New California Case Law Regarding Admissibility

of Medical Bills and Mitigation of Damages

By: Dawn Cushman, Esq.

It has been the law for over 100 years that a person injured as a result of the commission of a tort by another person is entitled “to recover the reasonable value of medical care and services reasonably required and attributable to the tort.” At the time of trial, however, it is often difficult to determine: How must the jury decide “the reasonable value” of the medical care provided to plaintiff, particularly when the jury must also decide both the amount of “economic damage” and the amount of “noneconomic” damage?

Is it the amount reflected on plaintiff’s medical bills? Is it the amount plaintiff paid, assuming plaintiff paid anything? Is it the amount the plaintiff’s healthcare insurance provider or Medicare paid? Is it the amount that doctors or experts say is a reasonable amount? Is it both? What is the amount of “reasonable” medical services?

In 2011, the Howell decision by the California Supreme Court answered several of these questions when it concluded that an injured plaintiff may recover as economic damages no more than the amounts actually paid by plaintiff or paid by anyone making payment on the plaintiff’s behalf.  Howell arrived at its decision by recognizing that an insured plaintiff often incurs only the amount of the bill as negotiated between the insurer and the healthcare provider, not the full, billed amount. Therefore, an insured plaintiff may not recover more than his or her actual loss, i.e., the amount incurred and paid by the insurer to settle the medical bills. Moreover, for that reason, the full amount billed by the healthcare providers is not admissible evidence of the reasonable value of plaintiff’s medical care, the reasonable value of future medical care or the reasonable value of noneconomic damages and, therefore, should be excluded from evidence presented to the jury.

Subsequent appellate court decisions continued to exclude evidence of an insured plaintiff’s medical bills as evidence of the reasonable value of the medical care provided to the plaintiff. But in the case of an uninsured-plaintiff’s medical bills, at least one decision concluded that medical bills continue to be relevant and admissible as evidence presented to the jury to prove both the amount incurred by plaintiff and the reasonable value of medical services so long as the uninsured plaintiff also presents expert testimony that the billed amounts were reasonable and necessary.

On May 8, 2018, though, a decision by the Second District Court of Appeal, Division 6, concluded that Howell would not be applied despite the existence of insurance for plaintiff’s medical care.  (Pebley v. Santa Clara Organics, LLC (2018) – Cal.App.5th – , 2018 WL 2112307, at *1.) In situations where an insured plaintiff chooses to treat with healthcare providers “outside” of his or her insurance plan, plaintiff will be considered as “uninsured” and the medical bills are admissible as evidence for the jury to determine the “cost” of medical care.

In Pebley, plaintiff was in an automobile accident, had health insurance, but sought treatment from healthcare providers outside of his health plan. At trial, and over defense objections, plaintiff offered his medical bills from the outside providers as evidence of the cost of his medical care. His experts also testified that the amounts were reasonable and customary. Testimony at the time of trial also showed that plaintiff was referred to these outside healthcare providers by his attorneys, whose sole purpose was to avoid the application of the Howell decision, to get around the exclusion of the medical bills as evidence, and to present to the jury evidence of medical treatment that was almost double what plaintiff would have been charged for the same services if he had treated within his insurance plan. In the face of this testimony, the jury nonetheless awarded the full amount of the medical bills sought by plaintiff.

The Pebley Court concluded that evidence of the medical bills was proper because a plaintiff who elects to treats under a “lien” system, outside of his insurance plan, will be considered as “uninsured” for purposes of the application of the Howell decision. The Pebley Court rejected the argument that plaintiff failed to mitigate his damages by treating with the lien healthcare providers, stating: “A tortfeasor cannot force a plaintiff to use his or her insurance to obtain medical treatment for injuries caused by the tortfeasor. That choice belongs to the plaintiff.”

This decision will now present a hurdle for the defense. An appellate court has effectively undermined the Howell decision by allowing plaintiffs’ attorneys and their clients to manipulate the system through the use of medical liens. Plaintiffs’ attorneys can refer their insured clients to their chosen medical providers, who can bill exorbitant amounts for medical care on a “lien” recovery basis and then testify that their charges were reasonable. Once the jury awards the amount of the “outside” medical liens, plaintiffs’ attorneys obtain higher contingency fees, the medical liens are reduced by the plaintiffs’ attorneys, and the insured plaintiffs may receive a windfall in damages that would not ordinarily be allowed under Howell.

