Supreme Court of California Justia
Citation 52 Cal. 4th 541, 257 P.3d 1130, 129 Cal. Rptr. 3d 325

Howell v. Hamilton Meats



Filed 8/18/11



IN THE SUPREME COURT OF CALIFORNIA



REBECCA HOWELL,

Plaintiff and Appellant,

S179115

v.

Ct.App. 4/1 D053620

HAMILTON MEATS & PROVISIONS,

INC.,

San Diego County

Defendant and Respondent.

Super. Ct. No. GIN053925



When a tortiously injured person receives medical care for his or her

injuries, the provider of that care often accepts as full payment, pursuant to a

preexisting contract with the injured person‘s health insurer, an amount less than

that stated in the provider‘s bill. In that circumstance, may the injured person

recover from the tortfeasor, as economic damages for past medical expenses, the

undiscounted sum stated in the provider‘s bill but never paid by or on behalf of the

injured person? We hold no such recovery is allowed, for the simple reason that

the injured plaintiff did not suffer any economic loss in that amount. (See Civ.

Code, §§ 3281 [damages are awarded to compensate for detriment suffered], 3282

[detriment is a loss or harm to person or property].)

The collateral source rule, which precludes deduction of compensation the

plaintiff has received from sources independent of the tortfeasor from damages the

plaintiff ―would otherwise collect from the tortfeasor‖ (Helfend v. Southern Cal.

Rapid Transit Dist. (1970) 2 Cal.3d 1, 6 (Helfend)), ensures that plaintiff here may

1




recover in damages the amounts her insurer paid for her medical care. The rule,

however, has no bearing on amounts that were included in a provider‘s bill but for

which the plaintiff never incurred liability because the provider, by prior

agreement, accepted a lesser amount as full payment. Such sums are not damages

the plaintiff would otherwise have collected from the defendant. They are neither

paid to the providers on the plaintiff‘s behalf nor paid to the plaintiff in indemnity

of his or her expenses. Because they do not represent an economic loss for the

plaintiff, they are not recoverable in the first instance. The collateral source rule

precludes certain deductions against otherwise recoverable damages, but does not

expand the scope of economic damages to include expenses the plaintiff never

incurred.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Rebecca Howell was seriously injured in an automobile accident

negligently caused by a driver for defendant Hamilton Meats & Provisions, Inc.

(Hamilton). At trial, Hamilton conceded liability and the necessity of the medical

treatment plaintiff had received, contesting only the amounts of plaintiff‘s

economic and noneconomic damages.

Hamilton moved in limine to exclude evidence of medical bills that neither

plaintiff nor her health insurer, PacifiCare, had paid. Hamilton asserted that

PacifiCare payment records indicated significant amounts of the bills from

plaintiff‘s health care providers (the physicians who treated her and Scripps

Memorial Hospital Encinitas, where she was treated) had been adjusted downward

before payment pursuant to agreements between those providers and PacifiCare

and that, under plaintiff‘s preferred provider organization (PPO) policy with

2



PacificCare, plaintiff could not be billed for the balance of the original bills

(beyond the amounts of agreed patient copayments). Relying primarily on Hanif

v. Housing Authority (1988) 200 Cal.App.3d 635 (Hanif),1 Hamilton argued that

because only the amounts paid by plaintiff and her insurer could be recovered, the

larger amounts billed by the providers were irrelevant and should be excluded.

The trial court denied the motion, ruling that plaintiff could present her full

medical bills to the jury and any reduction to reflect payment of reduced amounts

would be handled through ―a posttrial Hanif motion.‖

Plaintiff‘s surgeon and her husband each testified that the total amount

billed for her medical care up to the time of trial was $189,978.63, and the jury

returned a verdict awarding that same amount as damages for plaintiff‘s past

medical expenses.

Hamilton then made a ―post-trial motion to reduce past medical specials

pursuant to [Hanif],‖ seeking a reduction of $130,286.90, the amount assertedly

―written off‖ by plaintiff‘s medical care providers, Scripps Memorial Hospital

Encinitas (Scripps) and CORE Orthopaedic Medical Center (CORE). In support

of the motion, Hamilton submitted billing and payment records from the providers

and two declarations, the first by Scripps‘s collections supervisor, the second by

an employee of CORE‘s billing contractor. The Scripps declaration stated that of


1

In Hanif, the plaintiff introduced evidence that the reasonable value of the

medical services he received was greater than the amount Medi-Cal had paid on
his behalf, and the trial court awarded him the greater sum. (Hanif, supra, 200
Cal.App.3d at p. 639.) The appellate court held this was error, for ―when the
evidence shows a sum certain to have been paid or incurred for past medical care
and services, whether by the plaintiff or by an independent source, that sum
certain is the most the plaintiff may recover for that care despite the fact it may
have been less than the prevailing market rate.‖ (Id. at p. 641.)

3



the $122,841 billed for plaintiff‘s surgeries, PacifiCare paid $24,380, plaintiff paid

$3,566, and the remaining $94,894 was ― ‗written off‘ or waived by [Scripps]

pursuant to the agreement between [Scripps] and the patient‘s private healthcare

insurer, in this case Pacificare PPO.‖ The CORE declaration stated that of the

surgeon‘s bill for $52,915, PacifiCare paid $9,665, and $35,392 was waived or

written off pursuant to CORE‘s agreement with PacifiCare.2 Both declarants

stated the providers had not filed liens for, and would not pursue collection of, the

written-off amounts.

In opposition, plaintiff argued reduction of the medical damages would

violate the collateral source rule. She supported her opposition with copies of the

patient agreements she had signed with Scripps, in which she agreed to pay

Scripps‘s ―usual and customary charges‖ for the medical care she was to receive,

and with CORE, in which she agreed to pay any part of the physician‘s fee her

insurance did not pay.

The trial court granted Hamilton‘s motion, reducing the past medical

damages award ―to reflect the amount the medical providers accepted as payment

in full.‖ Accordingly, the court reduced the judgment by $130,286.90.

The Court of Appeal reversed the reduction order, holding it violated the

collateral source rule. Because it viewed the reduction of the award as

substantively improper, the Court of Appeal did not resolve plaintiff‘s additional


2

For simplicity, we have rounded these amounts to the nearest dollar,

leading to a $1 discrepancy in the Scripps total. The $7,858 difference between
the total CORE bill and the sum of the PacifiCare payments and write-offs is not
explained in the CORE declaration.

4



contentions that the procedures used in the trial court were statutorily unauthorized

and the evidence Hamilton presented was insufficient.

We granted Hamilton‘s petition for review.

DISCUSSION

Compensatory damages are moneys paid to compensate a person who

―suffers detriment from the unlawful act or omission of another‖ (Civ. Code,

§ 3281), and the measure of damages generally recoverable in tort is ―the amount

which will compensate for all the detriment proximately caused‖ by the tort (id.,

§ 3333). Civil Code section 3282, in turn, defines ―detriment‖ as ―a loss or harm

suffered in person or property.‖ A person who undergoes necessary medical

treatment for tortiously caused injuries suffers an economic loss by taking on

liability for the costs of treatment. Hence, any reasonable charges for treatment

the injured person has paid or, having incurred, still owes the medical provider are

recoverable as economic damages. (See Melone v. Sierra Railway Co. (1907) 151

Cal. 113, 115 [plaintiff is entitled to ―[s]uch reasonable sum . . . as has been

necessarily expended or incurred in treating the injury‖].)

When, as here, the costs of medical treatment are paid in whole or in part

by a third party unconnected to the defendant, the collateral source rule is

implicated. The collateral source rule states that ―if an injured party receives some

compensation for his injuries from a source wholly independent of the tortfeasor,

such payment should not be deducted from the damages which the plaintiff would

otherwise collect from the tortfeasor.‖ (Helfend, supra, 2 Cal.3d at p. 6.) Put

another way, ―Payments made to or benefits conferred on the injured party from

other sources [i.e., those unconnected to the defendant] are not credited against the

tortfeasor‘s liability, although they cover all or a part of the harm for which the

tortfeasor is liable.‖ (Rest.2d Torts, § 920A, subd. (2).) The rule thus dictates that

5



an injured plaintiff may recover from the tortfeasor money an insurer has paid to

medical providers on his or her behalf.

Helfend, like the present case, involved a health insurer‘s payments to

medical providers on the plaintiff‘s behalf. In these circumstances, we explained,

the collateral source rule ensures plaintiffs will receive the benefits of their

decision to carry insurance and thereby encourages them to do so. (Helfend,

supra, 2 Cal.3d at pp. 9-10.) Since insurance policies frequently allow the insurer

to reclaim the benefits paid out of a tort recovery by refund or subrogation, the

rule, without providing the plaintiff a double recovery, ensures the tortfeasor

cannot ―avoid payment of full compensation for the injury inflicted . . . .‖ (Id. at

p. 10.)

In Helfend, we addressed a challenge to the continued acceptance of the

collateral source rule. After considering the rule‘s operation and consequences,

we rejected that challenge, concluding that ―in the context of the entire American

approach to the law of torts and damages, . . . the rule presently performs a number

of legitimate and even indispensable functions.‖ (Helfend, supra, 2 Cal.3d at

p. 13.) Helfend did not, however, call on this court to consider how the collateral

source rule would apply to damages for past medical expenses when the amount

billed for medical services substantially exceeds the amount accepted in full

payment. While Helfend unequivocally reaffirmed California‘s acceptance of the

rule, it did not explain how the rule would operate in the circumstances of the

present case.

The collateral source rule has an evidentiary as well as a substantive aspect.

Because a collateral payment may not be used to reduce recoverable damages,

evidence of such a payment is inadmissible for that purpose. Even if relevant on

another issue (for example, to support a defense claim of malingering), under

Evidence Code section 352 the probative value of a collateral payment must be

6



―carefully weigh[ed] . . . against the inevitable prejudicial impact such evidence is

likely to have on the jury‘s deliberations.‖ (Hrnjak v. Graymar, Inc. (1971) 4

Cal.3d 725, 732.) Admission of evidence of collateral payments may be reversible

error even if accompanied by a limiting instruction directing the jurors not to

deduct the payments from their award of economic damages. (Id. at pp. 729, 734.)

The Legislature has abrogated or altered the collateral source rule for two

classes of actions. First, in a professional negligence action against a health care

provider, the defendant may introduce evidence of collateral payments and

benefits provided to the plaintiff for his or her injury; the plaintiff, in turn, may

introduce evidence of premiums paid or contributions made to secure the benefits.

(Civ. Code, § 3333.1, subd. (a).) Second, a public entity defendant may move,

after trial, to reduce a personal injury award against it by the amount of certain

collateral source payments. (Gov. Code, § 985, subd. (b).) The trial court has

discretion to reduce the judgment, though its discretion is guided and limited in

several respects, including that the total deduction may not exceed one-half of the

plaintiff‘s net recovery. (Id., subd. (g).) Neither statute applies here.

The California history of the substantive question at issue—whether

recovery of medical damages is limited to the amounts providers actually are paid

or extends to the amounts of their undiscounted bills—begins with Hanif, supra,

200 Cal.App.3d 635.

The injured plaintiff in Hanif was a Medi-Cal recipient,3 and the amounts

Medi-Cal paid for his medical care were, according to his evidence, substantially

3

Medi-Cal is California‘s implementation of the federal Medicaid program.

(See Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 804.) The amounts paid
by Medicaid programs are ―usually, if not always‖ less than a provider‘s ordinary
charges. (Id. at p. 820.)

7



lower than the ―reasonable value‖ of the treatment (apparently the same as the

hospital bill, as the opinion notes the hospital had ― ‗written off‘ ‖ the difference).

(Hanif, supra, 200 Cal.App.3d at p. 639.) Although there was no evidence the

plaintiff was liable for the difference, the court in a bench trial awarded the

plaintiff the larger, ―reasonable value‖ amount. (Ibid.) The appellate court held

the trial court had overcompensated the plaintiff for his past medical expenses;

recovery should have been limited to the amount Medi-Cal had actually paid on

his behalf. (Id. at pp. 639, 643-644.) The court ordered the judgment modified to

reflect the proper reduction. (Id. at p. 646.)

Hanif‘s rationale was straightforward. While California courts have

referred to the ―reasonable value‖ of medical care in delineating the measure of

recoverable damages for medical expenses, in this context ― ‗[r]easonable value‘ is

a term of limitation, not of aggrandizement.‖ (Hanif, supra, 200 Cal.App.3d at

p. 641.) The ―detriment‖ the plaintiff suffered (Civ. Code, § 3281), his pecuniary

―loss‖ (id., § 3282), was only what Medi-Cal had paid on his behalf; to award

more was to place him in a better financial position than before the tort was

committed. (Hanif, at pp. 640-641.) A tort plaintiff‘s recovery for medical

expenses, the Hanif court opined, is limited to the amount ―paid or incurred for

past medical care and services, whether by the plaintiff or by an independent

source . . . .‖ (Id. at p. 641.)

We cited Hanif‘s holding with approval in Olszewski v. Scripps Health,

supra, 30 Cal.4th 798, in which we held California‘s provider lien statute (Welf. &

Inst. Code, § 14124.791) was preempted by federal law and invalid as applied to a

Medi-Cal beneficiary‘s tort recovery. In so doing, we observed that because a

provider‘s lien for its full fees was not permissible, pursuant to Hanif the Medi-Cal

beneficiary may recover as damages from the tortfeasor only the amount payable

to the provider under Medi-Cal. (Id. at pp. 826-827.)

