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Howell v. Hamilton Meats & Provisions

November 23, 2009


APPEAL from an order of the Superior Court of San Diego County, Adrienne A. Orfield, Judge. Reversed and remanded. (Super. Ct. No. GIN053925).

The opinion of the court was delivered by: Nares, J.



In this case, we must decide whether a plaintiff who has private health care insurance in a personal injury case may recover, under the collateral source rule, economic damages for the amount of past medical expenses that her health care providers have billed, but which neither the plaintiff nor her health care insurer is obligated to pay because the providers have agreed, under contracts into which they have entered with the insurer, to accept─as payment in full─payments in an amountthat is less than the amount the providers have billed. Stated differently, is the difference (hereafter referred to as the negotiated rate differential)*fn1 between (1) the full amount of the medical providers' bills, and (2) the lesser amount paid by the private health care insurer in cash payments to the medical providers that the providers have agreed to accept as payment in full pursuant to their agreements with the insurer, a benefit within the meaning of the collateral source rule such that the plaintiff is entitled under that rule to recover the amount of the negotiated rate differential as part of her economic damages award?

In this personal injury action, plaintiff Rebecca Howell's private health care insurance policy provided indemnity coverage for medical expenses she incurred for treatment of injuries she sustained in a vehicle accident caused by the negligent driving of an employee of defendant Hamilton Meats & Provisions, Inc. (Hamilton). Howell appeals an order granting Hamilton's posttrial motion to reduce by $130,286.90 the jury's special verdict award for her past injury-related medical expenses from $189,978.63, which was the full amount of her medical bills, to $59,691.73, the amount her medical providers Scripps Memorial Hospital Encinitas (Scripps) and CORE Orthopedic Medical Center (CORE) accepted as payment in full from Howell's health care insurer, PacifiCare PPO (PacifiCare). Howell contends the order should be reversed because (1) the reduction of the jury's award for her past medical expenses violates the collateral source rule, which (as we shall discuss more fully, post) generally bars at trial in a personal injury case evidence of compensation the plaintiff has received for her injuries from a source wholly independent of the defendant tortfeasor; and (2) Hamilton's motion was "procedurally improper and lacked sufficient evidence to support the claimed reduction."

We hold that in a personal injury case in which the plaintiff has private health care insurance, the negotiated rate differential is a benefit within the meaning of the collateral source rule, and thus the plaintiff may recover the amount of that differential as part of her recovery of economic damages for the past medical expenses she incurred for care and treatment of her injuries. Applying this holding to the instant case, we conclude the court erred by granting Hamilton's post-verdict motion to reduce the jury's special verdict award for the injury-related medical expenses Howell incurred. Accordingly, we reverse the order.


A. Howell's Private Health Care Insurance

Howell was seriously injured when the vehicle she was driving was struck by a truck driven by one of Hamilton's employees, who had negligently made an illegal U-turn across the lane in which Howell was traveling.

At the time of the accident, Howell had private health care insurance through PacifiCare. According to Howell, PacifiCare agreed to indemnify her for any medical charges covered by her health plan in exchange for her premium payments, subject to her responsibility for deductibles and copayments; and PacifiCare, as a regular part of its business practice, entered into contractual agreements with hospitals and other health care providers, including Scripps and CORE, to satisfy any bills incurred by PacifiCare plan members who obtained care from those providers.

Howell underwent two fusion spinal surgeries, as well as surgical procedures that took bone from her hip in an attempt to repair her neck and repaired the graft site on her hip.

B. Howell's Financial Responsibility Agreements with Her Medical Providers

Before she received treatment from Scripps and CORE, Howell executed written agreements in which she agreed to be financially responsible for all charges for the medical services they provided to her. Specifically, Howell's agreement with Scripps provided that in consideration for all services she received at a Scripps facility, she was "obligated to pay the Facility's usual and customary charges for such services." She expressly acknowledged in that agreement that "she may be asked to execute a separate financial agreement for all amounts deemed to be [her] responsibility and/or not covered under an insurance policy, health care service plan, managed care program or any third party payer not a party to this agreement." An assignment of benefits clause in the agreement provided that Howell "authorize[d] direct payment to the Facility of any insurance or reimbursement from third party payers otherwise payable to or on behalf of the patient for services obtained at the Facility, at a rate not to exceed the Facility's usual and customary charges." Howell also agreed that she "remain[ed] financially responsible for charges due, but not paid, under this assignment of benefits."

