Generally, an injured party is entitled to recover the medical costs and expenses reasonably incurred as a result of the tort of another. When the injured party’s health insurer pays those costs and expenses, the amount paid by the health insurer is usually considered the amount that was reasonably incurred. Most health insurers negotiate reduced rates with medical providers. The medical providers agree to accept reduced rates based on an expectation of assured payment and patient volume. Thus, the amounts paid by health insurers may be up to 70% less than the amount actually billed by the health care provider. Since the 2011 California Supreme Court opinion in Howell v. Hamilton Meats & Provisions, Inc., the general rule is that an injured plaintiff with health insurance may not recover economic damages in excess of the amount paid by the insurer for the medical services provided.
Recently, the California Second Appellate District Court in Pebley v. Santa Clara Organics, LLC created an exception to the general rule.
In Pebley, the plaintiff was injured in a motor vehicle accident caused by the defendant, an employee of Santa Clara Organics, LLC. Although plaintiff had health insurance through Kaiser Permanente, he chose to obtain medical services outside his insurance plan after filing a personal injury action against defendants. Specifically, plaintiff treated with an out-of-network orthopedic spine specialist who performed a cervical fusion surgery. Plaintiff successfully moved to exclude evidence that he had health insurance; that he had obtained his medical treatment on a lien basis; and of the amounts an insurance company may pay, or what a medical provider may accept, for medical services, both past and future. Defendant unsuccessfully moved to exclude evidence of “unpaid bills” from health care providers.
Plaintiff’s expert testified that the unpaid full rate medical bills were reasonable and customary charges. The jury awarded plaintiff over $3.6M including $269,000 in past medical expenses and $375,000 for future medical expenses. Defendants appealed arguing that the general rule set forth in Howell should have applied since plaintiff was insured but merely decided not to rely on his insurance coverage to pay the reasonable costs of medical care.
The Court of Appeals affirmed the judgment. It held, had plaintiff elected to treat through his insurance carrier, plaintiff’s recovery would have been limited to the amounts paid by the health insurer for the services provided. However, the Court ruled that plaintiff’s recovery was not so limited in this case, because where “plaintiff chooses to be treated outside the available insurance plan, the plaintiff is in the same position as an uninsured plaintiff and should be classified as such under the law.”
The Pebley decision will likely have an immediate and substantial impact on personal injury litigation and may result in larger verdicts. The decision permits insured plaintiffs to treat with health care providers outside of their insurance plans and then allows those plaintiffs to introduce the entire amount of medical expenses billed (rather than only those paid), as long as those medical expenses are reasonable and customary costs in the community. We anticipate personal injury lawyers will be advising their clients to eschew use of their health insurer and incur medical expenses with physicians and facilities that agree to accept a lien in lieu of payment.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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