8



In Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th

298 (Nishihama), the Court of Appeal applied Hanif‘s rationale to payments made

by a private health insurer. The jury awarded the injured plaintiff $17,168 for her

hospital expenses, an amount based on the hospital‘s ―normal rates.‖ (Id. at

p. 306.) The record, however, showed the plaintiff participated in a health plan

administered by Blue Cross, which had an agreement with the hospital pursuant to

which the hospital had accepted $3,600 in full payment for its services to the

plaintiff. (Id. at pp. 306-307.) Relying on Hanif‘s holding that only the amount

actually paid or incurred is recoverable as compensation for medical expenses, and

rejecting the plaintiff‘s argument that the hospital might take a larger sum (its

normal rate) out of her recovery under a lien it had filed,4 the Nishihama court

ordered the judgment reduced to reflect only the amount the hospital had received

from Blue Cross. (Nishihama, at pp. 306-309.)

This court subsequently reached the same conclusion in Parnell v.

Adventist Health System/West (2005) 35 Cal.4th 595, 598, holding the hospital

could not assert a lien against a patient‘s tort recovery for its full bill when it had

agreed to accept an insurer‘s lesser reimbursement as full payment. At the same

time, however, we reserved judgment on whether Hanif, supra, 200 Cal.App.3d

635, and Olszewski v. Scripps Health, supra, 30 Cal.4th 798, ―apply outside the

Medicaid context and limit a patient‘s tort recovery for medical expenses to the

amount actually paid . . . .‖ (Parnell, at pp. 611-612, fn. 16.)


4

The appellate court held that under the Hospital Lien Act (Civ. Code,

§§ 3045.1-3045.6) the hospital‘s lien rights ―do not extend beyond the amount it
agreed to receive from Blue Cross as payment in full for services provided to
plaintiff.‖ (Nishihama, supra, 93 Cal.App.4th at p. 307.)

9



Hanif and Nishihama were distinguished in Katiuzhinsky v. Perry (2007)

152 Cal.App.4th 1288. There, although the injured plaintiffs‘ medical providers

had sold some of their bills at a discount to a medical finance company, the

plaintiffs remained liable to the finance company for the original amounts of the

bills. (Id. at pp. 1290-1291.) The appellate court concluded the trial court, in

limiting recovery to the discounted amounts, ―did not correctly apply Hanif and

Nishihama. The intervention of a third party in purchasing a medical lien does not

prevent a plaintiff from recovering the amounts billed by the medical provider for

care and treatment, as long as the plaintiff legitimately incurs those expenses and

remains liable for their payment.‖ (Id. at p. 1291, italics added.)

None of the above decisions discussed the question, central to the

arguments in this case, of whether restricting recovery to amounts actually paid by

a plaintiff or on his or her behalf contravenes the collateral source rule. These

arguments, although extensive, can be reduced to a few central disputed issues:

(1) Was Hanif correct that a tort plaintiff can recover only what has been paid or

incurred for medical care, even if that is less than the reasonable value of the

services rendered? (2) Even if Hanif, which involved Medi-Cal payments,

reached the right result on its facts, does its logic extend to plaintiffs covered by

private insurance? (3) Does limiting the plaintiff‘s recovery to the amounts paid

and owed on his or her behalf confer a windfall on the tortfeasor, defeating the

policy goals of the collateral source rule? (4) Is the difference between the

providers‘ full billings and the amounts they have agreed to accept from a

patient‘s insurer as full payment—what the appellate court below called the

―negotiated rate differential‖—a benefit the patient receives from his or her health

insurance policy subject to the collateral source rule? We address these questions

below.

10



A. Hanif and the Measure of Damages for Past Medical Expenses

We agree with the Hanif court that a plaintiff may recover as economic

damages no more than the reasonable value of the medical services received and is

not entitled to recover the reasonable value if his or her actual loss was less.

(Hanif, supra, 200 Cal.App.3d at p. 641.) California decisions have focused on

―reasonable value‖ in the context of limiting recovery to reasonable expenditures,

not expanding recovery beyond the plaintiff‘s actual loss or liability. To be

recoverable, a medical expense must be both incurred and reasonable. (See

Melone v. Sierra Railway Co., supra, 151 Cal. at p. 115 [proper measure of

damages for medical expenses is ―[s]uch reasonable sum . . . as has been

necessarily expended or incurred in treating the injury‖ (italics added)]; Townsend

v. Keith (1917) 34 Cal.App. 564, 566 [trial court‘s failure to instruct the jury ―to

limit its finding to the reasonable value of the expenses incurred‖ did not prejudice

defendant, as the expenses incurred were, on their face, not unreasonable (italics

added)].)

The rule that a plaintiff‘s expenses, to be recoverable, must be both

incurred and reasonable accords, as well, with our damages statutes. ―Damages

must, in all cases, be reasonable . . . .‖ (Civ. Code, § 3359.) But if the plaintiff

negotiates a discount and thereby receives services for less than might reasonably

be charged, the plaintiff has not suffered a pecuniary loss or other detriment in the

greater amount and therefore cannot recover damages for that amount. (Id.,

§§ 3281, 3282.) The same rule applies when a collateral source, such as the

plaintiff‘s health insurer, has obtained a discount for its payments on the plaintiff‘s

behalf.

The Restatement rule is to the same effect. While the measure of recovery

for the costs of services a third party renders is ordinarily the reasonable value of

those services, ―[i]f . . . the injured person paid less than the exchange rate, he can

11



recover no more than the amount paid, except when the low rate was intended as a

gift to him.‖ (Rest.2d Torts, § 911, com. h, pp. 476-477, italics added.)

Plaintiff argues section 911 of the Restatement is irrelevant, as it deals only

with the wrongful taking of services and damage to property. Not so. Section 911

articulates a rule, applicable to recovery of tort damages generally, that the value

of property or services is ordinarily its ―exchange value,‖ that is, its market value

or the amount for which it could usually be exchanged. Comment h to section

911, on the ―[v]alue of services rendered,‖ applies, inter alia, to services the

plaintiff must purchase from third parties as a result of the tort, noting that if the

plaintiff obtains these for less than the exchange value, only the amount paid may

be recovered. The expenses of medical care, although not specifically mentioned,

are logically included in the rule articulated. Thus the general rule under the

Restatement, as well as California law, is that a personal injury plaintiff may

recover the lesser of (a) the amount paid or incurred for medical services, and

(b) the reasonable value of the services.

Contrary to the view of the dissent (dis. opn., post, at pp. 10-11), section

924 of the Restatement, which provides that a tort plaintiff may recover

―reasonable medical and other expenses,‖ expresses no different principle.

(Rest.2d Torts, § 924.) To be recoverable as ―expenses,‖ monies must generally

have been expended, or at least incurred; that they must also be reasonable does

not alter this general rule.5


5

The reporter‘s note for section 924 (Rest.2d Torts (appen.) § 924, reporter‘s

notes, p. 445) cites in support of its rule, among other cases, Birmingham
Amusement Co. v. Norris
(Ala. 1927) 112 So. 633, which stated, quoting an earlier
Alabama case, that ― ‗[w]hile it is true that the defendant is not liable for any more
than the reasonable value of the services of a physician, yet neither is it liable for



(footnote continued on next page)

12



B. Hanif and Private Health Insurance

Plaintiff contends Hanif‘s limitation on recovery, even if correct as to

Medi-Cal recipients, does not logically apply to plaintiffs, like her, with private

medical insurance. The appellate court below agreed, reasoning that ―Howell,

who was privately insured, incurred personal liability for her medical providers‘

usual and customary charges,‖ whereas the plaintiff in Hanif ―incurred no personal

liability for the medical charges billed to Medi-Cal.‖ Observing that Hanif stated

the measure of recovery for medical expenses was the amounts actually ―paid or

incurred‖ (Hanif, supra, 200 Cal.App.3d at p. 641), plaintiff argues she incurred

liability for the full amount of Scripps‘s and CORE‘s bills when she signed patient

agreements with those providers and accepted their services.

We find the distinction unpersuasive. Evidence presented at the posttrial

hearing showed Scripps and CORE accepted the discounted amounts as full

payment pursuant to preexisting agreements with PacifiCare, plaintiff‘s managed

care plan. Since those agreements were in place when plaintiff sought medical

care from the providers and signed the patient agreements, her prospective liability

was limited to the amounts PacifiCare had agreed to pay the providers for the

services they were to render. Plaintiff cannot meaningfully be said ever to have

incurred the full charges. (See Parnell v. Adventist Health System/West, supra, 35

Cal.4th at p. 609 [where hospital had agreed with plaintiff‘s health plan to accept

(footnote continued from previous page)

any more than has actually been paid or is due. So it is necessary to prove both
. . . .‘ ‖ (Id. at p. 636, italics added.) Comment f to section 924, on which the
dissent relies (dis. opn., post, at p. 11), notes the exception for donated medical
services (discussed further below) but does not suggest that recovery for medical
expenses may otherwise generally exceed the amount reasonably paid or incurred.
(Rest.2d Torts, § 924, com. f, pp. 526-527.)

13



discounted amounts as payment in full, plaintiff owed hospital nothing beyond

those discounted payments]; cf. People v. Bergin (2008) 167 Cal.App.4th 1166,

1170 [for purposes of Pen. Code § 1202.4, subd. (f)(3), requiring restitution in the

amount of the ―economic loss incurred,‖ crime victim incurred loss only in the

amount medical provider accepted as payment from private insurer].) In this

respect, plaintiff here was in the same position as the Hanif plaintiff, who also

bore no personal liability for the providers‘ charges. This is not a case like

Katiuzhinsky v. Perry, supra, 152 Cal.App.4th at page 1296, where the plaintiffs

―remain[ed] fully liable for the amount of the medical provider‘s charges for care

and treatment.‖

Hanif noted one exception to its rule, viz., for medical services that are

gratuitously provided or discounted, an exception included in the Restatement

section on which the court relied (Rest.2d Torts, § 911, com. h, pp. 476-477). (See

Hanif, supra, 200 Cal.App.3d at p. 643 [no evidence the low rate charged Medi-

Cal ―was intended as a gift to the plaintiff‖].) The question arises whether this

exception, if accepted, limits Hanif‘s logic in a manner important to the present

issue. That is, if a plaintiff, as the Restatement provides, may recover the

reasonable value of donated medical services—services for which neither the

plaintiff nor the plaintiff‘s insurer paid—should a plaintiff also be permitted to

recover other amounts that were not paid but were reasonably billed by the

provider, including the negotiated rate differential? If the amount of a gratuitous

discount would be considered a collateral source payment, should the amount of a

negotiated discount be treated in the same way?

The Restatement reflects the widely held view that the collateral source rule

applies to gratuitous payments and services. (Rest.2d Torts, § 920A, com. c, subd.

(3), p. 515 [―Thus the fact that the doctor did not charge for his services or the

plaintiff was treated in a veterans hospital does not prevent his recovery for the

14



reasonable value of the services.‖]; see also Rest.2d Torts, § 924, com. f, pp. 526-

527.) California law is less clear on the point. In Helfend, we suggested in dictum

that the collateral source rule applies to unpaid services only when those are

rendered ―with the expectation of repayment out of any tort recovery.‖ (Helfend,

supra, 2 Cal.3d at p. 7, fn. 5.) But in Arambula v. Wells (1999) 72 Cal.App.4th

1006, the Court of Appeal declined to follow this dictum, finding it inconsistent

with other California cases, the law of sister states, and the policy of encouraging

charitable action: ―We doubt such gifts would continue if, notwithstanding a

donor‘s desire to aid the injured, the person who caused the injury ultimately stood

to gain a windfall. Donors should not have to consult with a lawyer to make sure

their largesse is not hijacked by the tortfeasor.‖ (Id. at p. 1013.) Thus, although in

Arambula the injured plaintiff‘s employer had continued to pay his salary, the

appellate court held the jury should have been permitted to award damages for lost

earnings. (Id. at pp. 1008-1009, 1016.) This court has neither approved nor

disapproved Arambula‘s holding, nor does this case require that we do so.

Assuming California follows the Restatement‘s view that a plaintiff may

recover the value of donated services under the collateral source rule, this

exception to Hanif‘s limitation on recovery does not, we believe, militate against

applying Hanif‘s rule—that only amounts paid or incurred are recoverable—to

medical expenses paid by the plaintiff‘s insurer. Medical providers that agree to

accept discounted payments by managed care organizations or other health

insurers as full payment for a patient‘s care do so not as a gift to the patient or

insurer, but for commercial reasons and as a result of negotiations. As plaintiff

herself explains, hospitals and medical groups obtain commercial benefits from

their agreements with health insurance organizations; the agreements guarantee

the providers prompt payment of the agreed rates and often have financial

incentives for plan members to choose the providers‘ services. (See Stanley v.

15



Walker (Ind. 2009) 906 N.E.2d 852, 863-864 (dis. opn. of Dickson, J.) [detailing

administrative and marketing advantages medical providers derive from managed

care agreements, particularly those with preferred provider plans].) That plaintiffs

are not permitted to recover undiscounted amounts from those who have injured

them creates no danger these negotiations and agreements will disappear; the

medical provider has no financial reason to care whether the tortfeasor is charged

with or the plaintiff recovers the negotiated rate differential. Having agreed to

accept the negotiated amount as full payment, a provider may not recover any

difference between that and the billed amount through a lien on the tort recovery.

(Parnell v. Adventist Health System/West, supra, 35 Cal.4th at p. 598.)

In jurisdictions where donated services are considered to fall within the

collateral source rule, the plaintiff is presumably entitled to recover the reasonable

value of the services even though he or she did not incur liability in that amount.

