Recently in Collateral Source Rule Category

Does the alleged defective design of car's seat allow application of " consumer expectation" test, engineer strict-liability, and non-apportionment of general damages among designers?

seat-424212-m.jpgIn Romine v. Johnson Controls, Inc. (filed 3/17/14) B239761, the chain collision caused by a speeding vehicle crashing into a line of vehicles stopped at an intersection resulted in the striking of plaintiff's vehicle, rendering her a quadriplegic. The force of the collision caused plaintiff's seatback to collapse and her head violently struck the vehicles back seat. Parties sued by plaintiff included the manufacturer of the car seat and the engineering company which participated in the design of the Nissan Frontier vehicle's driver's seat. Other defendant-parties settled before trial. Plaintiff tried the case on the theory of strict product liability alone. The jury found these remaining defendants 20% responsible, with total verdict of $24.745 million; the trial court entered judgment against them in the sum of $4.607 million.

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On appeal, the instant defendants contended (1) the trial court erred in permitting plaintiff to try the case under the consumer expectations design defect test;(2) the component parts doctrine precluded a strict liability finding; (3) the provider of engineering services could not be held strictly liable; (4) apportionment of fault should have been allowed among other manufacturers; and (5) the full billings of past medical care were erroneously admitted. The Court of Appeal, Second Appellate District, Division Five, while disagreeing with contentions (1), (2) and (5), reversed and remanded the matter for a partial retrial because the engineering company could not be strictly liable for its services, and the seat manufacturer was entitled to an apportionment of fault with the others within the stream of manufacture, as well with other defendants found by the jury to be a substantial cause of plaintiff's injuries.

First, the appellate court found the consumer expectation test was properly put before the jury. Defendant argued that the jury should have only been allowed to consider the risk/benefit test. Under the consumer expectation test, the objective condition of the product (the seat) is evaluated by the jury to see if its design meets a consumer's ordinary expectation of safety under the circumstances, regardless of the merits of the design. Such a test should not be used by a jury where the theory of defect seeks to examine "obscure components under complex circumstances." (McCabe v. American Honda Motor Co. (2002) 100 Cal.App.4th 1111, 1122.) The Court of Appeal found this not to be a matter of a component part at all, the seat itself being a product; furthermore this was not matter so complex as to render the jury incapable of assessing. Consumers have expectations about whether a vehicle's driver seat will collapse in a rear-end collision.

Next, the court ruled that because the engineering company did not "manufacture, sell, or otherwise place the car seat into commerce", it could not be held strictly liable. It could be liable for negligence, which was a cause of action in plaintiff's complaint; but plaintiff chose only to try the case on the strict liability theory.

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Is the full amount billed for medical care admissible at personal injury trial to prove past medical, future medical or general damages?

medical_doctor.jpgThe recent appellate opinion in Corenbaum v. Lampkin (filed 4/30/13) 2013 DJDAR 5591 answers "no" on all counts. The California Court of Appeal, Second Appellate District, Division Three, determined that only the actual amount paid for past medical care (here, as is typical, the discount rate paid by the medical insurer) is relevant and admissible. The court acknowledges that in ruling this full-billing evidence inadmissible for all of these purposes, it plows new ground, beyond the holding of the California Supreme Court in Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal. 4th 541. There, the state high court took the minority view among U.S. jurisdictions in holding that an injured plaintiff may not recover as past economic damages more than the amount paid by medical insurance--the full amount of medical billing was not recoverable as past medical expense damages; the court "expressed no opinion as to its relevance or admissibility on other issues, such as noneconomic damages or future medical expenses."( Id., at p. 567.) Allow me to discuss briefly the underpinnings from Howell, how the Corenbaum court navigated its conclusion, and what might lie ahead.

In Howell, the Supreme Court had before it the following: the trial court had admitted evidence of the full medical billings, but granted the defense motion to reduce the medical damage award to reflect the amount actually accepted by medical providers as full payment (per Hanif v. Housing Authority (1988) 200 Cal.App.3d 625); the Court of Appeal reversed, holding the reduction violated the collateral source rule. The Supreme Court held: [W]e 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 injuries and therefore does not come within the rule." (Howell, at p. 566.) Thus the trial court in Howell had properly reduced the past medical award post-verdict.

