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A plaintiff in a California personal injury action can collect both past and future medical care costs from a defendant who causes him injury even if the plaintiff’s health insurance company paid some or all of those costs and is expected to pay medical care costs in the future. This is often referred to as the “collateral source” rule which provides that payments or benefits conferred on an injured party from third-party sources (such as a plaintiff’s medical insurance company) are not credited against the tortfeasor’s liability. Thus, the defendant does not get any credit for payments made by plaintiff’s medical insurance provider. That sounds like a very fair rule. But for many years prior to 2011, plaintiffs and their attorneys who sought to recover past medical expenses from a defendant presented evidence of the total charges made by medical care providers (hospitals, doctors and other caregivers) without reference to the amount actually paid by plaintiff’s health insurer, on the grounds that the total charges reflected the reasonable value of those services. In most situations involving health insurance, a medical provider will accept a smaller sum from an insurance carrier than the amount the provider has billed. The defendant then faced the prospect of having to pay for all medical charges billed regardless of how much plaintiff’s medical care providers accepted as payment for their services. The defendant was not entitled to the deductions made by plaintiff’s insurance carrier pursuant to its contracts with the medical providers.

That all changed in 2011 when the California Supreme Court issued its opinion in Howell v. Hamilton Meats (52 Cal.4th 541). That decision limits plaintiff’s medical cost damages in a personal injury lawsuit to the actual amount paid by plaintiff’s health insurer for past medical services. Now, the defendant gets the benefit of the plaintiff’s health insurance payment reductions to plaintiff’s medical care providers. Another case decided by a California Court of Appeal in 2013 (Corenbaum v. Lumpkin) appears to extend this limitation to future medical costs as well. The courts reasoned that a plaintiff should not obtain an economic recovery that includes a windfall based on the difference between the billed amount of medical care and what was actually paid for that care.

Most private health insurance contracts contain a reimbursement provision that allows the insurer to collect money paid for a plaintiff’s past medical care when the plaintiff recovers such damages from a defendant. The plaintiff’s lawyer should handle claims made for reimbursement as part of the legal services provided to plaintiff during the pendency of the personal injury lawsuit.

Written by: Keith Lovendosky, attorney @ Bailey & Partners