The dissent argues that to limit the recovery of a plaintiff with medical insurance,

such as Howell, to the amounts paid or incurred is anomalous, given that he or she

could have recovered a hypothetically larger reasonable value had the services

been gratuitously provided. (Dis. opn., post, at p. 6.) We see no anomaly, even

assuming we would recognize the gratuitous-services exception to the rule limiting

recovery to the plaintiff‘s economic loss. The rationale for that exception—an

incentive to charitable aid (Arambula v. Wells, supra, 72 Cal.App.4th at

p. 1013)—has, as just explained, no application to commercially negotiated price

agreements like those between medical providers and health insurers. Nor, as

discussed below, does the tort-law policy of avoiding a windfall to the tortfeasor

16



suggest the necessity of treating the negotiated rate differential as if it were a

gratuitous payment by the medical provider.6 (See pt. C, post.)

The dissent‘s repeated description of the negotiated rate differential as a

write-off from the provider‘s bill illustrates the confusion between negotiated

prices and gratuitous provision of medical services. (See dis. opn., post, at pp. 2,

5, 7, 12.) Where a plaintiff has incurred liability for the billed cost of services and

the provider later ―writes off‖ part of the bill because, for example, the plaintiff is

unable to pay the full charge, one might argue that the amount of the write-off

constitutes a gratuitous benefit the plaintiff is entitled to recover under the

collateral source rule. But in cases like that at bench, the medical provider has

agreed, before treating the plaintiff, to accept a certain amount in exchange for its

services. That amount constitutes the provider‘s price, which the plaintiff and

health insurer are obligated to pay without any write-off. There is no need to

determine a reasonable value of the services, as there is in the case of services

gratuitously provided. ―[W]here, as here, the exact amount of expenses has been

established by contract and those expenses have been satisfied, there is no longer

any issue as to the amount of expenses for which the plaintiff will be liable. In the

latter case, the injured party should be limited to recovering the amount paid for


6

The dissent also argues that since an uninsured plaintiff would be entitled

to recover the reasonable value of medical services received, an insured plaintiff
like Howell should be entitled to the same. The dissent‘s premise is erroneous; a
plaintiff who lacks health insurance would not be entitled to recover the
reasonable value of the medical services if that amount exceeded the liability he or
she incurred for the services. The rule that medical expenses, to be recoverable,
must be both incurred and reasonable (Civ. Code, §§ 3281, 3282, 3359; Melone v.
Sierra Railway Co.
, supra, 151 Cal. at p. 115) applies equally to those with and
without medical insurance.

17



the medical services.‖ (Moorhead v. Crozer Chester Medical Center (Pa. 2001)

765 A.2d 786, 789.)

C. Windfall to the Tortfeasor

Nor does the tortfeasor obtain a ―windfall‖ (Arambula v. Wells, supra, 72

Cal.App.4th at p. 1013) merely because the injured person‘s health insurer has

negotiated a favorable rate of payment with the person‘s medical provider. When

an injured plaintiff has received collateral compensation or benefits as a gift,

allowing a deduction from damages in that amount would result in a windfall for

the tortfeasor and underpayment for the injury. Because the tortfeasor would not

pay the full cost of his or her negligence or wrongdoing, the deduction would

distort the deterrent function of tort law. (See Katz, Too Much of a Good Thing:

When Charitable Gifts Augment Victim Compensation (2003) 53 DePaul L.Rev.

547, 564 [if a charitable gift to the plaintiff reduces the tort recovery, the

defendant ―pays less than the full social costs of his conduct and is

underdeterred‖].) Analogously, if it were established a medical provider‘s full bill

generally represents the value of the services provided, and the discounted price

negotiated with the insurer is an artificially low fraction of that true value, one

could make a parallel argument that relieving the defendant of paying the full bill

would result in underdeterrence. The complexities of contemporary pricing and

reimbursement patterns for medical providers, however, do not support such a

generalization. We briefly explore those complexities below.

A 2005 study of hospital cost setting conducted for the Medicare Payment

Advisory Commission concluded: ―Hospital charge setting practices are complex

and varied. Hospitals are generally faced with competing objectives of balancing

budgets, remaining competitive, complying with health care and regulatory

standards, and continuing to offer needed services to the community. . . .

18



[¶] Disparities between charges and costs [have] been growing over time as many

existing charges were set before hospitals had a good idea of their costs and/or

were set in response to budgetary and competitive considerations rather than

resource consumption. Hospital charges are set within the context of hospitals‘

broader communities, including their competitors, payers, regulators, and

customers. . . . These competing influences and hospitals‘ efforts to address them

often produce charges which may not relate systematically to costs.‖ (Dobson et

al., A Study of Hospital Charge Setting Practices (2005) p. v,

<http://www.medpac.gov/documents/Dec05_Charge_setting.pdf> (as of Aug. 18,

2011).)

The rise of managed care organizations, which typically restrict payments

for services to their members, has reportedly led to increases in the prices charged

to uninsured patients, who do not benefit from providers‘ contracts with the plans.

As one article explains: ―Before managed care, hospitals billed insured and

uninsured patients similarly. In 1960, ‗there were no discounts; everyone paid the

same rates‘—usually cost plus ten percent. But as some insurers demanded deep

discounting, hospitals vigorously shifted costs to patients with less clout.‖ (Hall &

Schneider, Patients as Consumers: Courts, Contracts, and the New Medical

Marketplace (2008) 106 Mich. L.Rev. 643, 663, fns. omitted (hereafter Patients as

Consumers).) As a consequence, ―only uninsured, self-paying U.S. patients have

been billed the full charges listed in hospitals‘ inflated chargemasters,‖7 so that a


7

A hospital charge description master, or chargemaster, is ―a uniform

schedule of charges represented by the hospital as its gross billed charge for a
given service or item, regardless of payer type.‖ (Health & Saf. Code, § 1339.51,
subd. (b)(1).) California hospitals are required to make their chargemasters public



(footnote continued on next page)

19



family might find itself ―paying off over many years a hospital bill of, say,

$30,000 for a procedure that Medicaid would have reimbursed at only $6,000 and

commercial insurers somewhere in between.‖ (Reinhardt, The Pricing of U.S.

Hospital Services: Chaos Behind a Veil of Secrecy (2006) 25 Health Affairs 57,

62 (hereafter The Pricing of U.S. Hospital Services).) Some physicians, too, have

reportedly shifted costs to the uninsured, resulting in significant disparities

between charges to uninsured patients and those with private insurance or public

medical benefits. (Patients as Consumers, at pp. 661-663.)

Nor do the chargemaster rates (see fn. 7, ante) necessarily represent the

amount an uninsured patient will pay. In California, medical providers are

expressly authorized to offer the uninsured discounts, and hospitals in particular

are required to maintain a discounted payment policy for patients with high

medical costs who are at or below 350 percent of the federal poverty level. (Bus.

& Prof. Code, § 657, subd. (c); Health & Saf. Code, § 127405, subd. (a)(1)(A).)

Nationally, ―many hospitals now have means-tested discounts off their

chargemasters for uninsured patients, which bring the prices charged the uninsured

closer to those paid by commercial insurers or even below.‖ (The Pricing of U.S.

Hospital Services, supra, 25 Health Affairs at p. 62.) Because so many patients,

insured, uninsured, and recipients under government health care programs, pay

discounted rates, hospital bills have been called ―insincere, in the sense that they

would yield truly enormous profits if those prices were actually paid.‖ (Id. at

p. 63.)

(footnote continued from previous page)

and to file them with the Office of Statewide Health Planning and Development.
(Id., §§ 1339.51, subds. (a)(1), (b)(3), 1339.55, subd. (a).)

20



We do not suggest hospital bills always exceed the reasonable value of the

services provided. Chargemaster prices for a given service can vary

tremendously, sometimes by a factor of five or more, from hospital to hospital in

California. (See The Pricing of U.S. Hospital Services, supra, 25 Health Affairs at

p. 58, exhibit No. 1 [prices for a chest x-ray at selected California hospitals,

showing low of around $200 and high of around $1,500].)8 With so much

variation, making any broad generalization about the relationship between the

value or cost of medical services and the amounts providers bill for them—other

than that the relationship is not always a close one—would be perilous.

Finally, private health insurers are well equipped to conduct sophisticated

arm‘s-length price negotiations, whereas patients individually suffer inherent

disadvantages that significantly impede negotiating prices with medical care

providers: difficulty in gathering information, lack of choice and bargaining

power, and possible physical and emotional disabilities relating to the injury or

illness. (See Patients as Consumers, supra, 106 Mich. L.Rev. at pp. 648-659.) If

we seek, then, the exchange value of medical services the injured plaintiff has

been required to obtain (see Rest.2d Torts, § 911 & com. h, pp. 476-477), looking

to the negotiated prices providers accept from insurers makes at least as much

sense, and arguably more, than relying on chargemaster prices that are not the

result of direct negotiation between buyer and seller. For this reason as well, it is


8

Hospitals‘ chargemaster prices can be accessed on the Web site of the

Office of Statewide Health Planning and Development at
<http://www.oshpd.ca.gov/Chargemaster> (as of Aug. 18, 2011). Updating
Reinhardt‘s 2004 survey using 2010 data, one finds the listed price for a two-view
chest x-ray was $176 at San Francisco General Hospital and $1,390 at Doctors
Medical Center of Modesto.

21



not possible to say generally that providers‘ full bills represent the real value of

their services, nor that the discounted payments they accept from private insurers

are mere arbitrary reductions. Accordingly, a tortfeasor who pays only the

discounted amount as damages does not generally receive a windfall and is not

generally underdeterred from engaging in risky conduct.

The dissent argues that unless the insured plaintiff is permitted to recover

the reasonable value or ―market value‖ of the medical services, the tortfeasor will

not pay the full cost of its negligence, ―distort[ing] the deterrent function of tort

law.‖ (Dis. opn., post, at pp. 1, 5.) But as discussed above, pricing of medical

services is highly complex and depends, to a significant extent, on the identity of

the payer. In effect, there appears to be not one market for medical services but

several, with the price of services depending on the category of payer and

sometimes on the particular government or business entity paying for the services.

Given this state of medical economics, how a market value other than that

produced by negotiation between the insurer and the provider could be identified

is unclear.9

The dissent‘s proposal that the insured plaintiff recover the ―reasonable

value‖ of his or her care, to be proven in each case by expert testimony (dis. opn.,

post, at pp. 1, 12-14), is also troubling because it would routinely involve


9

The Restatement (Rest.2d Torts, § 911, com. h, p. 476) notes the

―customary rate‖ for services governs tort recovery ―[i]f the services are rendered
in a business or profession in which there is a rate for them definitely established
by custom . . . .‖ But how may such a rate be determined when the ―custom‖ is to
bill for medical services at chargemaster rates that are paid by relatively few
patients and to discount those rates to varying degrees for various government,
insurance, and individual payers according to a complex system of regulation and
negotiation?

22



violations of the evidentiary aspect of the collateral source rule. If the jury were

required to decide whether the price actually paid for medical care was lower than

reasonable, the defense could not in fairness be precluded from showing the

circumstances by which that price was determined, including that it was negotiated

and paid by the plaintiff‘s health insurer. In contrast, our conclusion, that the

plaintiff may recover no more than the medical providers accepted in full payment

for their services, allows for proof of the amount paid without admitting evidence

of the payment‘s source. (See p. 28, post.)

D. The Negotiated Rate Differential as Insurance Benefit

If the negotiated rate differential is not a gratuitous payment by the provider

to the injured plaintiff (recoverable, at least in the Restatement‘s view, under the

collateral source rule), nor an arbitrary reduction (arguably recoverable to prevent

a defense windfall and underdeterrence), is it, as plaintiff contends and the Court

of Appeal held, recoverable as a benefit provided to the insured plaintiff under her

policy? Plaintiff contends the negotiated rate differential represents the monetary

value of the administrative and marketing advantages a provider obtains through

its agreement with the insurer. Having incurred liability for the full price of her

medical care, plaintiff maintains, she then received the benefit of having her

insurer extinguish that obligation through a combination of cash payments and

noncash consideration in the amount of the negotiated rate differential. Both parts

of this consideration being benefits accruing to her under her policy, for which she

paid premiums, both parts should assertedly be recoverable under the collateral

source rule.

We disagree. As previously discussed, plaintiff did not incur liability for

her providers‘ full bills, because at the time the charges were incurred the

providers had already agreed on a different price schedule for PacifiCare‘s PPO

23



members. (See Parnell v. Adventist Health System/West, supra, 35 Cal.4th at

p. 609.) Having never incurred the full bill, plaintiff could not recover it in

damages for economic loss. For this reason alone, the collateral source rule would

be inapplicable. The rule provides that ―if an injured party receives some

compensation for his injuries from a source wholly independent of the tortfeasor,

such payment should not be deducted from the damages which the plaintiff would

otherwise collect from the tortfeasor.‖ (Helfend, supra, 2 Cal.3d at p. 6, italics

added.) The rule does not speak to losses or liabilities the plaintiff did not incur

and would not otherwise be entitled to recover. As was explained by an Oregon

justice, ―The collateral source doctrine does not address the amount of damages

that a plaintiff can recover in the first instance.‖ (White v. Jubitz Corp. (Or. 2009)

219 P.3d 566, 584 (dis. opn. of Kistler, J.); see also Goble v. Frohman (Fla. 2005)

901 So.2d 830, 833 (conc. opn. of Bell, J.) [collateral source rule has no

application where plaintiff ―has not paid, nor is he obligated to pay, the

prediscount amount of his medical bills‖].) ―Certainly, the collateral source rule

should not extend so far as to permit recovery for sums neither the plaintiff nor

any collateral source will ever be obligated to pay.‖ (Beard, The Impact of

Changes in Health Care Provider Reimbursement Systems on the Recovery of

Damages for Medical Expenses in Personal Injury Suits (1998) 21 Am. J. Trial

Advoc. 453, 489.)

