Damage Control

Damage Control

In today’s world of medicine, costs can be all over the board. The number on a bill given to a patient can vary dramatically from the amount paid by a patient’s insurance company. Things can get even trickier if a patient enters into an agreement with a medical provider to put a lien on any legal damages the patient may collect related to their medical treatment. Evolving payment options have kept the courts on their toes about the proper method of calculating damages in personal injury cases, and have kept parties to litigation guessing about what damages a personal injury plaintiff will be permitted to recover at trial.

There are three major types of tort damages in common legal usage: punitive, compensatory, and nominal. Medical damages are usually considered “compensatory,” meaning that they are awarded to a plaintiff in order to compensate for actual damage incurred or the “reasonable value” of the damage. This is different from punitive damages, which are awarded to punish or “send a message” to a defendant, or nominal damages, which are minimal money damages awarded to plaintiffs who have established a cause of action, but have not actually suffered significant injury.

In the 2011 case of Howell v. Hamilton Meats & Provisions Inc., 52 Cal. 4th 541 (2011), the California Court of Appeal decided that a plaintiff can only recover compensatory economic medical damages for the amount paid by the plaintiff’s health insurance company, and not the amount that was charged to the patient. In other words, a plaintiff’s recovery is limited to the amount actually paid to the medical provider by the insurance company, not the amount billed to the patient. By accepting an amount less than the amount billed to the patient, the Howell court determined the amount paid by the insurance company is the actual “reasonable value.” of the medical services.  In Howell, plaintiff’s medical bills were approximately $190,000, however, the court only allowed the jury to consider $60,000 in bills, which was the actual amount the plaintiff’s health insurance company paid after negotiating reductions.

Although the decision in Howell was a step toward predictability of medical damages, it did not address the complexities surrounding the growing use of medical liens. A medical lien is a lien issued by a medical provider who has provided treatment to the plaintiff, and seeks the full amount the provider bills to the patient. The provider places a lien on plaintiff’s lawsuit so that at the time of any recovery by plaintiff, the medical lien holder is paid directly out of the plaintiff’s recovery proceeds. Like other debts, a medical lien can be sold, often at a discount, to intermediaries known as factoring companies. By avoiding insurance companies altogether, plaintiffs can maneuver around Howell and seek the total amount billed to them, even when the actual amount paid to the medical provider is less.

Recently, in Dodd v. Cruz, 201 4 DJDAR 1 530 (Feb. 5, 2014), the California Court of Appeal decided that the sale of liens to factoring companies was discoverable information. Although the court did not go so far to decide that the sale of liens to factoring companies was necessarily “relevant” in litigation, it could be used to illustrate what the medical provider believed the “reasonable value” of the treatment provided to the plaintiff is.  While not a complete fix, Dodd provides a resource for defendants in personal injury lawsuits to better assess potential damages prior to trials.

By: Aerin C. Murphy

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