Howell's agreement with CORE provided it was "[her] responsibility to pay any co-insurance, or any other balance not paid for by [her] insurance." The agreement contained an assignment of benefits clause, under which she "assign[ed] all medical and/or surgical benefits, to include major medical benefits to which [she was] entitled, including Medi Care, private insurance, and other health plans to the provider." (Italics added.)


A. Hamilton's Motion In Limine

Hamilton filed a motion in limine seeking to exclude at trial any evidence of, or reference to, those portions of Howell's medical bills that were not paid either by PacifiCare, or by Howell as a copayment. Hamilton argued that the decision in Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 (Hanif) "preclude[d] [Howell] from seeking to recover as medical expenses amounts billed, but not ultimately paid by PacifiCare."

Howell opposed the motion, arguing that under the collateral source rule articulated in Helfend v. Southern California Rapid Transit Dist. (1970) 2 Cal.3d 1 (Helfend), "the gross amount of all medical bills, not any lesser amount, should be presented to the jury."

Following oral argument, the court denied Hamilton's in limine motion, ruling that Howell was entitled to present at trial evidence of the full amount of the medical bills. The court, however, on a defense motion under Hanif, supra, 200 Cal.App.3d 635, deferred to a posttrial proceeding the determination of whether the jury's award of damages for Howell's past medical expenses should be reduced by any amount her medical providers may have "compromised their billing."

B. Trial and Special Jury Verdict

In their joint trial readiness conference report, the parties stipulated that the only issue to be determined at trial was the amount of damages Howell suffered as a result of the accident caused by the admitted negligence of Hamilton's driver. The report and Howell's trial exhibit list identified as exhibit No. 57 Howell's "Summary of Plaintiff's Past Medical Expenses," which itemized 19 medical expenses and indicated that those expenses totaled $189,978.63. Her trial exhibit list also indicated that copies of the billing records were attached to that exhibit.

During the trial, Dr. Timothy Peppers, who performed Howell's surgeries, testified on her behalf. After Dr. Peppers testified about his qualifications, Howell's injuries, and the medical treatment she received for those injuries, Howell's counsel showed him exhibit No. 57 and the attached billing records. Dr. Peppers testified that to the best of his knowledge the summary and billing records were a fair and reasonable representation of the medical billings.

Howell's husband, James Michael Vallee, also testified on her behalf. He indicated he had been keeping track of her injury-related medical bills, which to date totaled $189,978.63, as shown in exhibit No. 57.

The jury returned a special verdict that awarded to Howell compensatory damages in the total amount of $689,978.63, which included $189,978.63 for "[p]ast economic loss, including medical expenses," $150,000 for "[f]uture economic loss, including medical expenses," $200,000 for "[p]ast non-economic loss (including physical pain, mental suffering, loss of enjoyment of life, disfigurement, physical impairment, inconvenience, grief, anxiety, humiliation, and emotional distress," and $150,000 for "[f]uture non-economic loss."

C. Hamilton's Motion To Reduce the Special Verdict for Past Medical Expenses

Before the court entered judgment, Hamilton filed a motion under Hanif, supra, 200 Cal.App.3d 635 and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298 (Nishihama) seeking an order reducing the jury's special verdict for Howell's past medical expenses by $130,286.90 (i.e., from $189,978.63 to $59,691.73).

In its motion papers, Hamilton argued it was entitled to the claimed reduction under Hanif and its progeny because the amount was neither incurred nor expended for the medical services that Scripps and CORE provided to Howell in this matter.

In support of its motion, Hamilton submitted the declarations of Mourence Burris, Scripps's supervisor of customer service and collections from third parties, and Betsy Engstrom, who was employed in the accounting department of CHMB, a billing company that provided medical billing services for CORE. In his declaration, Burris indicated that Scripps's billing records showed that Scripps waived or "[wrote] off" the sum of $94,894.42 related to Howell's "surgeries and related treatment as a result of the agreement with PacifiCare," no outstanding balance remained on Howell's account, and no further collection would be pursued. In her declaration, Engstrom indicated that the entries in CORE's bill related to the services CORE provided to Howell showed that CORE had waived or "written off" the sum of $35,392.48 pursuant to its agreement with PacifiCare, and no collection from ...

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