Episode 27. Damages

Let’s talk turkey. No, not the deep-fried kind we talked about a couple of weeks ago. We mean money. Specifically, damages.

In this week’s episode, Bob discusses damages in insurance cases, with a focus on medical expenses. Listen to learn more about how California law, the collateral source rule, and hospital liens can all affect the assessment of damages, and why you should start gathering evidence to support your argument earlier rather than later. 

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Transcript

Hello friends. Today we're going to talk about damages. Every liability policy is key

to coverage for damages, but in my experience damages analysis is often the

the stepchild to the liability analysis that goes on in a case.

I can't tell you the number of mediations I've been to, where the majority of the

time is spent talking about liability and the liability issues, and short shrift is

given to the damages calculation.

In my opinion, the damages calculation is where a considerable amount of effort

should be spent because that's where the money is in all of this. So today I want

to talk about, in particular, medical special damages or special damages to compensate

an injured plaintiff for past and future medical expenses.

I can tell you over the last year I have had no fewer than Eight cases,

and probably closer to 15 cases, where the plaintiff's attorneys simply put in the

total amount of medical bills, or attempted to put in the total amount of medical

bills as damages, not realizing that in California, the medical bills aren't

necessarily the proof of special damages for past medical services rendered.

It came as quite a surprise to those attorneys and frankly to a couple of the

defense lawyers that in California where the hospital or the healthcare provider has

accepted as full payment to discounted rate from the plaintiffs insurer,

it's that discounted amount that is the provable amount of damages,

not the usual and customary charge from the hospital or healthcare provider.

So let's talk about that a little bit. The first thing that we need to look at is

whether the medical specials, the damages for past medical services,

are being sought by the plaintiff or are being sought pursuant to a lien by the

health care provider.

I'm going to separate those two things out because the analysis is different.

Let's talk first about the damages that are sought by the plaintiff.

The plaintiff has to prove the reasonableness amount of the charges and to do that

it's a two -step analysis. First, we have to ask the question,

has the plaintiff proven she actually incurred the medical expenses. Second,

we have to ask, has the plaintiff proven the charges for the medical services were

reasonable? If the answer to those, either of those is no,

then you exclude damages for past medical services,

or you exclude the charges for the past medical services from the damages

calculation. But let's assume that the plaintiff has at least attempted to prove that

she actually incurred the medical expenses.

Usually that is done by having the plaintiff's treating physician testify testify

about the plaintiff's pretrial medical treatment and condition and the necessity for

the the treatment in relationship to that condition.

Keep in mind that the treating physician can't say for example that the accident

caused the condition. There has to be somebody else testified of that and that's

usually an expert, a medical expert, comes in and testifies about the cause of the

plaintiff's injuries.

That expert can also back up the treatment for the condition that

the plaintiff had by saying the treatment was reasonable and And then you get into

the question of, okay, how much did that treatment cost? Because the mere fact that

the plaintiff

incurred medical services means nothing if the plaintiff is not liable for the cost

of those services.

Pretty much every defense lawyer will subpoena the billing records, but they should

also subpoena the contracts between the person that paid for those records and

subpoena any information about discounts that were given either to the plaintiff or

to the third party payers such as a health insurance company or an HMO.

That should be done for every health care provider.

It's well established in California and several other states that an injured plaintiff

whose medical expenses are paid through private insurance may recover his economic

damages no more than the amounts paid by the plaintiff or his or her insurer for

the medical services received, or that are still owing at the time of trial.

This is where the plaintiffs lawyers got caught in the cases I was referring to,

and the defense lawyers were happy to learn about that rule in California.

Note that it does not work that way in all states. There are some states where the

usual and customary charges count as the reasonable cost of the medical care that

was provided even though an insurer paid a lesser amount. That has something to do

with the collateral source rule which I will talk about in a minute but generally

speaking in California, at least, it's the discounted rate that matters,

not the usual and customary. So what defense lawyers should do in these cases is

file a motion in Lemony to preclude evidence of the reasonable value of services in

an amount more than the amount actually paid.

