• UPDATED: Consumers win one; Rule is arcane but important Monday, November 23, 2009

    By Steve Ingram

    In a case with far-reaching implications for California consumers, a state appellate court ruled today that an insurance company must take full responsibility for health care costs related to a car accident.

    UPDATE: Here’s the San Francisco Chronicle’s report on the issue.

    Justice Gilbert Nares, writing for an unanimous California court of appeal in San Diego, ruled that Hamilton Meats & Provisions cannot avoid its full responsibility and must reimburse Rebecca Howell for medical costs she incurred stemming from a traffic accident involving a Hamilton Meat employee’s bad driving.

    Howell was seriously injured when a Hamilton Meats trucker made an illegal u-turn and struck her car. Her medical bills nearly hit $190,000.

    Like every medical patient, whether insured or not, Howell was legally  responsible for the full cost of her medical care.

    Howell also paid for private health care insurance with PacificCare, which had agreed to indemnify her for medical charges covered by her health plan.

    She underwent two spinal surgeries and other medical procedures.

    The actual cost of Howell’s care was $189, 978. Under the terms of contracts they had negotiated with PacificCare, the two hospitals providing medical care to Howell agreed to accept payment of $59,691 in cash, and $130,287 in contractual allowances.

    A jury in the trial court awarded Ms. Howell the full $189,978, plus other damages for future pain and suffering.

    Hamilton Meats asked the trial judge to reduce the amount of money it owed from $189,978 to $59,691.

    Hamilton Meats argued that it did not owe Howell the entire $189,978 because Howell’s health insurance company had negotiated a lower price.

    In other words, Hamilton Meats did not want its responsibility to Howell to include all of the benefits of her health insurance. Instead, the company wanted to receive the benefits of the contract rates that Howell’s health insurer had negotiated, without having paid premiums to PacificCare, and without having to bear any of PacificCare’s costs of negotiating and servincing contracts with the hospitals.

    Superior Court Judge Adrienne A. Orfield of San Diego agreed with Hamilton Meats, and reduced Howell’s award.

    In the appeal, Howell’s attorneys argued the trial court’s ruling violated an important rule of California law, the “collateral source rule.”

    The rule states that:

    If an injured person receives compensation for injuries from an independent source (such as an insurance company) other than the person who actually injured her, then that money should not be deducted from the damages the person would otherwise collect from the defendant.

    The appellate court made the point that Howell should not be penalized for having planned ahead and bought insurance.

    Howell has invested years of insurance premiums to ensure medical care and should receive the full benefit of that thrift.

    The Court of Appeal summed up its ruling by stating that rulings in recent medical care cases in California have “divorced the collateral source rule from the complicated area of medical insurance…and this line of cases simply goes too far.”

    “It is a huge issue,” said consumer attorney John Rice of San Diego who argued the case before the San Diego-based appellate court, along with consumer attorney Scott Sumner of Walnut Creek. Rice estimated that the insurance industry practices costs injured consumers “hundreds of millions of dollars.”

    “Consumers absolutely ought to benefit from their own investments, and not havetheir thrift and foresight benefit the very people and companies that injure them and take them away from their jobs and families,” Sumner added. “In this decision, the court made it clear that tort law is not separate from contract law or from the laws enacted by our Legislature in the early and mid-1980s to encourage health insurance companies, hospitals, and other medical providers to negotiate and enter into contracts for services,”

    Howell v. Hamilton Meats & Provisions, INC., Court of Appeal, 4th Dist. Div 1 (B053620)

    (Ingram is an attorney who specializes on appellate issues for Consumer Attorneys of California.)

  • An explanation of the collateral source rule
  • Stay tuned: Consumers won big Monday. Can they win two in a row?
  • CA Supreme Court comes down in favor of big insurance, against consumers
  • Updated: Round 2: Plaintiff wins in collateral source case
  • More from Scott Sumner on the Yanez decision and the collateral source rule

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Category: Appellate Reports;