They say if you like law or you enjoy eating sausage, you should never watch either one being made or, you may change your mind. In my opinion, the decision of Howell v. Hamilton Meats and Provisions, Inc. (2011) 52 Cal.4th 541, is an example of how a court can have good intentions but, end up making very bad law.
Facts of The Case: The plaintiff, Rebecca Hamilton, was severely injured when a delivery truck being driven by a truck driver hired by Hamilton Meats and Provisions crashed into her vehicle. Liability was not disputed but the parties could not agree on a settlement amount so the case went to trial in San Diego, CA. Prior to the trial, the attorneys for defendant (Hamilton) asked the judge to exclude evidence of what was billed by plaintiff’s health care providers because these bills had been written down pursuant to contracts between the health caregivers and the plaintiff’s health insurance company.
Some Context and Legal Background Leading Up to This Case: California, like many other states, had long ago adopted a rule of law called the “collateral source rule.” In essence, what the rule is supposed to mean is that evidence of sources of payments “collateral” to the injured party (e.g. health and auto insurance payments) should not be admissible to reduce what the plaintiff is entitled to recover from a liable defendant whose negligence causes bodily harm. The public policy rationale behind this rule is to not penalize people for being responsible citizens and maintaining health and other insurance policies.
Despite this rule of law, in 1988, the California Court of Appeal decided the case of Hanif v. Housing Authority of Yolo County, 200 Cal.App.3d 635, that a boy injured by negligence in a housing complex should not be allowed to recover the full amount awarded for his medical care due to the fact that the amount awarded exceeded what was actually paid for the treatment by public assistance benefits (Medi-Cal payments). Their reasoning is that awarding the boy what the reasonable and “fair market” rate for the medical services would, in essence, give him some type of “windfall” benefit in that the Medi-Cal payments were less than this market rate.
The Hanif case spurned several later decisions that seemed to chip away slowly at the collateral source rule. Many of these decisions, however, made a distinction between evidence of payments from private health insurance versus public assistance benefits when it came to determining what really was a “collateral source.” The other issue that continually arose after Hanif was whether to allow a jury to hear the full fair market value of the medical services for purposes of deciding how much to award a plaintiff for pain and suffering (so-called “non-economic” or “general” damages). A procedure began to develop in many state trial courts whereby the jury was allowed to hear evidence of the full “reasonable and necessary” value of the medical bills, issue an award, and then the defense could do a post-trial “Hanif” motion to reduce the award of “economic damages” for any insurance write-offs. This went on for years prior to Howell.
The Ruling: The California Supreme Court basically saw that this was a potential cumbersome process with the potential for errors. However, they needed to find a way to clean this up and not seem like they were abrogating the collateral source rule. In my opinion, what they should have done was simply overrule all of these lower appellate court decisions like Hanif and said, evidence of payments from health insurance is not admissible to show the “reasonable value” of medical services or anything else. They should have simply gone back to a pre-Hanif world of allowing the plaintiff’s medical experts to testify as to what they believed to be the reasonable value of services and their basis therefore, have the defense medical experts attest as to their estimation of value, and have the jury make a decision irrespective of health or auto insurance.
Instead, the California Supreme Court ruled that, no matter whether a plaintiff received public benefits or had private health insurance, the only evidence that they should be able to offer to a jury for purposes of awarding either economic or non-economic damages is what the insurance company paid to the doctors and hospitals. The decision goes on for pages and pages to try to justify and rationalize how this is not a complete and utter abolishment of the collateral source rule, which, in my opinion, it absolutely is!
Many personal injury legal advocates like the Consumer Attorneys of California, are currently lobbying the California legislature to enact new law that would take away the bad affect that this decision has had and will have on injured Californians. I am hopeful that they will succeed!