals are accustomed to evaluating non-economic damage awards by simply multiplying the total of the medical charges, the total amount of charges, which includes unpaid charges, is not relevant to prove or disprove the nature and extent of the injured plaintiff’s pain and suffering, which is what comprises the non-economic damage award. It appears that plaintiffs are taking the position that the past medical bills are relevant to demonstrate the nature and extent of the injury. Until an appellate court rules on this issue, it appears that the best arguments against introduction of the total amount of medical charge, which include unpaid charges, are that such evidence is irrelevant, that introduction would be a violation of the collateral source rule, and that introduction may lead to an excessive award which might require a new trial.

Can an Injured Plaintiff Recover for the Full Amount of Future Medical Charges Even Though His/Her Past Medical Charges Were Reduced?

Another issue that was not addressed by the Howell Court was whether a plaintiff may recover for the full amount of claimed future medical charges. By way of example, this issue may arise in cases where the plaintiff has had one surgery for which the insurer paid for 50% of the charges, but received a reduction for the other 50% of the charges pursuant to a negotiated discount. The injured plaintiff may require a second surgery sometime in the future. In that situation, does the defendant get the benefit of the insurer’s 50% negotiated reduction in charges?

Again, this issue is sure to arise during settlement discussions as it will affect the overall value of the case. Although the Howell Court did not rule on this issue, it appears somewhat more likely that plaintiffs will be able to recover the full value of future medical bills in this situation. Defendants will argue that the plaintiff “opens the door” to the issue, by introducing the full amount of the medical charges to the jury. In that situation, since the door was opened by the plaintiff, the defendant might be able to argue that, like the past medical specials, the plaintiff would only be required to pay for a portion of the future medical specials. The defendant can argue for the jury to award less than the full amount of future medicals that are claimed, in proportion to the reduction in the past medical specials. On the other hand, plaintiffs will argue that it would require speculation by the jury to determine what amount would likely be paid out of the full amount billed in the future, what insurance the plaintiff will have at some later point in time, and that it would violate the collateral source rule to allow evidence of how much various insurers are likely to pay for the future procedures or treatment. In other words, plaintiffs will argue that there is no other number that they can use other than the full amount of the future bills without speculating as to what the coverage for the plaintiff will be and the amount that insurance will pay in the future. Until an appellate court provides guidance on this issue, litigants will continue to argue over whether the evidence is admissible, over what their experts can testify to regarding future medical bills, and trial courts will undoubtedly make inconsistent rulings on this issue.