The negotiated rate differential lies outside the operation of the collateral

source rule also because it is not primarily a benefit to the plaintiff and, to the

extent it does benefit the plaintiff, it is not provided as ―compensation for [the

plaintiff‘s] injuries.‖ (Helfend, supra, 2 Cal.3d at p. 6.) Insurers and medical

providers negotiate rates in pursuit of their own business interests, and the benefits

of the bargains made accrue directly to the negotiating parties. The primary

24



benefit of discounted rates for medical care goes to the payer of those rates—that

is, in largest part, to the insurer.

Nor does the insurer negotiate or the medical provider grant a discounted

payment rate as compensation for the plaintiff’s injuries. As one amicus curiae

observes, sellers in almost any industry may, for a variety of reasons, discount

their prices for particular buyers, ―[b]ut a discounted price is not a payment. . . .

[¶] . . . [¶] Nor has the value of damages the plaintiff avoided ever been the

measure of tort recovery.‖ And even when the overall savings a health insurance

organization negotiates for itself can be said to benefit an insured indirectly—

through lower premiums or copayments, for example—it would be rare that these

indirect benefits would coincidentally equal the negotiated rate differential for the

medical services rendered the plaintiff.

Finally, while the providers presumably did obtain some commercial

advantages by virtue of their agreements with PacifiCare, plaintiff‘s insurer, the

global value of those advantages cannot be equated to the amount of the

negotiated rate differential for plaintiff‘s individual care. As we have seen, a

medical care provider‘s billed price for particular services is not necessarily

representative of either the cost of providing those services or their market value.

Within a single hospital‘s chargemaster, for example, ―[m]ark-ups tend to vary by

service line, with high cost items receiving a lower mark-up than low cost items.‖

(Dobson et al., A Study of Hospital Charge Setting Practices, supra, at p. v.) The

price schedules for PacifiCare members, meanwhile, were negotiated for the entire

PPO membership, not individually for plaintiff, and covered a range of medical

services Scripps and CORE provided, not only those rendered to plaintiff. For a

given medical service to a given plaintiff, therefore, the amount of the negotiated

rate differential may be higher or lower than the average discount over the range

of services offered. The negotiated rate differential in a particular case thus does

25



not necessarily reflect the commercial advantages the provider obtained in

exchange for accepting a discounted payment in that case.

We conclude the negotiated rate differential is not a collateral payment or

benefit subject to the collateral source rule. We emphasize, however, that the rule

applies with full force here and in similar cases. Plaintiff here recovers the

amounts paid on her behalf by her health insurer as well as her own out-of-pocket

expenses. No ―credit[] against the tortfeasor‘s liability‖ (Rest.2d Torts, § 920A,

subd. (2)) and no deduction from the ―damages which the plaintiff would

otherwise collect from the tortfeasor‖ (Helfend, supra, 2 Cal.3d at p. 6) is allowed

for the amount paid through insurance. Plaintiff thus receives the benefits of the

health insurance for which she paid premiums: her medical expenses have been

paid per the policy, and those payments are not deducted from her tort recovery.

Plaintiff‘s insurance premiums contractually guaranteed payment of her

medical expenses at rates negotiated by the insurer with the providers; they did not

guarantee payment of much higher rates the insurer never agreed to pay. Indeed,

had her insurer not negotiated discounts from medical providers, plaintiff‘s

premiums presumably would have been higher, not lower. In that sense, plaintiff

clearly did not pay premiums for the negotiated rate differential. Recovery of the

amount the medical provider agreed to accept from the insurer in full payment of

her care, but no more, thus ensures plaintiff ―receive[s] the benefits of [her] thrift‖

and the tortfeasor does not ―garner the benefits of his victim‘s providence.‖

(Helfend, supra, 2 Cal.3d at p. 10.)

In holding plaintiff may not recover as past medical damages the amount of

a negotiated rate differential, then, we do not alter the collateral source rule as

articulated in Helfend and the Restatement. Rather, we conclude that because the

plaintiff does not incur liability in the amount of the negotiated rate differential,

which also is not paid to or on behalf of the plaintiff to cover the expenses of the

26



plaintiff‘s injuries, it simply does not come within the rule. ―[A] rule limiting the

measure of recovery to paid charges (where the provider is prohibited from

balance billing the patient) . . . provides certainty without violating the principles

protected by the collateral source rule. Even with a limit of recovery to the net

loss there is no lessening of the deterrent force of tort law, the defendant does not

gain the benefit of the plaintiff‘s bargain, and the plaintiff receives full

compensation for the amount of the expense he was obligated to pay.‖ (Beard,

The Impact of Changes in Health Care Provider Reimbursement Systems on the

Recovery of Damages for Medical Expenses in Personal Injury Suits, supra, 21

Am. J. Trial Advoc., at p. 489.)

There is, to be sure, an element of fortuity to the compensatory damages the

defendant pays under the rule we articulate here. A tortfeasor who injures a

member of a managed care organization may pay less in compensation for medical

expenses than one who inflicts the same injury on an uninsured person treated at a

hospital (assuming the hospital does not offer the person a discount from its

chargemaster prices). But, as defendant notes, ―[f]ortuity is a fact in life and

litigation.‖ To use an example provided by amicus curiae League of California

Cities, when a driver negligently injures a pedestrian the amount of lost income

the injured plaintiff can recover depends on his or her employment and income

potential, a matter of complete fortuity to the negligent driver. In that situation as

in this, ―[i]dentical injuries may have different economic effects on different

victims.‖ We should not order one defendant to pay damages for an economic

loss the plaintiff has not suffered (Civ. Code, §§ 3281, 3282) merely because a

27



different defendant may have to compensate a different plaintiff who has suffered

such a loss.10

We hold, therefore, 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. In so holding, we in no way abrogate or

modify the collateral source rule as it has been recognized in California; we

merely conclude the negotiated rate differential—the discount medical providers

offer the insurer—is not a benefit provided to the plaintiff in compensation for his

or her injuries and therefore does not come within the rule. For this reason,

plaintiff‘s argument that any reform of the collateral source rule should come from

the Legislature rather than this court misses the mark. Government Code section

985 and Civil Code section 3333.1, which limit or eliminate the collateral source

rule for cases involving, respectively, public entity defendants and negligence of a

health care provider, simply do not speak to the issue presented here. Our holding


10

Plaintiff cites several decisions from other states in which courts have

declined to follow Hanif, expressed the view that a negotiated rate differential
should be recoverable as a collateral source payment, or both. (See, e.g., Lopez v.
Safeway Stores, Inc.
(Ariz.Ct.App. 2006) 129 P.3d 487, 491-497; Bynum v. Magno
(Hawaii 2004) 101 P.3d 1149, 1155-1162; Wills v. Foster (Ill. 2008) 892 N.E.2d
1018, 1029-1031; White v. Jubitz Corp., supra, 219 P.3d at pp. 576-583.) By and
large, however, these decisions rest on reasoning we have considered and rejected
above, or on statutory provisions without California parallel. And while ours may
presently be the minority view, several other courts have reached the same
conclusion. (See, e.g., Boutte v. Kelly (La.Ct.App. 2003) 863 So.2d 530, 552-553;
Kastick v. U-Haul Co. of Western Michigan (N.Y.App.Div. 2002) 740 N.Y.S.2d
167, 169; Moorhead v. Crozer Chester Medical Center, supra, 765 A.2d at pp.
789-791; see also Goble v. Frohman, supra, 901 So.2d at pp. 833-835 (conc. opn.
of Bell, J.); Robinson v. Bates (Ohio 2006) 857 N.E.2d 1195, 1200 [a negotiated
rate differential does not come within the collateral source rule].)

28



neither contradicts or undermines these statutes nor alters their operation. Trial

courts continue to have authority to reduce a plaintiff‘s recovery against a public

entity under Government Code section 985; in an action arising from the

professional negligence of a health care provider, evidence of indemnity payments

made to the plaintiff, and premiums paid by the plaintiff, continues to be

admissible under the circumstances set out in Civil Code section 3333.1.

It follows from our holding that when a medical care provider has, by

agreement with the plaintiff‘s private health insurer, accepted as full payment for

the plaintiff‘s care an amount less than the provider‘s full bill, evidence of that

amount is relevant to prove the plaintiff‘s damages for past medical expenses and,

assuming it satisfies other rules of evidence, is admissible at trial. Evidence that

such payments were made in whole or in part by an insurer remains, however,

generally inadmissible under the evidentiary aspect of the collateral source rule.

(Hrnjak v. Graymar, Inc., supra, 4 Cal.3d at p. 732.) Where the provider has, by

prior agreement, accepted less than a billed amount as full payment, evidence of

the full billed amount is not itself relevant on the issue of past medical expenses.

We express no opinion as to its relevance or admissibility on other issues, such as

noneconomic damages or future medical expenses. (The issue is not presented

here because defendant, in this court, conceded it was proper for the jury to hear

evidence of plaintiff‘s full medical bills.)

Where a trial jury has heard evidence of the amount accepted as full

payment by the medical provider but has awarded a greater sum as damages for

past medical expenses, the defendant may move for a new trial on grounds of

excessive damages. (Code Civ. Proc., § 657, subd. 5.) A nonstatutory ―Hanif

motion‖ is unnecessary. The trial court, if it grants the new trial motion, may

permit the plaintiff to choose between accepting reduced damages or undertaking

a new trial. (Id., § 662.5, subd. (b).)

29



In the case at bench, the trial court correctly ruled plaintiff could recover as

damages for her past medical expenses no more than her medical providers had

accepted as payment in full from plaintiff and PacifiCare, her insurer. The Court

of Appeal, believing incorrectly that this ruling violated the collateral source rule,

reversed the trial court‘s ruling on the merits and thus had no occasion to resolve

plaintiff‘s claims of procedural and evidentiary error. As these issues were not

resolved in the Court of Appeal, they were not included in defendant‘s petition for

review, and we do not address them. (Cal. Rules of Court, rule 8.516(b)(1).) On

remand the Court of Appeal may, as appropriate, consider any remaining issues

regarding the procedures and evidence on which the trial court ordered the

damages reduced.

DISPOSITION

The judgment of the Court of Appeal is reversed. The matter is remanded

to that court for further proceedings consistent with our opinion.



WERDEGAR, J.

WE CONCUR:

CANTIL-SAKAUYE, C. J.
KENNARD, J.
BAXTER, J.
CHIN, J.
CORRIGAN, J.


30













DISSENTING OPINION BY KLEIN, J.

I respectfully dissent. I agree Rebecca Howell (Howell), who was insured

by PacifiCare under a preferred provider organization (PPO) health insurance

policy, is not entitled to recover the gross amount of her potentially inflated

medical bills. However, I disagree with the majority insofar as it concludes

Howell‘s recovery of medical damages must be capped at the discounted amount

her medical providers agreed to accept as payment in full from her insurer.

Rather, Howell should be entitled to recover the reasonable value or market value

of such services, as determined by expert testimony at trial, just as would be the

case if the injured person had not purchased insurance or if the medical services

had been donated.

The majority, while it states ―we do not alter the collateral source rule as

articulated in Helfend [v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1] and

the Restatement‖ (maj. opn., ante, at p. 26), creates a significant exception to this

state‘s long-standing collateral source rule. The majority draws a bright line and

limits Howell‘s recovery of medical damages to ―no more than the medical

providers accepted in full payment for their services.‖ (Id. at p. 23.) Thus, Howell

is left in a worse position than an uninsured individual or one who was a donee of

medical services, persons who are entitled to recover the full reasonable value of

their medical care. (Arambula v. Wells (1999) 72 Cal.App.4th 1006, 1012

(Arambula) [tortfeasor cannot mitigate damages because of a third party‘s

charitable gift]). Neither law nor policy supports such an anomalous outcome.

1



The majority holds the ―negotiated rate differential‖ (the difference between

the original billed amount of $189,978.63 and the lesser amount accepted by the

providers as payment in full) lies outside the operation of the collateral source rule

because the plaintiff did not suffer any economic loss in the amount of the

negotiated rate differential and therefore said sum is not recoverable by plaintiff.

The majority fails to recognize the difference between the reasonable value

of Howell‘s care (hypothetically, $75,000) and the lesser sum Howell‘s preferred

providers agreed to accept as payment in full ($59, 691.73), did constitute a

payment by others, namely, the medical providers, toward the cost of treating

Howell. Howell‘s medical providers, as participants in PacifiCare‘s PPO network,

wrote off a portion of her bills, pursuant to their agreements with PacifiCare. By

acquiring the PPO policy, Howell purchased not only indemnity coverage but also

access to the negotiated discounts between her health insurer and her medical

providers. Therefore, any difference between the reasonable value of Howell‘s

treatment, and the lesser amount the providers agreed to accept as payment in full,

was a benefit Howell is entitled to retain under the collateral source rule. There is

little justification for allowing a defendant tortfeasor to avoid liability for the

reasonable value of a plaintiff‘s medical expenses, where such value exceeds the

negotiated payment.

The task before this court is twofold. In the era of managed care, the court

is grappling with the problem of injured plaintiffs recovering compensatory

damages based on allegedly inflated medical bills, while continuing to adhere to

the collateral source rule and the policies underlying the rule.

The Court of Appeal held Howell is entitled to recover the gross

undiscounted amount of her medical bills (i.e., $189,978.63), including the full

amount of the ―negotiated rate differential‖ (i.e., the difference between the

original billed amount and the lesser amount accepted by the providers as payment

in full).

2



In contrast, the majority limits Howell‘s recovery as economic damages

for past medical expenses to ―no more than the medical providers accepted in full

payment for their services‖ (maj. opn., ante, at p. 23), amounting to $59,691.73.

