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Recent Ruling Gives Injury Victims Right to Full Recovery of Medical Expenses

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This past November, a California appellate court handed down an important victory for personal injury victims. In Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686, the Court of Appeal, Fourth Appellate District ruled that injury victims were entitled under the collateral source rule to recover the full amount of medical expenses billed by their health care providers, regardless of the amount actually paid by their private insurers.

Under the collateral source rule, defendants in personal injury lawsuits are prohibited from bringing evidence of any compensation the victim may have collected from independent, third parties unconnected to the litigation, i.e. “collateral sources.” This includes any compensation received under an insurance policy.

Prior to Howell, California trial courts had routinely held that plaintiffs were only permitted to recover medical expenses in the amount actually paid by their insurance companies, which often was much less than the amount billed by their health care providers. It is common for insurance companies to negotiate rate differentials with hospitals and physicians wherein the providers will agree to accept less payment from the insurers than the actual cost of services in exchange for other benefits, like preferred provider designation.

Howell v. Hamilton Meats & Provisions, Inc.

In Howell, plaintiff Rebecca Howell was injured when an employee of Hamilton Meats & Provisions, Inc. (hereinafter Hamilton), hit her while making an illegal U-turn in a company truck. She received treatment at two separate facilities for her injuries: Scripps Memorial Hospital Encinitas and CORE Orthopedic Medical Center. Howell then brought suit to recover for her injuries in the Superior Court of San Diego County. At trial, the jury awarded Howell $189,978.63 for her past injury-related medical expenses.

Hamilton then filed a post-verdict motion to have the amount of medical expenses reduced to $59,691.73, the actual amount paid by Howell’s insurance carrier, PacifiCare PPO, for her medical care. Under agreements with PacifiCare, the hospitals had agreed to write off a total of $130,286.90 of Howell’s medical bills. Hamilton argued that the jury had awarded Howell more than she had either incurred or expended on medical expenses. The trial court granted Hamilton’s motion and decreased the amount of the award. Howell then appealed the order to the Court of Appeal, Fourth Appellate District.

On appeal, the appellate court reversed the lower court’s order, ruling that the negotiated rate differential between a private insurance company and health care provider is a benefit within the meaning of the collateral source rule and as such, Howell was entitled to recover the full amount of expenses billed for her medical treatment.

The court rejected Hamilton’s arguments that Howell had not incurred any detriment for the amount of medical expenses that were waived by her health care providers. Instead, the court found that Howell had incurred a compensable detriment because she had signed written agreements with both hospitals, agreeing to be held financially responsible for any costs of treatment that were not paid by her health insurance provider. The fact that the hospitals agreed to waive more than $130,000 of the medical expenses and not hold Howell personally responsible for paying them was a benefit to Howell under her health insurance policy, and thus, fell within the protection of the collateral source rule.

The appellate court was careful to distinguish the Howell decision from Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, the leading case standing for the proposition that personal injury plaintiffs only have the right to recover the amount of medical expenses actually paid, rather than the full amount billed.

In Hanif, the court ruled that a plaintiff who was a Medi-Cal beneficiary was only entitled to recover the amount actually paid by the government-run insurance program for his medical expenses. In Howell, the court differentiated its decision from Hanif on two grounds: first, Howell had private insurance that indemnified her for her medical expenses and second, she had incurred personal financial liability for her medical expenses. Conversely, in Hanif, the government was billed directly for the plaintiff’s medical expenses and the plaintiff did not incur personal financial liability for any portion of his medical expenses. Thus, the court ruled that Hanif was not controlling in this case.


Even though the decision in Howell is an important victory for personal injury plaintiffs, it is unlikely that the fight over the appropriate amount of medical expenses that may be awarded in personal injury litigation is over yet. Insurance companies and defendants will continue to fight the plaintiffs’ bar on this issue as they have been doing for the last twenty years.