Collateral Source – Trial court violates collateral source rule by reducing personal injury victim’s medical damages to amount paid by her medical insurers

Ana Silva Yanez v. Soma Environmental Engineering, Inc., et al., 2010 DJDAR  9720  (June 24, 2010).

Defendant was found negligent by a jury in causing injuries and damages to the plaintiff including significant medical damages.  After judgment was entered, the defendant successfully moved to reduce the medical award by the amount actually accepted by the plaintiff’s medical providers as payment in full from her health insurers.  Plaintiff appealed the reduction of the award as having violated the collateral source rule. 

 The appeals court reversed and remanded.  The court found that a wrongdoer cannot take advantage of the contracts that may exist between the injured person and third persons.  Thus, the collateral source rule provides that the compensatory damages recoverable from a tortfeasor in a personal injury case should not be reduced merely because the victim also receives compensatory benefits from independent or collateral sources, such as insurance.  Here, the trial court reduced the plaintiff’s damages to the amount actually paid by her insurers.  The amount written off by the plaintiff’s insurers constituted collateral benefits of her insurance in violation of the collateral source rule.  Thus, the trial court’s reduction was made in error.

This case deals with the still unsettled issue of how much of a person’s medical bills an injured party may in a personal injury lawsuit.   In Yanez v. Soma Environmental Engineering, Inc. the appeals court found that the trial court erred in reducing plaintiff’s award for medical expenses to the amount actually accepted by plaintiff’s medical providers as payment in full under their contracts with plaintiff’s private health insurers.   The appeals court held that amounts written off by a health care provider pursuant to its contract with a private insurer may be recovered as damages under the collateral source rule.

A similar case is now before the California Supreme Court in Howell v. Hamilton Meats & Provisions, Inc., 179 Cal.App.4th 686 (review granted March 10, 2010, No. S179115).     Until the recent decision in Howell, case law in California suggested that compensatory damages should be limited to the amount actually expended by the injured party.  But the appeals court in Howell found that the collateral-source rule entitled injury victims to a recovery of the full reasonable value of reasonable medical services received.  The Yanez court followed suit, but not before the Supreme Court unanimously agreed to review Howell.     The California Supreme Court could entertain a concurrent review of Yanez and a comprehensive opinion addressing the issues raised in both cases.

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