California Victory for Insurance Companies Hurts Personal Injury Victims

policyThe California Supreme Court recently dealt a big blow to California consumers and personal injury victims. This follows a trend of decisions which favor large corporations and insurance companies over the rights and needs of the individual. It seems whether its in politics or in the court, the common man and woman are not faring very well in modern times.

The case is Howell v Hamilton Meats & Provisions. It involves a personal injury claim which arose out of a collision between a truck and another driver. The truck, being driven by an employee of Hamilton Meats & Provisions made an illegal U-turn causing the traffic accident. The driver of the other car, Rebecca Howell, suffered serious neck injuries which required spinal fusion surgery.

Ms. Howell protected herself by purchasing health insurance. She incurred medical bills in the amount of $190,000.00. Her insurance company had an agreement with the hospital and other health care providers so that they only had to pay $60,000.00 to pay the bills in full.

Under California law, and the common law throughout the United States, when someone is injured as a result of the negligence of others they are entitled to recover as damages the reasonable amount of their medical bills, in addition to other damages such as pain and suffering, lost earnings, loss of earning capacity etc.

The question in this case was what is the reasonable value of the bills. Is the reasonable value the amount billed by the health care provider or is it the amount the insurance company actually paid to extinguish the bill? The California Supreme Court ruled that the injured party may only recover the amount that her insurance company paid, i.e. $60,000.00, not the amount that was billed by the hospital and doctors, $190.000.00. Thus, Ms. Howell’s damages were reduced by $130,000.00.

The ruling does not reflect the economic reality of why these bills are reduced. And, therefore, the ruling does not permit the injured person to recover the full value of their medical bills. What the court addresses in its decision, but fails to fully appreciate, is that the hospitals and doctors are not reducing their bills out of the goodness of their hearts. The bills are reduced because these healthcare providers are receiving other benefits, such as increased business from the insurers, reduced costs in the form of stream lined processing of claims, and other cost saving measures. Therefore, the reasonable value of the medical bill incurred is closer to the full billed amount than the reduced amount that the insurer actually pays.

Additionally, the court fails to address the everyday reality of how trucking accident claims, such as this, are settled. Invariably, the health insurer who paid the medical bills has a lien against any third party claim, such as auto accidents, slip and falls, or any general negligence claim where someone has filed a personal injury lawsuit or claim. This means that the health insurer has a legal right to be fully reimbursed from the personal injury claim for the amount it has paid out. So in Ms. Howell’s case, she will receive nothing for her medical bills–the full $60,000.00 will most likely go to her health insurer. The difference between the amount billed, and the amount received, $130,000.00 will go to the benefit of the person who made an illegal u-turn and caused her a serious disc injury resulting in spinal fusion. Where is the justice in that?

As an Alameda personal injury attorney, I have observed that for many years, starting in the 1950’s through the 1970’s California courts were stalwarts of protecting the rights of the injured. They were leaders in developing the law in products liability and insurance bad faith law among other areas. More recently, the California Supreme Court cases have swung in the opposite direction. More and more, the decisions favor large corporations, insurance companies and the powerful. The Howell case is just one more in a line of such cases. One can only hope the the California legislature will correct this injustice.


CA Supreme Court tort case ruling helps insurer, San Francisco Chronicle, August 19, 2011

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