Thursday, December 17, 2009

R.I.P. Hanif?- The Issue of Recoverable Damages in Tort Cases

Most any lawyer who has litigated personal injury cases (either through trial or at least through settlement) over the last 20 years has dealt with the so-called "Hanif" issues. [referring to Hanif v. Housing Authority (1988) 200 Cal. App. 3rd 635, 246 Cal. Rptr. 192] The “Hanif” rule essentially provides that when the injured plaintiff is treated for his/her injuries, but the cost of the medical care is covered by either private insurance or some other source, and the bills are reduced by the carrier to some much lesser amount, only the amount actually paid is the proper measure of damages. However, two recent cases out of the 4th District Court of Appeal, Olsen v. Reid (2008) 164 Cal.App.4th 200, 79 Cal.Rptr.3d 255 (Olsen ) and Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686, 101 Cal.Rptr.3d 805 (decided November 23, 2009), may seriously call that rule into question.

The long held belief/position that was always advanced by the defense in personal injury cases is this: that pursuant to Hanif, supra, and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298, 112 Cal.Rptr.2d 861, Plaintiffs may only recover what was actually paid by insurance, and the full value bills are both irrelevant and inadmissible. Thus, regardless of what a doctor or hospital charges or bills for their services, if the injured plaintiff is covered by applicable health insurance, and the doctor or hospital reduces those charges because of a contractual relationship with the carrier (or otherwise “writes off” any amount not paid by insurance), the only amount "recoverable" by an injured plaintiff is the amount that the health insurer actually pays. The facts of Hanif provide a good illustration of that process.

Hanif involved a personal injury action brought on behalf of a minor (a Medi-Cal beneficiary), who was struck by an automobile. The trial court awarded $31,618 in special damages to the minor, which the jury found to be the reasonable value of the past medical services he received, even though that award exceeded the amount Medi-Cal actually paid for those services. [Hanif, supra, 200 Cal.App.3d at pp. 639, 643-644, 246 Cal.Rptr. 192] The defendant appealed, arguing the trial court should have limited the minor’s recovery for past medical services to the amount Medi-Cal "actually paid" ($19,317). [Id.] The Court of Appeal held that “when evidence shows a sum certain to have been paid or incurred for past medical care and services, whether by the plaintiff or by an independent source, that sum certain is the most that the plaintiff may recover for that care…" [Hanif, supra, 200 Cal.App.3d at p. 641, 246 Cal.Rptr. 192] Thus, it concluded, “a plaintiff is entitled to recover up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable.” [Id. at p. 643, 246 Cal.Rptr. 192] Applying this measure of damages, the plaintiff was not entitled to the full amount of the bills (over $31,000), but rather was only entitled to recovered what Medi-Care paid for those services ($19,317). [Id.] The apparent prevailing rationale was that tort law has a “bar against double recovery” [Hanif, supra, 200 Cal.App.3d 635, 643, 246 Cal.Rptr. 192, 197] and that an injured plaintiff should got get a “windfall” because insurance paid parts of his/her medical bills.

Similar results were reached in Nishihama, supra. There, the Court found that the hospital which provided the medical care had no right to “balance bill” the plaintiff for amounts above and beyond those amounts paid by the health insurer (Blue Cross) under California’s Hospital Lien Act (HLA) [Civil Code §§ 3045.1-3045.6]. Further, since the plaintiff faced no reimbursement liability to repay the hospital, it felt that allowing plaintiff to recover the “full meds” would amount to the type of “double recovery” that Hanif rejected.

Thus, under the "Hanif Rule", the cases held that when a plaintiff has medical insurance, damages are limited to the amount actually paid or incurred, not any greater amount a medical provider billed, even if that greater amount was actually reasonable. It followed that the Hanif and Nishihama lines of cases was used successfully for years to try to limit the evidence as to the amount of plaintiffs’ medical specials that would be admitted and presented to the jury.

That changed slightly with the more recent holdings of in Greer v. Buzgheia (2006) 141 Cal.App.4th 1150, 46 Cal.Rptr.780, and Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288, 62 Cal.Rptr.3d 309 (both of which are 3rd District cases out of Sacramento).

In Greer, supra, the Court held that the actual medical expenses charged are allowed to be presented to the jury, subject to post trial reduction of the award or verdict based on the actual recoverable amounts. That position was also confirmed in Katiuzhinsky, supra, which also provided that the party seeking to reduce the award to correspond to the amounts of the medical bills actually paid, bears the burden of producing evidence regarding the reductions, and suggested that such should only be done by post-trial motion.

For most of the last 20 years, the plaintiffs’ bar has regularly argued that these types of reductions in plaintiffs’ verdicts violated the “collateral source rule” articulated in Helfend v. Southern California Rapid Transit Dist. (1970) 2 Cal.3d 1, 84 Cal.Rptr. 173, 465 P.2d 61 and, later, Lund v. San Joaquin Valley Railroad (2003) 31 Cal.4th 1, 9, 1 Cal.Rptr.3d 412, 71 P.3d 770 (Lund). In Helfand, the California Supreme Court explained the "collateral source rule" as follows: "[I]f an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor." [Helfend, supra, 2 Cal.3d at page 6, 84 Cal.Rptr. 173, 465 P.2d 61] The argument followed that plaintiffs should be permitted to recover the full amount of the reasonable "cost" or "value" of the past medical expenses paid or incurred as a result of her injuries regardless of what his/her private health care insurer paid to the medical providers; and that Courts should exclude evidence of the benefits the insurer "paid" to Plaintiff’s health care providers. That position has now found some friendly voices from two separate divisions of the 4th District in Howell and Olsen, with the more striking of the two cases being Howell.

