Howell v. Hamilton Meats & Provisions, Inc. - 52 Cal. 4th 541, 129 Cal. Rptr. 3d 325, 257 P.3d 1130 (2011)

Rule:

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, ensures that the plaintiff may recover in damages the amounts his or her insurer paid for the plaintiff's 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.

Facts:

Plaintiff, Rebecca Howell, was seriously injured in an automobile accident negligently caused by a driver for defendant Hamilton Meats & Provisions, Inc. (Hamilton). At trial, Hamilton conceded liability and the necessity of the medical treatment plaintiff had received, contesting only the amounts of plaintiff's economic and noneconomic damages. Hamilton made a post-trial motion to reduce past medical specials pursuant to Hanif, seeking a reduction of $130,286.90, the amount assertedly “written off” by plaintiff's medical care providers. The trial court granted Hamilton's motion, reducing the past medical damages award to reflect the amount the medical providers accepted as payment in full. Accordingly, the trial court reduced the judgment by $130,286.90. The Court of Appeal, Fourth Dist., Div. One, No. D053620, reversed the reduction order, concluding it violated the collateral source rule.

Issue:

Did the trial court’s reduction order violate the collateral source rule?

Answer:

No.

Conclusion:

The Supreme Court reversed the judgment of the Court of Appeal and remanded the matter to that court for further proceedings. The Court concluded that plaintiff could recover as damages for her past medical expenses no more than her medical providers had accepted as payment in full from plaintiff and her health insurer. According to the Court, plaintiff did not incur liability for her providers' full bills, because at the time the charges were incurred, the providers had already agreed on a different price schedule for the insurer's members. Having never incurred the full bill, plaintiff could not recover it in damages for economic loss. For this reason alone, the Court held that the collateral source rule was inapplicable. Plaintiff received the benefits of the health insurance for which she paid premiums: her medical expenses had been paid per the policy, and those payments were not deducted from her tort recovery. Plaintiff's insurance premiums contractually guaranteed payment of her medical expenses at rates negotiated by the insurer with the providers; they did not guarantee payment of much higher rates the insurer never agreed to pay. The Court concluded that the Court of Appeal incorrectly believed that the reduction order violated the collateral source rule.