In ruling on the Pebley case, the court declined to follow an earlier ruling in a case called Ochoa v. Dorado, which came to the opposite conclusion regarding plaintiffs who treat on a lien basis.  The Pebley ruling has now, therefore, created a split in authority. As such, trial judges are not bound by either Ochoa or Pebley, and instead, must choose to follow the holding the judge believes is better reasoned. As a practical matter, however, trial courts usually adhere to the decisions from their own districts.

Because this decision seems to ignore the admitted existence of insurance to cover the injury and to ignore long-standing rules requiring mitigation of damages, it is likely to be subjected to further appellate review by requests for de-publication or for review by the California Supreme Court. In the meantime, it is valid law. While Pebley remains the law, Bradley & Gmelich LLP will continue to take appropriate action to defend against plaintiff’s efforts to obtain a windfall through lien based medical treatment. We will continue to depose plaintiffs and plaintiffs’ treating physicians; to learn about and to question the lien process involved, if any; to depose relevant experts regarding the true market value of medical care; and, to argue at the time of trial that plaintiffs’ medical bills are inadmissible under Howell and that plaintiffs have a duty to mitigate damages.

Dawn Cushman, Esq. graduated from San Diego State University with a degree in Liberal Arts and Western School of Law, San Diego where she earned her Juris Doctorate. Ms. Cushman has been an attorney in California for almost 40 years and is a Certified Specialist in Appellate Law. She has submitted over 80 appellate briefs in both state and federal appellate courts, resulting in over 10 published appellate court decisions, and involving subjects including construction defect litigation, wrongful termination, discrimination, causation and comparative fault in tort litigation, medical staff privileges, elder abuse litigation, proper expert discovery, elimination of punitive damages claims, and insurance bad faith litigation.

Ms. Cushman is a past presenter at several conferences including the Southern California Association for Healthcare Risk Management, Mandatory Continuing Legal Education as well as multiple client training presentations. She has been honored with the Journal Author Excellence Award, Journal of Healthcare Risk Management and the Phillip C. Jessup International Law Moot Court Competition, National 2nd Best Brief. 

Ms. Cushman’s practice focuses on a variety of specialties including Appellate law, insurance defense, employment law, construction defect litigation and dependent adult and elder abuse as well as public entity defense. She has been admitted to practice before all California State Courts and the United States District Courts (Northern, Central, Eastern and Southern) and United States Supreme Court.

Congratulations to Kathryn (Kamil) Canale, Esq. and Mark I. Melo, Esq. on obtaining summary judgment in a tragic case involving four separate vehicle collisions. On the night of January 26, 2015, a 22-year-old woman was driving her Honda Civic on State Route 2 when she lost control of her vehicle, slamming into the center divider and ending up back in traffic lanes.  

At approximately 3:00 a.m., our client was driving a box truck to work when, without warning, he discovered the wrecked Honda sitting motionless, and with no lights on, in the No. 2 and No. 3 lanes of the freeway. Our client managed to avoid crashing into the Honda, with the rear of his truck only clipping the wreckage. Within minutes, however, the Honda was involved in two additional accidents of greater force. 

The critical issue was determining which accident(s) caused or contributed to the Honda driver’s death. Based on the findings of both an accident reconstructionist and a certified medical examiner, we filed for summary judgment, presenting evidence that the Honda’s collision with the center divider was sufficient to cause the Honda driver’s fatal injuries, and that the minimal contact with our client’s truck was incapable of causing or contributing to any of the driver’s injuries. In opposing our motion, Plaintiffs relied upon the opinions of a chiropractor/accident reconstructionist, but we convinced the Court that Plaintiffs’ expert could provide no evidence that the Honda driver had survived the initial impact with the center divider.

Despite the unfortunate outcome of these accidents, the Court rendered the correct decision and ruled that our client did not cause or contribute to the death of the Honda’s driver.  Kamil and Mark’s award of summary judgment saved our client the sizable costs of undergoing a lengthy trial in a technically-complex and sympathetic case.  Congratulations to Kamil and Mark on an important win!

Bradley & Gmelich LLP Partners and Attorneys treated the staff to a week of treats and surprises in recognition of Administrative Professionals Day. To start the week off right, attorneys presented their culinary skills by preparing a delicious luncheon for staff to enjoy. Thank you to our extraordinary B&G staff for your hard work and dedication to our firm. Our success would not be possible without you!

A warm and heartfelt congratulations to records Supervisor, Kristina Nazarian and Mike Calzada on the birth of their son. Elias Mack Calzada was born May 2, 2018. Congratulations Kristina and Mike!