The Corenbaum court recognized the Howell court did not hold that full amount billed was inadmissible to prove past medical expenses, let alone that it was not at all relevant to prove future medicals and/or pain and suffering. It however theorized that because plaintiff can recover as past special damages no more than the amount incurred for past medical services, the value of those services exceeding what was paid is irrelevant and inadmissible to prove the past specials. As to future medical expenses, it reasoned that the billing rate not paid would be an improper foundation for an expert to use to project future medical expenses. Finally, because pain and suffering is so difficult to assess, any attempt to use the otherwise irrelevant "full amount billed" to gauge pain and suffering would be improper.

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Gratuitously written off medical bills are recoverable as special damages under collateral source rule

November 25, 2011

As discussed in the August 23, 2011 blog, the California Supreme Court in Howell v. Hamilton Meats & Provisions, Inc. 92011) 52 Cal.4th 541, held that a plaintiff may not recover for reasonably incurred medical billings to the extent they are discounted under a plaintiff's private insurer's contract with the medical provider. In dicta, the court commented it recognized the gratuitous-services exception to the rule limiting recovery to plaintiff's economic loss; that the exception's policy is to provide an incentive to charitable aid. (Id. at p. 559.)

In Sanchez v. Strickland (filed November 4, 2011) 2011 DJDAR 16230, the Court of Appeal, Fifth Appellate District, was presented with the precise issue of recoverability of medical charges gratuitously written off by the medical provider. Plaintiff Hueso had $7,020 of his medical bills written off by Vibra Healthcare. Vibra had charged $113,989 for treatment, billed Medicare as primary payor from whom it received $66,704 in payment with a $40,265 contract allowance. The balance of $7,020 was billed to Medi-Cal, but denied payment because Vibra had no contract with Medi-Cal.

Relying upon the previously stated dicta from Howell, an appellate court case cited in Howell, Arambula v. Wells (1999) 72 Cal.App.4th 1006, and the Restatement of Second of Torts, the Sanchez court ruled that the amount written off gratuitously by the medical provider constitutes a benefit that may be recovered by the plaintiff under the collateral source rule.

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Collateral source rule in California: injured plaintiffs barred recovery of value of medical services in excess of bargained rate paid by insurance

Thumbnail image for gaveljanjpg.jpgThe California Supreme has filed its opinion after months of speculation in the legal community about the reach of the collateral source rule. In Howell v. Hamilton Meats (filed August 18, 2010), the court held an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more that the amounts paid by the plaintiff or his insured for the medical services. It concluded the negotiated rate differential (the difference between the medical provider's customary charges and the charge it agrees to receive as payment-in-full from plaintiff's insurance) is not a collateral benefit recoverable by plaintiff under the collateral source rule.

While, the 6-1 majority opinion written by Associate Justice Werdegar goes into 30-page detail to explain its ruling, the critical turning point is found in the following language: "[W]e do not alter the collateral source rule as articulated in Helfend [Helfend v. Southern California Rapid Transit (1970) 2 Cal.3d 1] 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 expenses of the plaintiff's injuries, it simply does not come within the rule." (Slip opinion at pp. 26-27.)

Presiding Justice Cantil-Sakauye voted with the six justice majority. Just one year ago, she authored the opinion of the Court of Appeal, Third Appellate District in King v. Willmett (one of three opinions granted review along with Howell) and wrote, "We see no basis in the record from which we could conclude plaintiff did not incur $169, 499.94 [of which $93, 213.62 was the negotiated rate differential not paid by medical insurance] in past medical expense." (Slip opinion at p. 25.) In holding exactly the opposite as the holding in the state high court ruling in Howell, the King court found persuasive the Helfend view 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 the victim's providence." (Id. at p.26)

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The Risky Business of Judges and Counsel, Both Trial and Appellate, Predicting How the Supreme Court Will Decide An Undecided Issue, Such as Award for Reasonable Value of Negotiated Medical Services

In my last posting, I discussed the recently published appellate court opinion in Cabrera. Part of the rationale of that opinion was that the court was following "current" California published case law. My question is how should judges and attorneys handle legal authority that may appear shaky based upon currently pending cases before higher authority? In the present situation, three previously published appellate opinions reaching the opposite result of Cabrera are under review by the California Supreme Court. For attorneys, it all depends which side you are on; you will want to shed the best possible light on the arguments that favor your client. Judges have a tougher call.