There is an intermediate position between these two ends of the spectrum,

one more consistent with both the collateral source rule and with the deterrent

function of tort law: For purposes of determining the application of the collateral

source rule, a plaintiff who has purchased private health insurance, just like a

plaintiff who is a donee or is uninsured, should be entitled to recover from the

defendant tortfeasor economic damages for past medical expenses an amount not

to exceed the reasonable value of medical expenses which the plaintiff incurred

for tortiously caused injuries. Howell should be entitled to recover the reasonable

value of her medical care, no more and no less. That the plaintiff may have

purchased a negotiated rate benefit is not, for purposes of the collateral source

rule, relevant.

By limiting the plaintiff‘s recovery to the reasonable value of the treatment

(an amount which the plaintiff is required to prove at trial), I would eliminate the

potential mischief created by the Court of Appeal‘s opinion, which enables a

plaintiff to recover damages for medical expenses based on potentially inflated

medical bills, while still preserving the full protection of the collateral source rule

for all injured plaintiffs, whether or not covered by private insurance.

Under the reasonable value approach, in the event the reasonable value of a

plaintiff‘s treatment exceeds the amount the medical providers have agreed to

accept as payment in full from plaintiff‘s insurer, such difference would be

allocated to the plaintiff, rather than to the defendant tortfeasor. This approach

preserves the long-standing collateral source rule, and at the same time, prevents a

plaintiff from recovering excessive damages based on potentially inflated medical

bills.

3



1. Policy considerations underlying the collateral source rule.

a. The collateral source rule represents the sound policy judgment of

encouraging citizens to purchase insurance and denying the tortfeasor the benefits

of the victim’s providence.

It has long been settled in California that ― ‗[d]amages recoverable for a

wrong are not diminished by the fact that the party injured has been wholly or

partly indemnified for his loss by insurance effected by him, and to the

procurement of which the wrongdoer did not contribute. . . .‘ ‖ (Loggie v.

Interstate Transit Co. (1930) 108 Cal.App. 165, 169; accord Helfend v. Southern

Cal. Rapid Transit Dist., supra, 2 Cal.3d at p. 6 (Helfend); Peri v. L. A. Junction

Ry. (1943) 22 Cal.2d 111, 131.)

In Helfend, this court engaged in an extensive review of the policy

arguments for and against the collateral source rule and reaffirmed its adherence to

the rule as it has developed in California. In the context of insurance payments for

medical treatment, where the rule is most frequently applied, the court stated the

collateral source rule ―embodies the venerable concept that a person who has

invested years of insurance premiums to assure his medical care should receive

the benefits of his thrift. The tortfeasor should not garner the benefits of his

victim’s providence. [¶] The collateral source rule expresses a policy judgment in

favor of encouraging citizens to purchase and maintain insurance for personal

injuries and for other eventualities. Courts consider insurance a form of

investment, the benefits of which become payable without respect to any other

possible source of funds. If we were to permit a tortfeasor to mitigate damages

with payments from plaintiff‘s insurance, plaintiff would be in a position inferior

to that of having bought no insurance, because his payment of premiums would

have earned no benefit. Defendant should not be able to avoid payment of full

compensation for the injury inflicted merely because the victim has had the

foresight to provide himself with insurance.‖ (Helfend, supra, 2 Cal.3d at pp. 9-10,

italics added.)

4



b. Deterrence of tortious conduct; the collateral source rule ensures

the tortfeasor pays the full cost of its negligence or wrongdoing.

When an injured plaintiff has received collateral compensation from

insurance, a gift, or other sources (such as the expense borne by the preferred

providers, which wrote off a portion of their bills pursuant to the PPO contract),

allowing a deduction for damages in that amount would result in a windfall for the

tortfeasor and underpayment for the injury. (Helfend, supra, 2 Cal.3d at p. 10;

Arambula, supra, 72 Cal.App.4th at pp. 1013-1014.) Because the tortfeasor would

not be paying the full cost of its negligence or wrongdoing, a deduction for

collateral compensation would distort the deterrent function of tort law.

(See Katz, Too Much of a Good Thing: When Charitable Gifts Augment Victim

Compensation (2003) 53 DePaul L.Rev. 547, 564 [if a charitable gift to the

plaintiff reduces tort recovery, the defendant ―pays less than the full social costs of

his conduct and is underdeterred‖].)

2. The difference between the reasonable value of the medical services and

the lesser sum the medical provider agreed to accept as payment in full constitutes

a “payment by others” on behalf of the injured person and therefore is a benefit

within the meaning of the collateral source rule.

The majority acknowledges the negotiated rate differential is not a gift by

the provider to the injured plaintiff, but it regards the negotiated rate differential as

merely a price discount. However, because the issue at bench is the application of

the collateral source rule, involving (1) an injured party, (2) the injured party‘s

PPO health insurance policy, and (3) a negligent tortfeasor, treating the negotiated

rate differential as nothing more than a discount is, in my view, inappropriate.

The majority properly recognizes: ―Medical providers that agree to accept

discounted payments by managed care organizations or other health insurers as

full payment for a patient‘s care do so not as a gift to the patient or insurer, but for

commercial reasons and as a result of negotiations. As plaintiff herself explains,

hospitals and medical groups obtain commercial benefits from their agreements

5



with health insurance organizations; the agreements guarantee the providers

prompt payment of the agreed rates and often have financial incentives for plan

members to choose the providers‘ services.‖ (Maj. opn., ante, at p. 15, italics

added.)

However, the fact that Howell‘s medical providers, as participants in a PPO

network, agreed to accept discounted payments motivated by their economic self-

interest, rather than with a donative intent, should not make a difference in the

analysis of the issues presented herein. The majority‘s analysis rests upon a

distinction between commercial motive and donative intent, a distinction the

majority has failed to explain. Had Howell been uninsured, or had Howell‘s

providers donated their services, Howell would be entitled to recover the

reasonable cost of her medical care. It is anomalous to limit Howell‘s recovery of

medical damages to the deeply discounted amount her providers accepted as

payment in full, merely because Howell was insured under a PPO policy, rather

than being uninsured or a donee. Howell should not be penalized, nor should the

negligent tortfeasor be rewarded, based on the manner in which her PPO policy is

structured.

Clearly, medical providers in a PPO network benefit from their status as

preferred providers in significant ways: the preferred providers obtain access to an

expanded client base; the preferred providers have greater certainty of being paid

for their services; and the preferred providers can expect relatively prompt

reimbursement. In return for these commercial benefits, the preferred providers

agree with the insurer to accept reduced fees for their services. The insurer

likewise derives a commercial benefit from the PPO system through greater cost

control and reduced costs for patient care. At the same time, the PPO system has

advantages for the consumer who enjoys reduced fees when obtaining care

through a preferred provider.

This recognition of the existence of a tripartite negotiated relationship

among the insured, the insurer, and the medical providers, informs the proper

6



characterization of the ―negotiated rate differential.‖ It is undisputed the

negotiated rate differential was not a gratuitous payment by the providers.

Nor should the negotiated rate differential be deemed a mere price discount by a

vendor. Rather, the negotiated rate differential was, in effect, a ―payment by a

third party,‖ namely, the medical providers, which wrote off a portion of Howell‘s

bills. It is undisputed that ―[w]hen, as here, the costs of medical treatment are

paid in whole or in part by a third party unconnected to the defendant, the

collateral source rule is implicated.‖ (Maj. opn., ante, at p. 5, italics added.)

Accordingly, to the extent the reasonable value of Howell‘s care exceeded the

amount accepted by her providers in full payment, that sum should be considered a

benefit covered by the collateral source rule.

Although the majority recognizes the collateral source rule is implicated

whenever the costs of medical treatment are paid in whole or in part by a

nontortfeasor third party, it takes the position the negotiated rate differential, i.e.,

the discount medical providers offer the insurer, was ―never paid by or on behalf

of the injured person‖ (maj. opn., ante, at p. 1, italics added), and therefore does

not come within the collateral source rule.

Said conclusion overlooks the fact the preferred providers absorbed a

portion of the reasonable cost of treating Howell by writing off a portion of her

bills. The fee reduction, a benefit to which Howell was entitled under the PPO

policy, was purchased with costly health insurance premiums and was an essential

part of the bargain between Howell and PacifiCare. Thus, it is entirely

appropriate to recognize the difference between the reasonable value of the

medical services and the lesser amount the providers agreed to accept in full

payment for their services, as a payment made by others, namely, the providers,

on Howell‘s behalf. A consistent application of the collateral source rule, as it

prevails in the United States, entitles Howell to retain that benefit. (See pt. 5,

post.)

7



3. Limiting plaintiff’s recovery to the reasonable cost of care prevents a

windfall recovery by the victim based on potentially inflated medical bills.

The problem in the instant case arises due to the practice of inflating

medical charges and then deeply discounting them, which has become the norm in

this era of managed care.

―Before managed care, hospitals billed insured and uninsured patients

similarly. In 1960, ‗[t]here were no discounts; everyone paid the same rates‘ –

usually cost plus ten percent. But as some insurers demanded deep discounting,

hospitals vigorously shifted costs to patients with less clout.‖ (Hall & Schneider,

Patients as Consumers: Courts, Contracts, and the New Medical Marketplace

(2008) 106 Mich. L.Rev. 643, 663, fns. omitted.) As a consequence, ―only

uninsured, self-paying U.S. patients have been billed the full charges listed in

hospitals‘ inflated chargemasters.‖ (Reinhardt, The Pricing of U.S. Hospital

Services: Chaos Behind a Veil of Secrecy (2006) 25 Health Affairs 57, 62;

see Health & Saf. Code, § 1339.51, subd. (b)(1) [chargemaster, or hospital charge

description master is ―a uniform schedule of charges represented by the hospital as

its gross billed charge for a given service or item, regardless of payer type‖].)

Therefore, to reconcile the collateral source rule with the problem posed by

potentially inflated medical bills, a uniform rule should apply. Irrespective of

whether a plaintiff has private health insurance, is a donee or is uninsured, the

plaintiff should be entitled to recover as economic damages for past medical

expenses the reasonable value of the medical expenses the plaintiff incurred for

tortiously caused injuries.

With this approach, in the event the reasonable value of the plaintiff‘s

treatment exceeds the amount the medical providers agreed to accept as payment

in full from plaintiff‘s insurer, that difference is allocated to the plaintiff, rather

than to the tortfeasor. This fully preserves the collateral source rule, and at the

same time prevents a plaintiff from recovering excessive damages pursuant to

potentially inflated medical bills.

8



4. Collateral source rule does not yield a double recovery.

Helfend observed that insurance policies increasingly provide for either

subrogation or refund of benefits upon recovery from the tortfeasor, thus

transferring the risk from the victim‘s insurer to the tortfeasor by way of the

victim‘s tort recovery. (Helfend, supra, 2 Cal.3d at pp. 10-11.) Helfend explained

that viewed from this perspective, the collateral source rule does not permit the

plaintiff a double recovery, as critics of the rule have charged. (Ibid.) Further,

―[t]he collateral source rule partially serves to compensate for the attorney‘s share

and does not actually render ‗double recovery‘ for the plaintiff.‖ (Id. at p. 12.)

Consequently, it should be recognized that where an insured plaintiff

prevails and obtains an award of economic damages for past medical expenses

from a third party, the insured generally is contractually required to reimburse the

health insurer to the extent the insured recovers on her judgment against the

tortfeasor. In addition to having to reimburse the health insurer, the plaintiff will

have incurred attorney fees to prosecute the claim for economic damages.

Thus, because the plaintiff‘s award of economic damages for past medical

expenses is likely to be largely transferred from the defendant (or from the

defendant‘s insurer) to the plaintiff‘s insurer and to the plaintiff‘s attorney, the

award is not likely to yield a windfall to the plaintiff.

In addition, it should be recognized the collateral source rule serves to

protect the ―person who has invested years of insurance premiums to assure [her]

medical care.‖ (Helfend, supra, 2 Cal.3d at pp. 9-10.) However, the award of

compensatory damages does not expressly include reimbursement to the plaintiff

for those premiums. It is only through the application of the collateral source rule

that the plaintiff is rewarded for maintaining his or her own health insurance for

personal injuries.

9



For all these reasons, any perceived windfall to the plaintiff as a

consequence of the collateral source rule represents a relatively minor portion of

plaintiff‘s overall recovery of economic damages. Further, as between the injured

person and the tortfeasor, the equities dictate such benefit should be allocated to

the injured party, not to the negligent tortfeasor. Indeed, it is difficult to

understand just what policy considerations justify denying the thrifty or prudent

plaintiff who has purchased private health insurance the full benefit of his or her

own foresight, and instead, transferring that benefit to the tortfeasor.

5. This court should follow the majority rule in the United States, which is

consistent with the Restatement Second of Torts.

The majority, limiting plaintiff‘s recovery of medical damages to the

amount her medical providers accepted as payment in full from plaintiff‘s insurer,

has failed to explain why California should align itself with the minority view in

the United States.

By way of background, courts across the country have considered the issue

of whether the collateral source rule allows a plaintiff to recover insurance write-

offs. Three general approaches have emerged: (1) the reasonable value of

services; (2) the benefit of the bargain; and (3) the actual amounts paid. (See, e.g.

Martinez v. Milburn Enterprises, Inc. (2010) 290 Kan. 572, 591-592.)

― ‗[T]he vast majority of courts to consider the issue‘ follow the common-

law rule articulated in section 924 of the Restatement and permit plaintiffs to seek

the reasonable value of their expenses without limitation to the amount that they

pay or that third parties pay on their behalf. See Wills v. Foster, 229 Ill.2d 393,

414, 323 Ill.Dec. 26, 892 N.E.2d 1018, 1031 (2008) (so stating).‖ (White v. Jubitz

Corp. (Or. 2009) 347 Or. 212, 237.)

