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California Supreme Court Supports Defense in Decisive Decision on Plaintiffs' Recoverable Damages: Howell v. Hamliton Meats

By Jeffrey Y. Choi and Barry Clifford Snyder

August 24, 2011

On August 18, 2011, the California Supreme Court provided a landmark victory for defendants and their insurers by confirming plaintiffs can only recover at trial the amount of medical expenses actually paid to and accepted by medical providers. It resolved a split of decisions which had long kept the legal community in limbo on how to handle this issue.

The Opinion

Should personal injury plaintiffs be able to recover the full amount of medical expenses billed or the reduced amount actually accepted by medical providers as full payment for services rendered? This question, unsettled for 23 years, was finally resolved yesterday when the California Supreme Court emphatically limited plaintiffs' recoverable damages to reduced amounts accepted for services rendered.

In 1988, the 3rd District Court of Appeal ruled that plaintiffs with Medi-Cal may only recover the amount of medical expenses actually paid and accepted by medical providers even if that amount was much less than the full billed amount. [Hanif v. Housing Authority of Yolo County (1988) 200 Cal.App.3d 635.] In 2001, the 1st District Court of Appeal extended the Hanif rule to private insurance and quoted Hanif, stating, "Thus, when the evidence shows a sum certain to have been paid or incurred for past medical care and services, whether by the plaintiff or by an independent source, that sum certain is the most the plaintiff may recover for that care despite the fact that it may have been less than the prevailing market rate." [Nishihama v. City and Country of San Francisco (2001) 93 Cal.App.4th 298.]

In a line of cases culminating in Howell, plaintiffs began attacking Hanif and Nishihama in an effort to dilute their impact. One major decision that weakened the Hanif and Nishahama decisions was Greer, which held that plaintiffs may present the gross amount of their bills to the trier of fact. [Greer v. Buzgheia (2006) 141 Cal.App.4th 1150.] In direct contrast to their earlier decision in Hanif, a different panel from the 3rd District Court of Appeal reasoned that, "[Evidence of the full billed amount] gives the jury a more complete picture of the extent of a plaintiff's injuries." [Id. at 1157.]

The courts' rationale thus moved further and further away from of the principals set forth in Hanif and Nishihama, until they reached Howell. [Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686.] In Howell, the Fourth District Court of Appeal disagreed with Hanif and Nishihama, holding that reducing plaintiffs' recovery to adjusted amounts accepted by medical providers violated the collateral source rule. [Id. at 812.]

The California Supreme Court took up the issue and published a decision on August 18, 2011. Resolving the split between Howell and Hanif/Nishihama, the Court overturned Howell, ruling strongly in favor of limiting plaintiff's recoverable damages. Distinguishing the application of the collateral source rule, the Court returned to the Hanif rationale and relied on the longstanding principle that plaintiffs may only recover reasonable medical expenses that they actually incurred. In other words, the amount accepted as full and final payment is in fact the "reasonable amount for the services rendered." [See Hanif, supra, 200 Cal.App.3d at 641.]

In the decision, the Court also strongly suggests that reduced medical bills also represent the fair market value of services rendered and that recovery beyond that amount would overcompensate a personal injury plaintiff. For this reason, the difference between the reduced rate and the full billed amount does not provide a windfall to plaintiff as the difference in value only exists on paper.

The Court also addressed the Greer procedural reduction of medical specials post-trial by stating that, "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." Plaintiffs are no longer be able to admit evidence of the amounts billed by their medical providers when those providers have accepted reduced amounts as full and final payment of the services rendered.

The decision was published on August 18, 2011. It can be found on the Court's new website or at Howell v. Hamilton Meats & Provisions, Inc. (Cal., Aug. 18, 2011, S179115) 2011 WL 3611940.