This is because, well, the basis for the motion in Lemony really is that to have

somebody test fire provide evidence of a reasonable value of services and amount

greater than what was actually paid

has been held to be irrelevant on the issue of the amount of damages for past

medical services. And has also been found likely to confuse the jury because of its

interplay with the collateral source rule. So here's an opportunity for me to talk a

little bit about the collateral source rule, which is basically that the defendant is

not entitled to present evidence about recovery by the plaintiff from other sources.

So, under the collateral source rule. The defendant is not entitled to a deduction

of compensation to the plaintiff for the amount the plaintiff has received from a

source independent of the tort freezer to reduce recoverable damages. Evidence of such

payments is inadmissible for that purpose.

Best in a state like South Dakota, for example, they apply the collateral source

rule to allow evidence of the full amount charged by the health care provider in

the course of proving the cost of past medical services.

Whereas in a state like California, they basically have an exception to the

collateral source rule and find that only the amount actually paid by the third

party insurer, for example, can be found to be a measure of damages.

But there's another aspect to the collateral source rule that pops up,

especially where some

of the cost for past medical services is being sought by a lien interposed by one

or more of the health care providers. It is not unusual for a hospital to assert a

lien where, for example, they provided emergency services to an injured plaintiff,

and that plaintiff does not have insurance. that's less common these days than it

was in the past, but there are still instances where we see leans asserted for

amounts that were not paid by the plaintiff's health care insurer,

for example. So consider this kind of scenario. The hospital's usual and customary

charge for a service is let's say a thousand dollars,

but they have a contract with an HMO that they'll only charge $35 for it.

What happens is that under the general rule I just discussed the HMO

paid $35 So the plaintiff's damages for that service are capped at $35.

Well, what then if the hospital can assert a lien for $1 ,000 against the

plaintiff's recovery? The jury awards plaintiff $35 for medical expenses and

the hospital has a thousand dollar lien on that $35

that doesn't seem right and so there are some rules that apply when the hospital is

asserting a hospital lien.

California has the Hospital Lean Act, which allows a hospital that has provided

emergency services and ongoing medical care to a plaintiff to assert a lean.

However, the general rule is that

the hospital may not assert a lien in an amount

greater than that that the plaintiff can claim against the defendant.

So the first question you want to ask is has the hospital received payment from a

patient or is health insurer at a reduced negotiated rate under a prior agreement in

which the hospital agreed to accept that payment as payment in full for its

services. If the answer to that is yes, then the

hospital may not be entitled to assert a lien in an amount greater than the amount

it was paid and its lien is for of no effect because it's been satisfied.

What the defense lawyer is going to want to do under these circumstances is subpoena

the billing records, including the contracts and discounts to third -party payers such

as insurers from every health care provider. And the reason those contracts are

important is The next question is whether the contract with the HMO or the health

care insurer permits the hospital to collect for higher than negotiated rates to the

extent allowed by the hospital Lean Act.

If a hospital wishes to preserve its right to recover the difference between the

usual and customary charges and the negotiated rate through a lien under the HLA.

They are free to contract for this right when negotiating their contracts with

insurers. Otherwise, the hospital cannot assert a lien to recover the difference

between what the insurer paid and what the hospital charged.

So let's assume that such a contractual provision exists and that the defendant is

facing a claim not only based upon what the plaintiff and her insurer actually paid

to the hospital, but also a lien from the hospital for the difference between what

the insurer and the plaintiff paid and the usual and customary charges that the

hospital charges for those services? Is the defendant exposed to the full amount of

those medical charges? Well, the answer is No,

and here's the analysis that you go through. For purposes of this analysis,

we're going to first determine whether the hospital properly perfected its lien.

There are statutory requirements that hospitals have to follow to perfect the lien,

so if the lien is not properly asserted and maybe not asserted at all.

It's not an issue, but that's beyond the scope of this episode.

For our purposes, the real first question is, did the hospital provide emergency

services? This is brand new law. It came down on November 25th,

2024, in the case of Yaffe versus Skeen, a California 3rd District Court of Appeal

case, for which there's no official citation yet, but that court held that emergency

services must be provided before the HLA will apply.

So if the hospital did not provide emergency services, the HLA does not apply.

The hospital is not entitled to seek the difference between what its usual and

customary charges and what it was paid and you exclude the cost of that lien from

the damages calculation.