The Restatement Second of Torts, section 924, is entitled ―Harm to the

Person.‖ It provides, in part, that ―[o]ne whose interests of personality have been

tortiously invaded is entitled to recover damages for past or prospective [¶] . . . [¶]

(c) reasonable medical and other expenses[.]‖ (Ibid., italics added.) Comment f

10



to that section, entitled ―Expenses,‖ provides that an ―injured person is entitled to

damages for all expenses and for the value of services reasonably made necessary

by the harm.‖ (Rest. 2d Torts, § 924, com. f, p. 526, italics added.) Comment f

then instructs that ―[t]he value of medical services made necessary by the tort can

ordinarily be recovered although they have created no liability or expense to the

injured person, as when a physician donates his services.‖ (Id., at p. 527, italics

added, referring to Rest. 2d Torts, § 920A.) Thus, ―the Restatement permits a

plaintiff to recover from a tortfeasor the reasonable value of the medical treatment

that he or she receives whether plaintiff is liable to pay or pays the medical

providers‘ charges for that treatment, the providers waive those charges, or a third

party pays or otherwise satisfies those charges.‖ (White v. Jubitz Corp., supra,

347 Or. at p. 236, italics added.) Under the Restatement rule, ―plaintiffs who incur

the same injuries as a result of a defendant‘s tort[i]ous actions may claim and

recover the same damages.‖ (Ibid.; see also Martinez v. Milburn Enterprises, Inc.,

supra, 290 Kan. at p. 602 [reasonable value of medical services is the fairest

approach; ― ‗to do otherwise would create separate categories of plaintiffs based

on the method used to finance medical expenses‘ ‖ (italics omitted)].)

The majority‘s rationale for eschewing the majority rule is that those out-

of-state decisions ―rest on reasoning we have considered and rejected above, or on

statutory provisions without California parallel.‖ (Maj. opn., ante, at p. 28, fn. 10,

italics added.) However, insofar as the majority does not discuss how the statutes

of our sister states differ from our damages statutes (see, e.g., Civ. Code, § 3281,

3282, 3333), it is unpersuasive.

6. Statutory provisions in the Civil Code do not bar plaintiff’s recovery of

the difference between the reasonable value of the medical services and the lesser

amount the providers agreed to accept as full payment.

The majority takes the position that unlike the law of other states,

California‘s damages statutes bar Howell from recovering as damages for medical

expenses anything in excess of the amount her medical providers agreed to accept

11



as payment in full. That conclusion is unwarranted. Our damages statutes do not

preclude this court from following the majority rule and authorizing compensation

to Howell for the reasonable value of her medical treatment.

The pertinent statutes are as follows: Every person ―who suffers detriment

from the unlawful act or omission of another, may recover from the person in fault

a compensation therefor in money, which is called damages.‖ (Civ. Code,

§ 3281.) The measure of damages generally recoverable in tort is ―the amount

which will compensate for all the detriment proximately caused‖ by the tort.

(Id., § 3333.) Detriment is ―a loss or harm suffered in person or property.‖

(Id., § 3282.)

The maxims embodied in these statutory provisions do not dictate the

conclusions reached by the majority. It is undisputed that ―[w]hen, as here, the

costs of medical treatment are paid in whole or in part by a third party

unconnected to the defendant, the collateral source rule is implicated.‖

(Maj. opn., ante, at p. 5, italics added.)

As this dissent has sought to explain, in the instant case the costs of

Howell‘s medical treatment were partially borne by third parties, namely,

Howell‘s preferred medical providers, which wrote off a significant portion of her

bills pursuant to a tripartite contract for which valuable consideration was paid.

Therefore, any difference between the reasonable value of Howell‘s care and the

lesser amount the providers accepted as payment in full constitutes detriment,

which is recoverable by Howell from the tortfeasor.

7. Determining the reasonable value of plaintiff’s medical care; procedure

in future cases.

The majority precludes any inquiry into the reasonable value of the

patient‘s care and limits the plaintiff‘s recovery of medical damages to the amount

her preferred providers accepted as payment in full. The majority‘s bright-line

approach rests on the assumption ―the negotiated prices providers accept from

insurers‖ is equivalent to the reasonable value, or ―exchange value of medical

12



services the injured plaintiff has been required to obtain.‖ (Maj. opn., ante, at

p. 21.)

However, the reasonable value of the patient‘s care is a question for the

trier of fact. It may be that the sum the providers accepted in full payment is

equivalent to the reasonable value of the care, or it may be that the reasonable

value of the care is a higher figure. Preferred providers discount their fees to PPO

members because the providers ―obtain commercial benefits from their

agreements with health insurance organizations‖ (maj. opn., ante, at p. 15), such as

an expanded clientele. This court should not speculate that the amount a preferred

provider accepts as payment in full from the insurer is equivalent to the reasonable

value of the services rendered.

The inquiry at trial should be the same, irrespective of whether the injured

plaintiff was covered by a PPO health insurance policy, was a donee, or was

uninsured. The plaintiff‘s burden is to prove the reasonable value of the medical

care needed to treat his or her tortiously caused injuries.

―Due to the realities of today‘s insurance and reimbursement system, in any

given case, that determination is not necessarily the amount of the original bill or

the amount paid. Instead, the reasonable value of medical services is a matter for

the jury to determine from all relevant evidence. Both the original medical bill

rendered and the amount accepted as full payment are admissible to prove the

reasonableness and necessity of charges rendered for medical and hospital care.

[¶] The jury may decide that the reasonable value of medical care is the amount

originally billed, the amount the medical provider accepted as payment, or some

amount in between.‖ (Robinson v. Bates (Ohio 2006) 112 Ohio St.3d 17, 23 [857

N.E.2d 1195, 1200].) California jurors are as capable as jurors in Ohio or

elsewhere of making that determination.

A plaintiff may attempt to rely on the undiscounted medical bills to

establish economic damages, but if such billing is inflated, it would be exposed on

cross-examination and through defense expert testimony. For example, if a chest

13



X-ray was billed at $1,500 but the evidence shows the provider has rarely, if ever,

obtained that sum in payment, or if the evidence shows the billed amount

significantly exceeds the charges by other medical providers for such treatment,

the trier of fact would take such evidence into consideration in assessing the

reasonable value of the treatment. A jury, with the help of expert opinion

testimony, is capable of weighing the evidence and determining the reasonable

value of the medical services provided to the plaintiff.

Finally, in the event the verdict as to past medical expenses is excessive,

the defendant can move for a new trial on that basis. (Code Civ. Proc., § 657,

subd. 5.)

8. Any modification to the collateral source rule should be left to the

Legislature.

There is nothing unique about PPO insurance coverage that requires this

court to carve out a special rule governing the negotiated rate differential in this

type of health insurance. An injured person with PPO coverage, like uninsured

plaintiffs or donees, should be able to recover the reasonable value of care

required to treat the tortiously caused injuries.

Any change to the collateral source rule should be left to the Legislature.

(Olsen v. Reid (2008) 164 Cal.App.4th 200, 213-214 (conc. opn. of Moore, J.).)

The Legislature twice has abrogated or modified the collateral source rule, in the

Medical Injury Compensation Reform Act (Civ. Code, § 3333.1, subd. (a) [health

care providers]) and in Government Code section 985 (public entity defendants),

and can do so again if it sees fit.

―It may well be that the collateral-source rule itself is out of sync with

today‘s economic realities of managed care and insurance reimbursement for

medical expenses. However, whether plaintiffs should be allowed to seek

recovery for medical expenses . . . only for the amount negotiated and paid by

insurance is for the [Legislature] to determine.‖ (Robinson v. Bates, supra, 857

N.E.2d at p. 1201.)

14



9. Proposed disposition.

The judgment of the Court of Appeal should be reversed with directions to

remand the matter to the trial court for a limited new trial to determine, and award,

the reasonable value of the medical services which Howell received for her

tortiously caused injuries.

















KLEIN, J.*


*

Presiding Justice of the Court of Appeal, Second Appellate District,

Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.

15



See last page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Howell v. Hamilton Meats & Provisions, Inc.
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding
Review Granted
XXX 179 Cal.App.4th 686
Rehearing Granted

__________________________________________________________________________________

Opinion No.
S179115
Date Filed: August 18, 2011
__________________________________________________________________________________

Court:
Superior
County: San Diego
Judge: Adrienne A. Orfield

__________________________________________________________________________________

Counsel:

Law Office of Gary L. Simms, Gary L. Sims; LaFave & Rice, John J. Rice; Basile Law Firm, J. Jude
Basile; Law Offices of J. Michael Vallee and J. Michael Vallee for Plaintiff and Appellant.

Barbara A. Jones; Michael Schuster, Kelly Bagby and Bruce Vignery for AARP as Amicus Curiae on
behalf of Plaintiff and Appellant.

Hinton, Alfert & Sumner, Scott H. Z. Sumner, Jeremy N. Lateiner; Liberson & Wolford and Joel K.
Liberson for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant.

Tyson & Mendes, Robert F. Tyson, Mark T. Petersen and Kristi Deans for Defendant and Respondent.

McCormick, Barstow, Sheppard, Wayte & Carruth, Dean Petrulakis, John M. Dunn and Jeffrey R Olson for
CSAC Excess Insurance Authority and Central Region School Insurance Group as Amici Curiae on behalf
of Defendant and Respondent.

Hayes, Scott, Bonino, Ellingson & McLay and Mark G. Bonino for Association of Defense Counsel of
Northern California and Nevada as Amicus Curiae on behalf of Defendant and Respondent.

Sedgwick, Detert, Moran & Arnold, Christina J. Imre and Kirk Jenkins for Allstate Insurance Company as
Amicus Curiae on behalf of Defendant and Respondent.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant
and Respondent.

Greines, Martin, Stein & Richland and Robert A. Olson for Association of Southern California Defense
Counsel and DRI-The Voice of the Defense Bar as Amici Curiae on behalf of Defendant and Respondent.











Page 2 – S179115 – counsel continued:


Horvitz & Levy, David S. Ettinger and H. Thomas Watson for American Insurance Association,
Association of California Insurance Companies, Personal Insurance Federation of California, California
State Automobile Association Inter-Insurance Bureau, Chartis, Inc., Farmers Insurance Exchange, Infinity
Insurance Company, Interinsurance Exchange of the Automobile Club, Mercury Insurance Group, State
Farm General Insurance Company and State Farm Mutual Automobile Insurance Company as Amici
Curiae on behalf of Defendant and Respondent.

Cole Pedroza, Curtis A. Cole, Kenneth R. Pedroza for California Medical Association, California Dental
Association and California Hospital Association as Amici Curiae on behalf of Defendant and Respondent.

Newdorf Legal, David B. Newdorf and Vicki F. Van Fleet for The League of California Cities as Amicus
Curiae.


















Counsel who argued in Supreme Court (not intended for publication with opinion):

Gary L. Sims
Law Office of Gary L. Simms
2050 Lyndell Terrace, Suite 240
Davis, CA 95616-6206
(530) 564-1640

Robert F. Tyson
Tyson & Mendes
5661 La Jolla Blvd.
La Jolla, CA 92037
(858) 459-4400

Robert A. Olson
Greines, Martin, Stein & Richland
5900 Wilshire Boulevard, 12th Floor
Los Angeles, CA 90036
(310) 859-7811



Petition for review after the Court of Appeal reversed a post-verdict order in a civil action. This case presents the following issues: (1) Is the "negotiated rate differential"  the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer  a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment? (2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury's award of damages by the negotiated rate differential?

