In this article we discuss California’s “Collateral Source” Rule, and how the 2011 case of Howell v. Hamilton Meats and Provisions, Inc. affects this rule in regard to personal injury settlements.
The collateral source rule essentially prohibits the admission of evidence that the plaintiff or victim has received compensation from some source other than the damages sought against the defendant. In other words, under this rule, whether a plaintiff can recover damages from a source other than those sought against the defendant is irrelevant.
However, in the 2011 opinion issued by the California Supreme Court in Howell v. Hamilton Meats and Provisions, Inc., the rule was changed in 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.
So what does this mean? Well, insurance companies most often have what are called “negotiated rates” with medical providers. That is to say that the “billed amount”, and what insurance companies actually pay are often drastically different, because the insurance companies have entered into contracts with these providers agreeing in advance to pay only a certain amount for any given medical service provided to a patient, typically much less than the amount the provider would bill for the service.
Essentially, this means that the value of many personal injury cases has dropped since Howell, because the much higher amount that a plaintiff is billed cannot be presented as evidence, only the “reasonable and actual amount paid” by the insurance company.
Let’s take a look at an example…
So you have been injured by another driver in a car accident that was not your fault? For example, as the result of the accident and your injuries, you have to have spinal surgery. The amount billed by the surgeon and the hospital for the cost of the surgery is $100,000. You thought ahead and purchased health insurance prior to the accident, so your insurance company pays your medical expenses. However, your insurance company has a contract with the hospital, where they have a pre-negotiated rate for the surgery you had at a cost of $50,000. Since Howell, you and your attorney will not be able to present the billed amount of $100,000 to a jury, since the “reasonable and actual amount paid” was only $50,000. So, when the jury decides to award you damages for your medical bills, they will only be allowed to consider the $50,000 paid by the insurance company. Furthermore, under most contracts with medical and auto insurance policies, you are required to reimburse the insurance company for any and all expenses that they incurred stemming from your accident. So, in this case, the $50,000 that you recover will go to the insurance company as reimbursement. Keep in mind however, that settlement amounts and verdicts also include money for future economic damages (such as future medical expenses), and “non-economic” damages (such as pain and suffering, or “loss of enjoyment of life”) for what you have endured as a result of the injuries.
If you are involved in an accident of any type where you are injured, you may want to seek the advice and services of an experienced attorney who understands the law in the wake of Howell. For over 30 years, The Law Offices of Vann H. Slatter have helped injured people receive the compensation that they deserve. Call today for a free consultation at (310) 444-3010 or toll-free at (888) 293-0404.