So what are emergency services? These include the medical screening,

the examination, evaluation by specified medical personnel, all to determine if an

emergency medical condition exists. And that can include active labor for pregnant

women. And if those conditions do exist, then emergency services include the care,

treatment, and maybe even surgery by specified medical personnel that are deemed

necessary to relieve or eliminate the emergency medical condition within the capability

of the facility.

That's kind of a long definition, but basically emergency services are what you would

think they are. You go into the emergency room and somebody needs to evaluate

whether your injury is an emergency and requires immediate care.

Interestingly though, the fact that a plaintiff's emergency room visit was three weeks

after the accident does not change the fact that the plaintiff obtained emergency

services even when in that preceding three weeks the plaintiff had sought non

-emergency treatment for his injuries from his primary care physician.

It was enough that the injuries and pain continued to develop an increase in that

eventually the plaintiff had to go to the emergency room and receive treatment and

was hospitalized. So all of those helped in the Yaffe case to establish that there

was emergency services that were provided.

So now the question is, does the amount of the lien extend to just those emergency

services. Under the hospital lien act the cost of emergency services may be the

subject matter of a lien as well as the cost of ongoing medical services.

But in Yaffe the question was what constitutes ongoing medical services.

In that case, the plaintiff had been discharged from the hospital, but had had

several follow -up visits. Those follow -up visits were included in the jury verdict

of damages, and the Court of Appeal found this was improper. The court found that

the HLA applies only to services obtained while the patient remains in the emergency

room, the hospital, or an associated care facility as needed to relieve or eliminate

the emergency medical condition.

Basically what the hospital can get under the Hospital Lean Act are the costs of

the emergency services that are incurred from the time the plaintiff enters the

emergency room to the time the patient is discharged to go home.

Once the patient is discharged to go home, the follow -up visits do not qualify

under the LA lien. Those follow -up expenses are excluded from the damages calculation

under the lien. To summarize on the availability of damages for past medical

services, the way you analyze it is, first of all, look to see whether the usual

and customary charges of the hospital were discounted to the plaintiff.

If they were and paid by the plaintiff's insurer, the plaintiff or self,

it's the discounted amount that the plaintiff can claim. Once you've determined that

amount, you also want to look to see if there are any emergency services. If there

were emergency services and a hospital lien has been properly asserted for them,

then the associated usual and customary charges for the emergency services and ongoing

care until the time the patient is discharged home get added to the cost of the

past medical services to make up the medical specials for past care.

Now what I want to do is turn to future care. The value of personal injury cases

is often inflated by estimates of life care plan,

future care needs, and associated expenses.

An injured party may collect damages for future medical expenses if those future

medical expenses are certain to resolve.

So there must be evidence to show such a degree of probability of their occurring

as amounts to a reasonable certainty that they will result from the original injury.

The problem that plaintiffs have and the defendants need to exploit in these kinds

of cases is the issue of uncertainty about what additional future care may be

required. I can't tell you the number of medical experts who have written reports

and testified that there's a possibility that the future care is needed.

Well, possibility or consistency with an injury is not the same as stating to a

reasonable degree of medical certainty future care will be required.

For example, in the Yaffe case that I've been talking about, where the expert's

testimony of possible future care turned on a diagnostic test that had not yet

occurred, the certainty requirement or future medical expense damages had not been

established because their testimony was deemed speculative, even though they were

experts. To summarize and provide the practice pointer for this episode of Coverage

Counsel is in, it is well for the defense lawyer and the coverage lawyer who's

evaluating damages and the extent of coverage under the policy or policies that may

exist to cover the insured's liability in a liability lawsuit.

It's well for those attorneys to do the analysis and the discovery early on in the

case and not to provide short shrift damages. There are questions that clearly need

to be asked of treating physicians and of medical experts.

There are documents and contracts that are usually not thought about that need to be

obtained and evaluated so that nobody's surprised at the time of mediation or trial

evidence, what the evidence is going to be about the extent of the expense for past

care that can be admitted into evidence when the damages are claimed by the

plaintiff and to the extent there's a lien, how much of the lien can even be

recognized. These things need to be taken care of early because once you get down

to the end of a case, there frequently is not enough time to dig in as far as is

necessary. So that's my practice pointer for today. I appreciate you tuning in and

listening to coverage council is in. And until next time, this is Bob Sallander

signing off. Bye -bye.