Opinion Information
Date:Citation:Docket Number:Category:Status:Cross Referenced Cases:
Thu, 08/18/201152 Cal. 4th 541, 257 P.3d 1130, 129 Cal. Rptr. 3d 325S179115Review - Civil Appealsubmitted/opinion due

YANEZ v. SOMA ENVIRONMENTAL ENGINEERING (S184846)
KING v. WILLMETT (S186151)
CABRERA v. E. ROJAS PROPERTIES (S191826)
FELIX v. ARONSON (S191874)


Parties
1Howell, Rebecca (Plaintiff and Appellant)
Represented by John J. Rice
Lafave & Rice
2333 First Avenue, Suite 201
San Diego, CA

2Howell, Rebecca (Plaintiff and Appellant)
Represented by J. Jude Basile
Basile Law Firm
1334 Chorro Street
San Luis Obispo, CA

3Howell, Rebecca (Plaintiff and Appellant)
Represented by Gary L. Simms
Law Office of Gary L. Simms
2050 Lyndell Terrace, Suite 240
Davis, CA

4Hamilton Meats & Provisions, Inc. (Defendant and Respondent)
Represented by Mark Taylor Petersen
Tyson & Mendes, LLP
5661 La Jolla Boulevard
La Jolla, CA

5Hamilton Meats & Provisions, Inc. (Defendant and Respondent)
Represented by Robert Francis Tyson
Tyson & Mendes, LLP
5661 La Jolla Boulevard
La Jolla, CA

6American Insurance Association (Amicus curiae)
Represented by Steven Suchil
American Insurance Association
915 "L" Street, Suite 1480
Sacramento, CA

7AARP (Amicus curiae)
Represented by Barbara A. Jones
AARP Foundation Litigation
200 S. Los Robles, Suite 400
Pasadena, CA

8Allstate Insurance Company (Amicus curiae)
Represented by Christina J. Imre
Sedgwick LLP
801 S. Figueroa Street, 19th Floor
Los Angeles, CA

9American Insurance Association (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

10Association of California Insurance Companies (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

11Association of Defense Counsel (Amicus curiae)
Represented by Mark G. Bonino
Hayes Davis Bonino Ellingson McLay & Scott
203 Redwood Shores Parkway, Suite 480
Redwood City, CA

12Association of Southern California Defense Counsel (Amicus curiae)
Represented by Robert A. Olson
Greines Martin Stein & Richland LLP
5900 Wilshire Boulevard, 12th Floor
Los Angeles, CA

13Association of Southern California Defense Counsel (Amicus curiae)
Represented by Sheila Annette Wirkus
Greines Martin Stein & Richland, LLP
5900 Wilshire Boulevard, 12th Floor
Los Angeles, CA

14California Dental Association (Amicus curiae)
Represented by Curtis A. Cole
Cole Pedroza, LLP
200 S. Los Robles Avenue, Suite 300
Pasadena, CA

15California Hospital Association (Amicus curiae)
Represented by Curtis A. Cole
Cole Pedroza, LLP
200 S. Los Robles Avenue, Suite 300
Pasadena, CA

16California Medical Association (Amicus curiae)
Represented by Curtis A. Cole
Cole Pedroza, LLP
200 S. Los Robles Avenue, Suite 300
Pasadena, CA

17California State Automobile Association Inter-Insurance (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

18Central Region School Insurance Group (Amicus curiae)
Represented by Dean Peter Petrulakis
McCormick Barstow Sheppard Wayte & Carruth, LLP
1150 Ninth Street, Suite 1200
Modesto, CA

19Chartis, Inc. (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

20Civil Justice Association of California (Amicus curiae)
Represented by Fred J. Hiestand
Attorney at Law
1121 "L" Street, Suite 404
Sacramento, CA

21Consumer Attorneys of California (Amicus curiae)
Represented by Scott H. Z. Sumner
Hinton Alfert & Summer
1646 N. California Boulevard, Suite 600
Walnut Creek, CA

22Consumer Attorneys of California (Amicus curiae)
Represented by Joel K. Liberson
Liberson & Wolford, LLP
660 Market Street, 5th Floor
San Francisco, CA

23CSAC Excess Insurance Authority (Amicus curiae)
Represented by Dean Peter Petrulakis
McCormick Barstow Sheppard Wayte & Carruth, LLP
1150 Ninth Street, Suite 1200
Modesto, CA

24DRI - The Voice of the Defense Bar (Amicus curiae)
Represented by Robert A. Olson
Greines Martin Stein & Richland LLP
5900 Wilshire Boulevard, 12th Floor
Los Angeles, CA

25Farmers Insurance Exchange (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

26Infinity Insurance Company (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

27Interinsurance Exchange of the Automobile Club (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

28League of California Cities (Amicus curiae)
Represented by David Blake Newdorf
Newdorf Legal
220 Montgomery Street, Suite 1850
San Francisco, CA

29League of California Cities (Amicus curiae)
Represented by Vicki Francine VanFleet
Newdorf Legal
220 Montgomery Street, Suite 1850
San Francisco, CA

30Mercury Insurance Group (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

31Personal Insurance Federation of California (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

32State Farm General Insurance Company (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

33State Farm Mutual Automobile Insurance Company (Amicus curiae)
Represented by David S. Ettinger
Horvitz & Levy, LLP
15760 Ventura Boulevard, 18th Floor
Encino, CA

34California Capital Insurance Company (Pub/Depublication Requestor)
Represented by Eric B. Kunkel
Law Offices of Tharpe & Howell
15250 Ventura Boulevard, 9th Floor
Sherman Oaks, CA


Opinion Authors
OpinionJustice Kathryn M. Werdegar
ConcurChief Justice Tani Cantil-Sakauye, Justice Carol A. Corrigan, Justice Joyce L. Kennard, Justice Marvin R. Baxter, Justice Ming W. Chin

Dockets
Dec 31 2009Petition for review filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen  
Dec 31 2009Record requested
 
Dec 31 2009Request for depublication (petition for review pending)
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen  
Jan 5 2010Received Court of Appeal record
  two doghouses ( volume 1 & 2 )
Jan 11 2010Opposition to depublication request filed
  Amicus Committee of the Consumer Attorneys of California (non party), Scot H.Z. Sumner, counsel
Jan 21 2010Answer to petition for review filed
Plaintiff and Appellant: Howell, RebeccaAttorney: John J. Rice  
Jan 21 2010Request for depublication filed (another request pending)
Pub/Depublication Requestor: California Capital Insurance CompanyAttorney: Eric B. Kunkel  
Jan 21 2010Request for depublication filed (another request pending)
Amicus curiae: Association of Southern California Defense CounselAttorney: Robert A. Olson  
Jan 22 2010Request for depublication filed (another request pending)
Amicus curiae: American Insurance AssociationAttorney: Steven Suchil  
Jan 28 2010Opposition to depublication request filed
  Rebecca Howell, Defendant and Appellant. John J. Rice, Retained Counsel
Feb 1 2010Reply to answer to petition filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Robert Francis Tyson  
Feb 19 2010Time extended to grant or deny review
  The time for granting or denying review in the above-entitled matter is hereby extended to and including March 30, 2010, or the date upon which review is either granted or denied.
Mar 10 2010Petition for review granted
  Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.
Mar 10 2010Letter sent to:
  counsel requesting each party file a "Certification of Interested Entities and Persons." The completed form should be returned to the court within 15 days.
Mar 22 2010Certification of interested entities or persons filed
  Rebecca Howell, Plaintiff and Appellant John Rice, Retained Counsel
Mar 24 2010Certification of interested entities or persons filed
  Hamilton Meats & Provisions, Inc., Defendant and Respondent. Mark T. Petersen, Retained Counsel
Mar 29 2010Received:
  Proof of service for CIP from attorney John Rices's office.
Apr 9 2010Opening brief on the merits filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen  
Apr 28 2010Association of attorneys filed
  The law firm of LaFave & Rice and John J. Rice, Esq., counsel of record on appeal for plaintiff and appellant Rebecca Howell, hereby associates attorney Gary L. Simms of the Law Office of Gary L. Simms as counsel of record in this Court.
Apr 28 2010Request for extension of time filed
  Gary L. Simms, counsel for appellant Rebecca Howell, requests to June 8, 2010, to file the answer brief on the merits. (to court for permission)
Apr 30 2010Extension of time granted
  On application of appellant and good cause appearing, it is ordered that the time to serve and file the answer brief on the merits is extended to and including June 8, 2010.
Jun 7 2010Received:
  motion for permission to file answer brief on the merits. In excess of word limit (brief submitted with the motion).
Jun 7 2010Answer brief on the merits filed
Plaintiff and Appellant: Howell, RebeccaAttorney: John J. Rice  
Jun 10 2010Request for extension of time filed
  By, Mark T. Petersen Attorney for respondent Hamilton Meats & Provisions, Inc. Requesting a (30) day extension to file reply brief on the merits (to court for permission)
Jun 15 2010Extension of time granted
  On application of respondent and good cause appearing, it is ordered that the time to serve and file the reply brief on the merits is extended to and including July 27, 2010.
Jul 6 2010Note: Mail returned and re-sent
  copy of order dated 6/15/10 to attorney J. Jude Basile
Jul 19 2010Change of contact information filed for:
  J. Jude Basile, counsel for appellant.
Jul 19 2010Application to file amicus curiae brief filed
  California Medical Association, California Hospital Association, California Dental Association, in support of respondent.
Jul 20 2010Received:
  Amended Proof of Service to AC Brief filed California Medical Association et al.,
Jul 21 2010Permission to file amicus curiae brief granted
  The application of California Medical Association, California Hospital Association, and California Dental Association for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Jul 21 2010Amicus curiae brief filed
Amicus curiae: California Medical AssociationAttorney: Curtis A. Cole Amicus curiae: California Hospital AssociationAttorney: Curtis A. Cole Amicus curiae: California Dental AssociationAttorney: Curtis A. Cole  
Jul 27 2010Received:
  Respondent's Oversized Reply Brief on the Merits.
Jul 27 2010Application filed
  By counsel for respondent for permission to file Reply Brief on the Merits in excess of word limit.
Jul 28 2010Request for extension of time filed
  by counsel for appellant requesting a 28-day extension to and including September 15, 2010, to file appellant's response to AC brief filed by California Medical Association et al., and any other AC brief filed.
Aug 2 2010Order filed
  The application of respondent for permission to file an over length reply brief on the merits is granted.
Aug 2 2010Reply brief filed (case fully briefed)
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Robert Francis Tyson   with permission.
Aug 2 2010Extension of time granted
  Appellant's application for an extension of time to file appellant's response to amici curiae briefs is hereby granted. Appellant's response to amicus curiae brief filed by The California Medical Association et al., and to any other amici curiae briefs is due on or before September 15, 2010.
Aug 24 2010Supplemental brief filed
Plaintiff and Appellant: Howell, RebeccaAttorney: Gary L. Simms  
Aug 25 2010Application to file amicus curiae brief filed
  AARP in support of plaintiff and respondent Rebecca Howell. (to court for pemission)
Aug 26 2010Application to file amicus curiae brief filed
  Consumer Attorneys of California (to court for permission)
Aug 26 2010Application to file amicus curiae brief filed
  The League of California Cities. (to court for permission)
Aug 30 2010Permission to file amicus curiae brief granted
  The application of AARP for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 30 2010Permission to file amicus curiae brief granted
  The application of The League of California Cities for permission to file an amicus curiae brief in support of neither party is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 30 2010Application to file amicus curiae brief filed
  By Dean Petrulakis, Attorney for CSAC EXCESS INSURANCE AUTHORITY (to court for permission)
Aug 30 2010Permission to file amicus curiae brief granted
  The application of Consumer Attorneys of California for permission to file an amicus curiae brief in support of appellant is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 30 2010Amicus curiae brief filed
Amicus curiae: Consumer Attorneys of CaliforniaAttorney: Scott H. Z. Sumner  
Aug 30 2010Amicus curiae brief filed
Amicus curiae: League of California CitiesAttorney: David Blake Newdorf  
Aug 30 2010Amicus curiae brief filed
Amicus curiae: AARPAttorney: Barbara A. Jones  
Aug 31 2010Application to file amicus curiae brief filed
  By: American Insurance Association; Association of California Insurance Companies; Personal Insurance Federation of California;California State Automobile Association Inter-Insurance Bureau; Chartis, Inc; Farmers Insurance Exchange; Infinity Insurance Company; Interinsurance Exchange of The Automobile Club; Mercury Insurance Group; State Farm General Insurance Company; State Farm Mutual Automobile Insurance Company. (to court for permission)
Aug 31 2010Permission to file amicus curiae brief granted
  The application of American Insurance Association; Association of California Insurance Companies: Personal Insurance Federation of California; California State Automobile Association Inter-Insurance Bureau; Chartis, Inc; Farmers Insurance Exchange of The Automobile Club; Mercury Insurance Group; State Farm General Insurance Company; State Farm Mutual Automobile Insurance Company for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 31 2010Permission to file amicus curiae brief granted
  The application of Csac Excess Insurance Authority for permission to file an amicus curiae brief in support of appellant and respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Aug 31 2010Request for judicial notice filed (Grant or AA case)
Amicus curiae: CSAC Excess Insurance AuthorityAttorney: Dean Peter Petrulakis  
Sep 1 2010Application to file amicus curiae brief filed
  The Association of Defense Counsel's of Northern California and Nevada Application for Permission to File an Amicus Curia Brief. (to court for permission)
Sep 1 2010Application to file amicus curiae brief filed
  by The Association of Southern California Defense Counsel and DRI-The Voice of The Defense Bar in support of respondent.
Sep 2 2010Application to file amicus curiae brief filed
  By Allstate Insurance Co. in support of respondent. CRC 8.25(b)
Sep 2 2010Application to file amicus curiae brief filed
  Civil Justice Association of California in support of Respondent. CRC 8.25(b)
Sep 3 2010Application to file amicus curiae brief filed
  Request for leave to join application and brief of Amicus Curiae CSAC Excess Insurance Authority By Amicus Curiae Central Region School Insuance Group. (to court for permission)
Sep 7 2010Request for extension of time filed
  by counsel for appellant Rebecca Howell to file appellant's response to multiiple Amici Curiae Briefs in support of respondent. (to court for permission)
Sep 7 2010Permission to file amicus curiae brief granted
  The application of The Association of Defense Cousel's of Northern California and Nevada for permission to file an amicus curiae brief in support of respondent is hereby granted.An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Sep 7 2010Permission to file amicus curiae brief granted
  The application of The Association of Southern California Defense Counsel and DRI- The Voice of the Defense Bar for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Sep 7 2010Permission to file amicus curiae brief granted
  The application of Civil Justixe Association of California for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Sep 7 2010Permission to file amicus curiae brief granted
  The application of Allstate Insurance Company for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Sep 7 2010Permission to file amicus curiae brief granted
  The application of Central Region School Insurance Group for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Sep 8 2010Extension of time granted
  On application of appellant and good cause appearing, it is ordered that the time to serve and file appellant's consolidated response to amici curiae briefs is hereby extended to and including October 25, 2010.
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Civil Justice Association of CaliforniaAttorney: Fred J. Hiestand  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Association of Defense CounselAttorney: Mark G. Bonino  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: DRI - The Voice of the Defense BarAttorney: Robert A. Olson  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Allstate Insurance CompanyAttorney: Christina J. Imre  
Aug 31 2010Amicus curiae brief filed
Amicus curiae: CSAC Excess Insurance AuthorityAttorney: Dean Peter Petrulakis  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Central Region School Insurance GroupAttorney: Dean Peter Petrulakis  
Sep 20 2010Response to amicus curiae brief filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen   Answer by Hamilton Meats & Provisions, Inc. To Amicus Curiae Briefs of (1) AARP, and (2) Consumer Attorneys of California.
Oct 25 2010Response to amicus curiae brief filed
Plaintiff and Appellant: Howell, RebeccaAttorney: Gary L. Simms  
Apr 20 2011Supplemental briefing ordered
  The parties are ordered to submit supplemental briefs on the following issues: Assuming, for sake of argument, that only amounts that have been paid or remain owing to medical providers are recoverable as damages for past medical expenses, what evidence of such expenses is admissible in a jury trial? Given defendant's concession that a jury properly hears evidence of "gross medical bills" (open. br., p. 52), should this court for guidance in other cases approve or disapprove the posttrial "Hanif" motion procedure used in the trial court? Briefs may be in letter form and are limited to 10 pages. Briefs are to be servered and filed simultaneously by May 5, 2011.
Apr 28 2011Justice pro tempore assigned
  Hon. Joan Dempsey Klein Second Appellate District, Division Three
May 2 2011Received:
  from Southern Calif. Defense Counsel request to file supplemental letter brief.
May 3 2011Letter brief filed
Amicus curiae: Association of Southern California Defense CounselAttorney: Sheila Annette Wirkus  
May 3 2011Case ordered on calendar
  to be argued Tuesday, May 24, 2011, at 9:00 a.m., in San Francisco
May 5 2011Supplemental brief filed
Plaintiff and Appellant: Howell, RebeccaAttorney: Gary L. Simms  
May 5 2011Supplemental brief filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen  
May 11 2011Change of contact information filed for:
  Sedgwick Law firm : notice of change of firm name to : SEDGWICK LLP.
May 12 2011Application filed
  Request to divide oral argument time, asking to share 10 minutes of time with amicus curiae Association of Southern California Defense Counsel.
May 16 2011Supplemental brief filed
Plaintiff and Appellant: Howell, RebeccaAttorney: Gary L. Simms   Regarding new authorities
May 17 2011Order filed
  The request of respondent to allocate to amicus curiae Association of Southern California Defense Counsel 10 minutes of respondent's 30-minute allotted time for oral argument is granted.
May 18 2011Request for judicial notice granted
  Amicus curiae CSAC Excess Insurance Authority's request for judicial notice, filed August 31, 2010, is granted.
May 23 2011Note: Mail returned and re-sent
  Address for Gary L. Simms updated per State Bar website.
May 24 2011Cause argued and submitted
 
