Last August, the California Supreme Court issued one of those once-in-a-generation opinions that cut a wide swath across many areas of tort law. A 6-1 opinion, Howell v. Hamilton Meats held that personal injury plaintiffs are limited to recovering, as medical special damages, the amount plaintiff’s private health insurer actually paid plaintiff’s medical provider in full satisfaction of the bill for services rendered to treat the personal injury. Plaintiffs cannot recover the face amount that their providers billed if their private health insurers paid less in full satisfaction, e.g., where the health insurer and hospital have a prenegotiated contractual agreement on how much the hospital will accept. Typically, the prenegotiated “discount” – though not really a “discount” at all – is much less than the face amount of the bill.
Though the phrase “landmark decision” is often over-used, Howell is one of those rare opinions that truly deserves the label. It applies to virtually every type of lawsuit in which the plaintiff who claims personal injury had private health insurance which picked up the tab for plaintiff’s medical services. In other words, Howell governs not merely in the traditional auto accident scenario, but any case in which plaintiff seeks to recover for medical services attributable to the injury defendant caused. Howell limits recovery to the “reasonable value” of the service, capped by the amount the provider accepted as payment in full. Some have estimated that Howell represents a net savings to defendants and their liability insurers of as much as $3 billion per year. Full disclosure: Sedgwick’s appellate department filed one of the amici curiae briefs on which the Supreme Court relied in its Howell decision.
The ink on Howell was hardly dry before a bill was introduced in the California Legislature to overrule it. SB 1528 was sponsored by Senate President Pro Tem Darrell Steinberg for the Consumer Attorneys of California (aka the plaintiffs’ bar.) As introduced in February, the two-paragraph bill declared that injured plaintiffs "shall be entitled to recover the reasonable value of medical services provided without regard to the amount actually paid." [pdf] In other words, the original version was aimed squarely at legislatively-overruling Howell.
But just a few days ago, the measure took an interesting detour. Proponents deleted all of the language that would have overturned Howell, leaving only a shell that says: “it is intent of the Legislature to establish a framework for compensating persons with injuries due to the fault of third parties.” [pdf] This, in essence, reduces the measure to a “spot bill” – one that contains no substantive provisions, a placeholder declaring the drafters’ “intent” to establish a compensation “framework” in the future. As Dan Walters, blogging for the Sacramento Bee, describes it: the remaining language is “essentially a blank slate that can move through the process and then be filled in later, perhaps in the crush of the legislative session’s final days, with or without a compromise between the warring factions.”
According to California’s official legislative website, a hearing is set for May 8, 2012.
Stay tuned to Appellate Strategist for further reports.