CA Supreme Court Comes Down in Favor of Big Insurance, Against Consumers


In a decision delivered August 18, the California Supreme Court ruled those who cause injuries, not those who were injured, will benefit from the reduced prices for medical care and services negotiated by the insurance company of the person who was injured.

The ruling in Howell v. Hamilton Meats & Provisions found that “personal injury plaintiffs are not entitled to full recovery of medical bills if their insurers paid only a smaller, negotiated amount,” according to reporter Kate Moser of The Recorder (full access to her story is limited to subscribers only).

 “This is a setback for consumer rights in California,” said John A. Montevideo, president of Consumer Attorneys of California, the professional association that includes attorneys who represent plaintiffs in personal injury cases such as the one that led to Howell. “It favors big business and big insurance over regular people.” (The author of this article is the press secretary for Consumer Attorneys of California, and members of CAOC are on the board of directors of the non-profit organization that funds this website.)

At issue was the amount of compensation due Rebecca Howell, who was struck by a Hamilton Meats truck after the driver had made an illegal U-turn in Encinitas. She required two spinal surgeries and ran up medical bills of about $190,000. Because she had the foresight to have purchased insurance, and her insurer had negotiated reduced rates with the providers involved, the amount actually paid to the hospitals for her care was about $60,000.

The court was asked to determine which party should benefit from the premiums Howell had paid for her medical insurance. Her attorney, Gary Simms, argued she deserved to be compensated for the full value of her care rather than allowing Hamilton Meats’ insurance company to compensate her with just the amount that was actually paid. That would, in essence, mean that Howell’s insurance payments went not to benefit her but to save $130,000 for the party that caused her injuries.

The Howell decision “takes money from the pocket of injured persons who have paid for insurance premiums and puts that money right into the pockets of the people who have caused that injury,” plaintiffs attorney Mike Danko told The Recorder.

That’s what bothered the one justice who opposed the decision to reverse an appeals court decision in favor of Howell. “Indeed, it is difficult to understand just what policy considerations justify denying the thrifty or prudent plaintiff who has purchased private health insurance the full benefit of his or her own foresight, and instead, transferring that benefit to the tortfeasor,” wrote Justice Joan Dempsey Klein, Presiding Justice of the Court of Appeal, Second Appellate District, Division Three. Klein was assigned to hear this case because of a vacancy on the court.

Justice Klein wrote that the decision to limit Howell’s compensation to what was paid by her insurer leaves her “in a worse position than an uninsured individual or one who was a donee of medical services, persons who are entitled to recover the full reasonable value of their medical care.” That reasonable value, to be determined by expert testimony at trial, would no doubt be greater than what was actually paid, although Justice Klein wrote she thought the $190,000 gross amount of Howell’s medical bills was “potentially inflated.”

“The standard for a century has been that a plaintiff gets the reasonable value of the medical treatment,” Simms told The Recorder after the high court’s decision was announced. That standard is under what’s known as the “collateral source rule.” He called the decision “a drastic rewriting of California law.”

Justice Klein, in her dissent, quoted from the court’s 1970 decision in Helfend v. Southern Cal. Rapid Transit Dist.: “The collateral source rule expresses a policy judgment in favor of encouraging citizens to purchase and maintain insurance for personal injuries and for other eventualities….If we were to permit a tortfeasor to mitigate damages with payments from plaintiff‘s insurance, plaintiff would be in a position inferior to that of having bought no insurance, because his payment of premiums would have earned no benefit.”

Some observers have tried to make this case as being about plaintiffs lawyers rather than about consumers. “Insurers win, lawyers lose in big state Supreme Court ruling,” read the headline on a post on the Sacramento Bee‘s Capitol Alert blog. The reference is to that fact that lawyers who represent plaintiffs in these types of personal injury suits typically receive no money unless they win the case, and then they are paid a percentage of what their client receives. The notion that lawyers are the main “losers” in the Howell decision ignores the fact that the vast majority of the monetary compensation goes to the consumer who was wronged.

For more on the collateral source rule and its application to this case, see a post from attorney Scott Sumner, an expert in the field, that appeared here on in June 2010, this analysis by Scott Sumner and Christopher Dolan and this piece by Sumner.


J.G. Preston is the Press Secretary at the Consumer Attorney’s of California and writes for the site Protect Consumer Justice, where this article originally appeared.


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