Aug 17 2011Notice of forthcoming opinion posted
  To be filed on Thursday, August 18, 2011 @ 10 a.m.

Briefs
Apr 9 2010Opening brief on the merits filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen  
Jun 7 2010Answer brief on the merits filed
Plaintiff and Appellant: Howell, RebeccaAttorney: John J. Rice  
Aug 2 2010Reply brief filed (case fully briefed)
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Robert Francis Tyson  
Jul 21 2010Amicus curiae brief filed
Amicus curiae: California Medical AssociationAttorney: Curtis A. Cole Amicus curiae: California Hospital AssociationAttorney: Curtis A. Cole Amicus curiae: California Dental AssociationAttorney: Curtis A. Cole  
Aug 30 2010Amicus curiae brief filed
Amicus curiae: Consumer Attorneys of CaliforniaAttorney: Scott H. Z. Sumner  
Aug 30 2010Amicus curiae brief filed
Amicus curiae: League of California CitiesAttorney: David Blake Newdorf  
Aug 30 2010Amicus curiae brief filed
Amicus curiae: AARPAttorney: Barbara A. Jones  
Oct 25 2010Response to amicus curiae brief filed
Plaintiff and Appellant: Howell, RebeccaAttorney: Gary L. Simms  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Civil Justice Association of CaliforniaAttorney: Fred J. Hiestand  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Association of Defense CounselAttorney: Mark G. Bonino  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: DRI - The Voice of the Defense BarAttorney: Robert A. Olson  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Allstate Insurance CompanyAttorney: Christina J. Imre  
Aug 31 2010Amicus curiae brief filed
Amicus curiae: CSAC Excess Insurance AuthorityAttorney: Dean Peter Petrulakis  
Sep 7 2010Amicus curiae brief filed
Amicus curiae: Central Region School Insurance GroupAttorney: Dean Peter Petrulakis  
Sep 20 2010Response to amicus curiae brief filed
Defendant and Respondent: Hamilton Meats & Provisions, Inc.Attorney: Mark Taylor Petersen  
Brief Downloads
application/pdf icon
s179115-1-respondents-petition-for-review.pdf (629235 bytes) - Respondents Petition for Review
application/pdf icon
s179115-2-appellants-answer-to-petition-for-review.pdf (381796 bytes) - Appellants Answer to Petition for Review
application/pdf icon
s179115-3-respondents-reply-answer-petiton-review.pdf (207077 bytes) - Respondents Reply to Petition for Review
application/pdf icon
s179115-4-respondents-opening-brief-on-the-merits.pdf (533919 bytes) - Respondents Opening Brief on the Merits
application/pdf icon
s179115-5-appellants-answer-brief-on-the-merits.pdf (723232 bytes) - Appellants Answer Brief on the Merits
application/pdf icon
s179115-6-respondents-reply-brief-on-the-merits.pdf (801447 bytes) - Respondents Reply Brief on the Merits
application/pdf icon
s179115-7-appellants-supplemental-brief-merits.pdf (266755 bytes) - Appellants Supplemental Brief on the Merits
application/pdf icon
s179115-8-appellants-supplemental-letter-brief.pdf (170913 bytes) - Appellants Supplemental Letter Brief
application/pdf icon
s179115-9-respondents-supplemental-letter-brief.pdf (116823 bytes) - Respondents Supplemental Letter Brief
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
Jun 8, 2012
Annotated by Joseph Rumpler

FACTS

Rebecca Howell, plaintiff, sued Hamilton Meats for personal injuries she sustained in an automobile accident with a Hamilton Meats employee. At trial, Hamilton Meats conceded that it was liable for negligence but contested the amount plaintiff sought in damages. In particular, Howell argued that the economic damages that she was due were those amounts originally billed by the medical providers (e.g., the hospital and physicians at Scripps Memorial Hospital Encinitas who treated her). Hamilton Meats countered that Howell’s economic damages were instead the amounts ultimately accepted as payment in full by the medical providers after the originally billed amounts were adjusted downwards as a result of agreements between the medical providers and PacifiCare, Howell’s preferred provider organization (PPO). Hamilton Meats filed a motion in limine to exclude evidence of the originally billed amounts that neither the plaintiff nor PacifiCare ultimately paid. The trial court denied this motion but provided that a post-trial Hanif motion could be used by the defendant to address the reduction of the original billed amounts.

At trial, plaintiff presented evidence that the total medical expenses originally billed were $189,978.63. The jury subsequently awarded her this sum for economic damages for past medical expenses. Hamilton Meats filed a post-trial Hanif motion asserting that the damages award should be reduced by a sum of $130,286.90 to reflect the total amount ultimately accepted as payment in full after the originally billed amounts were reduced pursuant to agreements between the medical providers and PacifiCare. Plaintiff opposed the motion arguing that such a reduction in economic damages would violate the collateral source rule. The trial court granted Hamilton Meats’ motion to reduce the past medical damages award. The Court of Appeals reversed the reduction order on the grounds that it violated the collateral source rule.

PROCEDURAL HISTORY

In the Superior Court of San Diego County, the trial court jury rendered a special verdict finding Hamilton Meats negligently liable and awarding plaintiff Howell economic damages for past medical expenses of $189,978.63, which was the total amount originally billed by the medical providers before being reduced according to agreements between the providers and Howell’s insurer. The trial court (Adrienne A. Orfield, J.) then granted Hamilton Meats’ post-trial Hanif motion to reduce the medical damages award by $130,286.90 to reflect the charges ultimately accepted by the medical providers as payment in full pursuant to agreements between the providers and PacifiCare. The Court of Appeals reversed the reduction order on the grounds that it violated the collateral source rule.

The Supreme Court of California granted Hamilton Meats’ petition for review.

ISSUES

Issue (1):
Is the “negotiated rate differential,” which represents the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer, a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment?

Issue (2):
Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury’s award of damages by the negotiated rate differential?

HOLDING

Holding With Respect to Issue (1):
The negotiated rate differential is not a collateral source benefit under the collateral source rule and thus the plaintiff is limited in economic damages to the amount the medical provider accepts as payment in full.

Holding With Respect To Issue (2):
No, the trial court did not err when it permitted the plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury’s award of damages by the negotiated rate differential.

ANALYSIS

Analysis for Issue (1):

The collateral source rule specifies that when a tortiously injured party is at least partially compensated for his injuries from a third party, such as an insurer, unconnected to the defendant tortfeasor, the amount of compensation should not be deducted from the damage award that the injured party would otherwise collect from the tortfeasor. The collateral source rule is not implicated for damages that the plaintiff would hypothetically collect from a third party. Instead, only the amount by which the injured was actually compensated by the third party is subject to the collateral source rule.

The negotiated rate differential represents the difference between the full billed amount for medical care and the actual paid in full amount as negotiated between a medical provider and an insurer. The question of whether the negotiated rate differential implicates the collateral source rule is a question of whether the negotiated rate differential actually compensates the injured party (the plaintiff in this case).

The negotiated rate differential does not implicate the collateral source rule because the differential does not actually compensate or benefit the plaintiff. The rate differential is not given as compensation for the plaintiff’s injuries but instead in order to benefit insurers. According to the Court, this follows from the fact that the plaintiff never faced liability for the medical providers’ full bills because when the plaintiff incurred the medical charges, the medical providers had already reached an agreement with PacifiCare’s PPO members on the reduced price of the medical treatment. The plaintiff never incurred the amount originally billed and thus the plaintiff may not recover it as economic damages.

Analysis for Issue (2):

In situations where the provider has, because of a prior agreement, accepted less than the full billed amount as payment, evidence of the full billed amount “is not itself relevant on the issue of past medical expenses.” However, in this case, the defendant Hamilton Meats conceded that it was proper for the plaintiff to present the full billed amount of medical charges to the jury. Evidence that a plaintiff’s medical provider accepted as full payment an amount less than the amount originally billed is relevant to prove the plaintiff’s economic damages for past medical expenses. However, such evidence is generally inadmissible at trial because of the collateral source rule. The trial court was right to rule that the plaintiff’s recovery as economic damages was limited to the amount her medical providers had accepted as payment in full from the plaintiff and her insurer.

JUSTICES:

Opinion by Werdegar, J.
Concurring: Cantil-Sakauye, C.J., Kennard, Baxter, Chin, and Corrigan, JJ.
Dissenting: Klein, J. (Presiding Justice of the Court of Appeal, Second Appellate District, Division Three)

RELATED CASES

Hanif v. Housing Authority, 200 Cal. App. 3d 635 (1988).
http://scholar.google.com/scholar_case?case=16225113073053692156&q=hanif...

Nishihama v. City and County of San Francisco, 93 Cal. App. 4th 298 (2001).
http://scholar.google.com/scholar_case?case=4994773295749790620&q=Nishih...

Olszewski v. Scripps Health, 30 Cal. 4th 798 (2003).
http://scholar.google.com/scholar_case?case=18273619992633241313&q=Olsze...

Helfend v. Southern Cal. Rapid Transit Dist., 2 Cal. 3d 1 (1970).
http://scholar.google.com/scholar_case?case=15846223936090416136&q=helfe...

Parnell v. Adventist Health System/West, 109 P.3d 69 (2005).
http://scholar.google.com/scholar_case?case=9282381365806461902&q=Parnel...

RELEVANT STATUTORY LAW

Cal. Civ. Code § 3281
http://law.justia.com/codes/california/2011/civ/3281-3283/

Cal. Civ. Code § 3282
http://law.justia.com/codes/california/2011/civ/3281-3283/

Cal. Civ. Code § 3333
http://law.justia.com/codes/california/2011/civ/3333-3343.7/

PRESS ARTICLES

Shaun Martin, Howell v. Hamilton Meats (Cal. Supreme Ct. - August 18, 2011), CALIFORNIA APPELLATE REPORT (Aug. 18, 2011),
http://calapp.blogspot.com/2011/08/howell-v-hamilton-meats-cal-supreme-c....

Bruce Nye, Cal Supremes Decide Howell v. Hamilton Meats . . . . Correctly, CAL BIZ LIT BLOG (Aug. 18, 2011),
http://www.calbizlit.com/cal_biz_lit/2011/08/cal-supremes-decide-howell-....

John O’Brien, Calif. groups say bill is attempt to overturn SC decision, LegalNewsline.com (May 9, 2012, 10:00 AM), http://www.legalnewsline.com/news/236101-calif.-groups-say-bill-is-attem....

California Senate Approves Bill to Overturn Howell vs. Hamilton Meats Supreme Court Decision, INSURANCE NEWS NET.COM, http://insurancenewsnet.com/article.aspx?id=344391 (May 31, 2012).

TAGS
damages, insurance, collateral source rule, negotiated rate differential, personal injury, PPO, preferred provider organization, Hanif motion, negligence, medical, health care, tort, liability, compensatory damage, bill, insurer, expense, charge, accident, detriment, recovery, premium, hospital, doctor, windfall, reimbursement, managed care, physician, mark up, discount rate, out-of-pocket, indemnification, indemnity, indemnify, third party, chargemaster, write-off, HMO, health maintenance organization, medicare, special verdict, Superior Court of San Diego County, Orfield, Werdegar, litigation, California Civil Code § 3281, California Civil Code § 3282, California Civil Code § 3333

Annotation by Joseph Rumpler