On the specific issue of jury awards for reasonable medical services rendered yet not actually paid due to a plaintiff's private insurance company's negotiated rate with the provider, defense counsel should not expect Cabrera to remain for very long as a citable opinion. I suspect it will have the shelf life of the "catch of the day." It will likely be promptly depublished by the Supreme Court as part of a review grant-and-hold order awaiting the Supreme Court's opinion in Howell. So until the Supreme Court rules, what will lower courts do? Based on everything I have read, the foundational case of Cabrera's "current law" rationale (Hanif) teeters on shaky ground. I draw a strong inference from the Supreme Court saying in Parnell that it had no opinion as to whether Hanif applies outside of the Medi-Cal context that it will find it does not. The Court need only summon the Supreme Court's authoritative language found in Helfend to say that Hanif is different from the collateral source principles that apply to private insurance, recognizing the important public policy of rewarding ones investment in medical insurance. The mere fact that Helfend is 41 years old does not make it bad law--it actually reads as a prescient statement of what has happened in medical cost financing during these many years since. I also suspect that a good predictor is Chief Justice Cantil-Sakauye's previous authorship of King the third case in the Howell trilogy, in which she concludes that Hanif (a case that came out of that same district) and two other cases that follow it, "do not provide governing authority for the question directly presented in this case."

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Appellate Panel Finds Collateral Source Rule Does Not Bar Reduction of Jury-Awarded Past Medical Expenses That Were Reasonable and Necessary but Negotiated Down by Plaintiff's Private Insurance

During 2010, the California Supreme Court granted review in the Court of Appeal cases of Howell v. Hamilton Meats (4th District), Yanez v. SOMA Environmental Engineering (1st District) and King v. Willmett (3rd District). In a nutshell, those three opinions can be summarized as saying that the award of an injured plaintiff's medical provider's full billing of reasonable and necessary charges was compelled because plaintiff's investment in medical insurance premiums is recompensed as a type of objectively verifiable economic damage under California Civil Code section 1431.2 (b) (1)--actual expense is only part of entitled damages; the fact that plaintiff 's insurance negotiated group rate paid to the provider is less does not provide a windfall to plaintiff whose prudence in procuring such insurance should not benefit the tortfeasor.

The 2nd District, Division 8, had the same issue before it in Cabrera v. E. Rojas Properties, Inc. (filed February 8, 2011; certified for publication on February 24, 2011) 2011 DJDAR 2961. There, after the jury had awarded plaintiff damages that included all of her reasonable and necessary medical billings (less 10% due to comparative fault regarding her fall down a staircase on property owned by defendant), the trial court granted defendants post-verdict motion to reduce the past medical damages to include only what was actually paid by her insurer.

The Cabrera court reasoned that under its view of current California law, as explained in Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 and followed by some other pre-2007 Court of Appeal opinions, an injured plaintiff is limited to medical expenses actually paid; to the extent the reasonable amount of those services is greater, there is no entitlement. The court recognized that Hanif concerned medical care paid by Medi-Cal, not private insurance, but other cases relying on Hanif, in the court's view, have "extended" Hanif to private insurers. The court dutifully recites from the venerable, seminal case of Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, cited frequently in the "Howell trilogy," which endorses the policy of encouraging people to get insurance; the collateral source rule protects that objective in valuing ones investment in insurance and not allowing the tortfeasor to benefit from the victim's providence. Interestingly, when evaluating the plaintiff's argument that the Hanif reduction view should be rejected based on this articulated policy and because it "rejects decades of Supreme Court authority", the Cabrera court responds there is "no current Supreme Court authority that extends the collateral source rule to include the benefit of a negotiated contract between a medical provider and a medical insurer."

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