Thursday, March 30, 2017


Over the past number of years, a series of groundbreaking case decisions have seriously affected both the amount and the procedure for a claimant in a bodily injury case to seek damages for their medical bills incurred to treat the injury.

Under a line of decision which may be generally referred to as the Hanif/Howell progeny of cases (see my blog from 2014 as to how this case law evolved), a claimant can only claim as economic damages the full amount billed by any given healthcare provider if there have been no payments made on the bill from a collateral source, such as the claimant's own medical insurance.  If there have been any payments from the claimant's own medical insurance and the provider has adjusted their charges in reciprocity for being paid, then the maximum amount that the claimant can claim as damages is the adjusted amount received by the provider as payment in full (i.e., the amount paid by the claimant's own medical insurance plus any out of pocket co-pays or deductibles personally borne by the claimant).

As most healthcare providers will routinely adjust their total charges in order to get timely payment from medical insurance, this will reduce the amount that the claimant can otherwise claim as damages.  For the reasons stated hereafter, this is not necessarily a negative thing.  Under what is known as the Collateral Source Rule, the fact that the claimant's own medical insurance paid some of the bills is not admissible as evidence at trial, nor does the defendant get a credit against what they are legally responsible for in medical expense damages just because the claimant's own medical insurance paid down the bills.

The public policy upholding the Collateral Source Rule is that the negligent defendant should not benefit from the claimant's prescience in having health insurance to begin with.

The plaintiffs' trial bar has had a difficult time in accepting the Hanif/Howell restrictions on what amounts can be claimed as medical damages in light of the above.  This is especially true where the claimant's medical expenses have been paid down via a governmental assistance source like Medi-Cal or Medicare, and which pay the provider pennies on the dollar as payment in full.

In the experience of this practitioner, many plaintiffs' attorneys will counsel their clients NOT to use their own medical insurance, or alternatively won't even apprise their clients of the impact of Hanif/Howell on their claim, much less of what may happen if the recovery at trial isn't sufficient to cover the unpaid medical bills.

In the opinion of this practitioner, in order to protect the client the attorney should always counsel the client to use their own medical insurance (or governmental assistance program) to pay down their bills, to the extent that they have coverage and the healthcare provider will accept it.

There are three (3) basis reasons behind this approach:

1.  Even when liability in a personal injury case is clear, there is no guarantee that a plaintiff will recover any damages at all if the case goes to trial.  If the plaintiff still owes medical bills for treatment of their injuries and the bills were not submitted to their medical insurance carrier in a timely fashion, then if they get nothing or an amount less than the bills at trial then they will be left holding the bag for personal responsibility for paying same.  Medical insurance companies require timely submission of bills as a condition of extending coverage benefits.

2.  Given the Hanif/Howell authorities, some trial judges may allow the introduction into evidence at trial of the plaintiff having available medical insurance, at least if it has not been utilized.  This is because the plaintiff has an affirmative legal duty to mitigate their damages, and the defendant will argue that they did not do so by not using their own medical insurance.   This type of evidence, if admitted, would give the defendant the argument that the plaintiff should get nothing in damages for their medical bills, and will cast the plaintiff in an unfavorable light in front of
a jury.

3.  Whether medical insurance is used or not, the defendant's obligation to pay economic damages for medical bills is limited only to those bills that are "reasonable and necessary".  There is even a jury instruction on this point.  When the bills haven't been submitted to medical insurance and the provider is treating solely on a lien basis, then many such providers will commonly "jack up" the amount of the bills given the fact that they may not be paid for as long as a year down the line, and they expect the plaintiff's attorney to try and negotiate with them after the case is resolved to take a lesser amount as payment in full.  Such inflated lienholder bills are harder to characterize as being "reasonable and necessary".  The argument becomes easier for the plaintiff to make if the bills have been adjusted downwards due to payment being made by their own medical insurance carrier.

It is somewhat of an open question as to whether it constitutes legal malpractice for a plaintiff's attorney to counsel their client not to use their own medical insurance to pay down their bills.  But at the very least, it is potentially very dangerous for the plaintiff not to do so.  The attorney should explain to the client the potential pitfalls of not doing so.

Attorneys should err on the side of caution and put their client's case and financial situation in the best possible position, especially if the matter does not turn out so favorable for the client in the long run.

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