Today the California Supreme Court issued a disappointing ruling for injury accident victims.   In Howell v. Hamilton Meats & Provisions, Case No S179115, the Court declined the opportunity to uphold the collateral source rule. 

The collateral source rule is an evidentiary rule that prohibits the admission of evidence that a victim's damages were or will be compensated from some source other than the damages awarded against the Defendant.  If the injured person was smart enough to buy insurance coverage then the tortfeasor should not be able to introduce evidence that the victim incurred no out of pocket expenses.  The rules assures that the tortfeasor is fully responsible for his own conduct.  To disallow use of the collateral source rule permits the tortfeasor to acquire a benefit at the expense of the injured person.

In Howell, the plaintiff had health insurance, and sustained serious injuries in an automobile accident caused by a driver for defendant Hamilton Meats.  Howell had Pacificare for health insurance, and received treatment at Scripps Memorial Hospital in Encinitas.  Scripps was a preferred provider pursuant to its contract with Pacificare.  Scripps accepted $59,691.73 on a $189,978.63 medical bill.  Scripps did not have the right to balance bill Howell and Howell had no obligation to pay Scripps the difference between the amount billed and the amount accepted.

Howell wanted to post the entire $189,978.63 at time of trial and was allowed to do so.  The trial court reduced the award to $59,691.73 after post trial motion.  An appeal ensued and the appellate court ruled in favor of the plaintiff stating that the collateral source rule protected the injured person.  The defendant petitioned the California Supreme Court and was granted review. 

The Supreme Court had to decide whether, in this case, the tortfeasor should receive the benefit of the victims insurance or whether the victim should recover money for damages that she never "incurred".  The California Supreme Court took the position that serves insurance companies and tortfeasors.  It stated that the plaintiff can not use the collateral source rule to receive a "double recovery" or a "windfall".  The Court failed to recognize that the victim paid for that windfall when she bought health insurance with her own hard work and money.

Health care providers should care about this ruling because it reduce the amount of compensation an injured person can receive from an accident.  At a time when health care is so expensive, the people causing accidents are allowed to pay less than their fair share. 

Injury victims would be better off not having health insurance coverage in this scenario.  They could post the entire $189,978 and receive it from the tortfeasors large commercial liability policy.  

Work around?  Attorneys in these cases will now speak with the hospital administrators early on and advise them never to "accept" the health insurance and allow the full amount billed to be claimed in the personal injury lawsuit.  This transfers the responsibility to the tortfeasor and away from the health insurer.  It allows the hospital to collect more money than they would have received under the health insurance contract.  In order for this to work, the hospital will need to know that there is a commercial liability policy with sufficient limits and a case that has clear liability.