The Collateral Source Colloquy Continues

by: David Melton and F. William Jackson

Diverging with several recent appellate court cases, the California Court of Appeal for the Second Appellate District recently ruled that an injured plaintiff’s recovery of past medical expenses may be reduced to reflect the amount actually paid by his or her private medical insurer, instead of the amount billed by the medical provider. (Cabrera v. E. Rojas Properties, Inc., 2011 Cal.App.Lexis 203.) In Cabrera, the trial court reduced the damages for plaintiff’s past medical expenses to reflect the amount actually paid, instead of the amount billed by plaintiff’s medical providers, a difference of almost $50,000.00. The plaintiff appealed, claiming that such a reduction violated the collateral source rule. The Court of Appeal for the Second Appellate District affirmed the trial court’s ruling.

The collateral source rule allows an injured plaintiff to recover damages for past medical expenses from the tortfeasor even if he or she receives compensation for those expenses from a wholly independent source, such as insurance. The rule is based on the policy that a tortfeasor should not benefit from the victim’s prudence in acquiring insurance. The court in Cabrera ruled that the plaintiff was entitled to recover compensation from the defendant for the amount paid for her past medical expenses, even though those expenses were paid by her insurance company. However, she was only entitled to the amount actually paid, not the amount billed. The court relied heavily on Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, 641, which held that a plaintiff may not recover more than the actual amount paid for past medical care. WhileHanif dealt with medical expenses paid by Medi-Cal, the court in Cabrera applied the same rule to the private insurance context. Since there was no evidence that the plaintiff was liable for the amounts billed by her medical providers and the reductions were not based on compensation received by plaintiff from an independent source, the collateral source rule was not violated by the reduction of damages. The plaintiff still received the benefit of her insurance, because she was provided with medical services for which her insurance company paid. The plaintiff was also compensated for the detriment caused by the defendant’s conduct by recovering the amount paid for the medical bills incurred as a result of such conduct.

The issue of whether a plaintiff may recover as economic damages the full amount billed by her medical providers, even when the providers agree to accept a lower amount, remains in flux. The Court of Appeal for the First, Third, and Fourth Appellate Districts took the opposite approach as the Second Appellate District in Yanez v. Soma Environmental Engineering, Inc., King v. Willmet, and Howell v. Hamilton Meats & Provisions, Inc., respectively.   However, those cases have been granted review by the California Supreme Court and are not citable. Until Cabrera receives the same fate or the California Supreme Court finally decides the issue, Cabrera is still binding on lower courts.