Our California Offices
maze image
Solving legal
problems for
our clients
since 1950


– By Sharon L. Hightower

In August of 2009, this writer posted an article on the challenges that were being made to the Hanif deduction. Since that time, plaintiff and defense attorneys alike in California have been riding a roller coaster of uncertainty on the subject. This article is intended to provide you with an overview of the current status of the caselaw on the issue.

Simply put, the issue is whether a plaintiff is entitled to recover compensation for the full amount of medical specials billed to him or her for care and treatment arising from negligent or criminal conduct or only that amount that was paid in full satisfaction of the bills. Closely aligned with that is the issue of the application of the collateral source rule, either during a trial before a trier of fact or after a trial by post trial motion.

In the previous article, I discussed the original Hanif case (Hanif v. Housing Authority of Yolo County (1988) 200 Cal.App.3d 635, 640) as well as several key decisions related to this case (Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298, 306; Greer v. Buzgheia (2006)141 Cal.App.4th 1150, 1154); Katiuzhinsky, et al. v. Perry (2007) 152 Cal.App.4th 1288; Olsen v. Reid (2008) 164 Cal.App.4th 299).

In November of 2009, shortly after my initial article, the Fourth Appellate District of the Court of Appeal of California issued an opinion in the matter of Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686. The court reversed the trial court's granting of defendant's post trial motion to reduce the jury's special verdict award for plaintiff's past injury related medical expenses from the full amount of the medical bills to the amount that the providers accepted as payment in full from the plaintiff's private health insurance company, a difference of $130,286. The Court of Appeal reversed the order with directions for the court to reinstate the award of economic damages and to enter judgment accordingly. The decision set forth that the order reducing the award for injury related medical expenses violated the collateral source rule and that in a case in which the plaintiff has private health care insurance that the negotiated rate differential was a benefit within the meaning of the rule. Put more simply, it was a benefit for the plaintiff's thrift and foresight in procuring private health insurance. The court concluded that the post trial motion used by the trial court was unauthorized. An appeal of the decision is pending before the California Supreme Court.

As the appeal process proceeded, it was joined by the matter of Yanez v. Soma Environmental Engineering, Inc. (2010), decided by the First Appellate District. In that case, a jury found for the plaintiff after trial of an automobile accident and awarded her $150,000 in damages, including $44,519.01 in past medical expenses. After judgment was entered, defendant moved to reduce the past medical expenses to $18,368.24, the amount accepted by plaintiff's medical providers as payment in full under their contracts with her private health insurers. The evidence submitted included the medical billings and actual payments with testimony by the providers that plaintiff did not owe the amounts that had been written. The trial court granted the motion and entered an amended judgment reducing the damage award by $21,355.66. After review of the history of caselaw in California as well as other States, the court concluded that the amounts written off by the Plaintiff's health care providers constituted collateral benefits of her private health insurance and that whether the full amounts billed by the health care providers reflected the reasonable value of their services was a separate issue for the jury, and not the court, to decide. Of note was the analysis of one justice who reluctantly concurred, but opined that the admission of the evidentiary aspect of the collateral source rule is left to the sound discretion of the trial court. In his view, a properly instructed jury should be able to consider evidence of amounts paid to health care providers on the issue of the reasonable value of health care services. He concluded that it is time to trust juries to heed limiting instructions, to let them hear all of the relevant evidence on the reasonable value of medical services, and to have solidly grounded verdicts returned by fully informed and deliberative jurors.

Finally, the appeal process has been joined by the case of King v. Willmett, decided by the Third Appellate District in August of 2010. This court reversed the trial court's granting of a post trial motion which reduced the past medical specials arising from a rear end accident from $169,499.94 to $76,286.32, the amount actually paid by his private insurance carrier to the health care providers, for an amended judgment of $221,286.32. The decision cited the public policy conclusions expressed by the California Supreme Court and the Legislature's enactment of specific statutes governing the operation of the collateral source rule in limited kinds of cases as the reasons for their opinion. The dissent concluded, however, that the difference in awarding the medical specials billed as opposed to what was accepted as payment in full could only be characterized as "phantom damages" given substance by an overbroad application of the collateral source rule.

It is anticipated that the California Supreme Court will issue their decision on the issues in the late Spring of 2011. Amicus briefs have been submitted by all of the interested parties and litigators throughout the State are awaiting the outcome. Until then, the cases of Hanif, Nishihama, Greer and those that followed remain the law as does the fundamental principle that tort damages are intended to compensate for actual loss or harm, nothing more.