Damages: Lien In: How One CA Appellate Decision May Change The Damages Game In Personal Injury Cases


Damages are the crux of every personal injury case. Although at first blush, damages appear to be a relatively simple concept – an injured plaintiff recovers an award (i.e., money) as compensation for loss or injury. However, the legal principles governing how that award is determined has devolved into an epic game of sorts between the defense and plaintiff bars. With a recent decision by a California appellate court in Dave Pebley v. Santa Clara Organics, LLC (May 8, 2018, B277893) (Pebley), it appears that the plaintiff’s bar now has the ball.

The Pebley decision holds that an insured plaintiff who chose to treat with medical providers outside his/her insurance plan “shall be considered uninsured, as opposed to insured, for the purpose of determining economic damages.” What this means is that for those plaintiffs who seek medical treatment through liens instead of health insurance will no longer be precluded from introducing those liens as evidence of medical damages.

Before 1988, the collateral source rule allowed a plaintiff to recover the full amount charged by a provider regardless of whether the plaintiff had insurance. Point – plaintiffs’ bar. Then came the Court of Appeal’s decision in Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, which limited a plaintiff’s recovery of medical bills to the amount actually expended or incurred, including pre-negotiated rates. Point – defense bar. The Hanif decision began to chip away a plaintiff’s ability to recover past medical damages under the collateral source rule. In 2011, the California Supreme Court decided Howell v. Hamilton Meats (2011) 52 Cal.4th 541, and affirmatively established that a plaintiff may not recover more than the amount accepted as full payment by the provider and that “[t]o be recoverable, a medical expense must be both incurred and reasonable.” The Supreme Court further held that evidence of the full billed amount is therefore not relevant on the issue of past medical expenses where the provider accepted a lesser amount by prior agreement. Point – defense bar.

Following Howell, a number of decisions followed suit, further clarifying a plaintiff’s ability to recover medical damages:

- Correnbaum v. Lampkin (2013) 215 Cal.App.4th 1308: evidence of full amount billed for past medical services could not support past/future medical or noneconomic damages. Point – defense bar.

- Ochoa v. Dorado (2014) 228 Cal.App.4th 120: evidence of full amount billed for past medical services that were unpaid is not relevant in determining the reasonable value of services provided. Point – defense bar.

- Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311: evidence of full amount billed are relevant to the amount incurred for uninsured plaintiffs. Point – plaintiffs’ bar.

Pebley involved the personal injury claims by a plaintiff who was injured when his disabled motorhome was rear-ended by a tractor-trailer. The husband initially sought treatment through his health insurance carrier, Kaiser Permanente. After filing the lawsuit, the plaintiff switched providers and began treating with providers not affiliated with Kaiser Permanente. The plaintiff subsequently underwent a 3-level cervical fusion surgery with Drs. Gerald Alexander and Carl Lauryssen.

A number of motions in limine were filed by both sides including:

- Exclude evidence that despite being insured through Kaiser Permanente, the plaintiff chose not to seek medical treatment through Kaiser Permanente. Granted.

- Exclude evidence that the plaintiff obtained most of his medical treatment on a lien basis. Granted.

- Exclude evidence of the amounts an insurance company may pay, or what a medical provider may accept, for medical services, both past and future. Granted.

- Preclude defense expert, Dr. Henry Miller, from challenging the plaintiff’s evidence regarding the reasonable value of medical services. Following an evidentiary hearing, the trial court ruled that Dr. Miller could only opine about the facility/hospital fees but not the professional physician fees.

- Exclude evidence of unpaid bills. Denied.

Based on the foregoing limitations, trial proceeded, with Drs. Gerald Alexander and Carl Lauryssen testifying that the surgery was necessary to treat the injuries the plaintiff sustained as a result of the subject accident. Both doctors also testified that the amounts they billed for the treatment they rendered to the plaintiff was reasonable and customary costs in the community and that they do not routinely discount them. Plaintiff also testified that he is personally liable for all of the costs of the surgery and his related treatment. The jury unanimously found that the defendants were wholly negligent and awarded the plaintiff damages including past medical expenses of $269,000 (the full amount requested by the plaintiff), future medical expenses of $375,000.

On appeal, one of the main arguments put forward by the defense was that the plaintiff had a duty to mitigate his damages and that he failed to do so by not going through insurance but rather on a lien basis. This argument did not sway the Court of Appeal who noted that there are several reasons why a plaintiff may choose to treat outside his or her insurance plan.

The Court of Appeal noted that without any authority as to why an injured plaintiff’s tort recovery should be limited to what his or her insurance would have paid on his/her behalf, such a plaintiff should “be considered uninsured (or non-insured) for purposes of proving the amount of his damages for past and future medical expenses.” The Court reasoned that therefore, it would be the plaintiff’s burden “to prove the ‘reasonable cost’ of past and future medical expenses. Point – plaintiffs’ bar.

With Pebley, the plaintiffs’ bar is now in control of the damages game. However, this may very well just be temporary setback as a petition for review will likely be filed by June 8, 2018.

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