Turning first to Olsen v. Reid (2008) 164 Cal.App.4th 200, 79 Cal.Rptr.3d 255 (Olsen ), there an injured pedestrian submitted records reflecting that she was billed nearly $62,500 for her care. The defense argued in motions in limine that the proper evidence of amount of the plaintiff’s specials was the amount actually paid by the plaintiff’s health insurer, an amount just over $8,000. The trial court denied the motion in limine and allowed the plaintiff to present the full medical bills( consistent with Greer and Katiuzhinsky). However, following the jury’s verdict in favor of the plaintiff, the trial court reduced the judgment by $57,000, the difference between what was billed by the providers versus what was actually paid by insurance (consistent with Hanif and Nishihama). Both sides appealed.
Division 3 of the 4th District Court of Appeal overturned the reduction in the verdict amount, concluding that the record was “far from clear as to what was paid, what, if anything, was ‘written off’, and to what extent [Plaintiff] remained liable for any further charges.” [Olsen, 164, Cal. App. 4th 200, 203, 79 Cal.Rptr. 3d 255, 257]. More importantly, Justice Moore (Acting PJ) wrote a concurring opinion that provided:
I write separately to sound the bell of alarm. By virtue of the Hanif/Nishihama procedure (Citations) permitting the posttrial reduction of medical expenses, the collateral source rule has been buried without dignity of any services or parting words. Without statutory authority or the Supreme Court’s blessing, the Hanif/Nishihama line of cases divorced the collateral source rule from the complicated area of medical insurance. Absent such approval, Hanif/Nishihama simply goes too far.” [Id.]

Apparently taking Justice Moore’s lead, the Court in Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686, 101 Cal.Rptr.3d 805, went one step further. Of particular note is Howell’s express rejection of the Nishihama decision. (“We disagree with this holding in Nishihama and the reasoning upon which it is based.” [Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686, 101 Cal.Rptr.3d 805, 818])

The Court in Howell, supra, also provided:

“… the issue of whether Nishihama was entitled to recover damages for past medical expenses based on her medical provider's (CPMC's) normal (i.e., usual and customary) rates or based on the negotiated rates CPMC agreed to accept from her private health care insurer (Blue Cross) as payment in full for the medical services CPMC rendered to her should have been resolved based on an analysis of Nishihama's rights under the collateral source rule… the fact that CPMC had no lien rights … was not pertinent to the issue of whether Nishihama was entitled under the collateral source rule to recover [full] economic damages based on CPMC's usual and customary rates. Resolution of that issue required an analysis under the collateral source rule of whether Nishihama, before she received medical care from CPMC, entered into a financial responsibility agreement with that medical provider, and thus whether she incurred pecuniary detriment or loss in the form of personal liability for the medical expenses she would later incur at CPMC's normal rates.[Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686, 101 Cal.Rptr.3d 805, 818]

The Court in Howell continued:

We agree with the observations of Associate Justice Eileen C. Moore in her concurring opinion in Olsen v. Reid (2008) 164 Cal.App.4th 200, 204, 79 Cal.Rptr.3d 255 (Olsen ) that, ‘[w]ithout statutory authority or the Supreme Court’s blessing, the Hanif/Nishihama line of cases divorced the collateral source rule from the complicated area of medical insurance,’ and, ‘[a]bsent such approval, Hanif/Nishihama simply goes too far.’ ” [Id.]

The Court in Howell was equally disapproving of the holding in Greer, supra, as evidenced by the following passage:

We disagree with Greer to the extent it holds that a trial court in a personal injury action is authorized to hear and grant a defendant's posttrial motion to reduce under Hanif and Nishihama a privately insured plaintiff's recovery of economic damages for past medical expenses. As discussed, ante, we have concluded that the negotiated rate differential is a collateral source benefit within the meaning of the collateral source rule, and thus the trial court erred in granting [Defendant’s] motion for an order reducing the jury’s award for [Plaintiff’s] past medical expenses in the amount of that differential…” [Id.]

Rather than rely on "Hanif and its progeny," the Court in Howell relied on the collateral source rule analysis, reversed the trial court’s ruling reducing the plaintiff’s recovery, and reinstated the jury’s verdict to include the full amount of the medical charges that were originally billed.

So, is the rule from Hanif and its progeny dead? Given the apparently conflicting rulings from the various Appellate Districts, it is probable that these issues will eventually need to be addressed by the California Supreme Court. However, until then, it would appear that those lawyers with cases within the 4th District, whether from the plaintiffs’ or defense perspective, will have to address the very real probability that a plaintiffs’ full medical bills will be recoverable, without regard for or consideration of the amounts that may have been by the plaintiffs’ health insurance carrier.