The Resolution Advocate: Tips on Getting to the Goal Line in Civil Litigation

“Three times the specials plus the wage loss.” For years that was the mantra for evaluating personal injury cases, particularly soft tissue cases. However, while perhaps more suitable to these types of cases, insurance carriers continue to covertly apply this “formula” when evaluating a broad spectrum of personal injury cases, except perhaps the most serious. But is this approach still meaningful in light of the Howell v. Hamilton Meats & Provisions, Inc., in which the California Supreme Court held that when a plaintiff has medical insurance, the reduced rate paid by the insurer is the proper measure of damages for determining medical specials and the actual billed amount is inadmissible for this purpose?1 The result of Howell is that the jury only hears evidence of a substantially reduced medical charge, which may not reflect the reasonable value of all medical services caused by the accident.

Moreover, according to the Howell court, the tortfeasor does not obtain a “windfall” when the injured person’s health insurer negotiates a favorable rate of payment with the person’s medical provider.2 The Restatement (Second) of Torts notes that the “customary rate” for services governs tort recovery.3 However, as the Howell court discussed, “There appears to be not one market for medical services but several, with the price of services depending on the category of payer and sometimes on the particular government or business entity paying for the services.”4 Given this state of medical economics, it is unclear how a market value other than that produced by negotiation between the insurer and the provider could be identified.5

Howell thus raises these questions: Is the reduced paid amount the preferred indicator of the value of the case? How significant is this number in measuring the injury’s effect on the plaintiff? Does it represent an accurate measure of the nature and extent of that injury? Is the old formula of “three times the specials plus the wage loss” even more misleading now that health insurance carriers apply negotiated rates to medical providers, doctor groups, and hospitals, who agree to provide bulk medical services at substantially reduced rates?

Today medical care that might be billed in the hundreds of thousands of dollars at the going rate may result in the acceptance of a dramatically reduced sum that is only a modest percentage of that total and fails to reflect the nature and extent of the injuries or the reasonable value of necessary medical care. Since there is no balance billing in California, meaning the plaintiff is not responsible for the difference between the billed amount and the discounted rate, the medical provider must accept the discounted payment from the insurer in full satisfaction of all sums due.6 How should this billing reality affect the way injuries are valued in personal injury cases?

Thus, plaintiff’s counsel may need to take a different approach to presenting evidence of the value of a client’s injuries in cases subject to Howell reductions. Other factors may need to play a more prominent role in presenting a demand package to the defense for settlement negotiation purposes and for presenting the case to a jury in those jurisdictions that allow a Howell approach. Also a major issue is if the Howell approach is also appropriate for claims for future medical care. This is the subject of a recent California Court of Appeal case, which if it remains on the books, will add more fuel to defense counsel’s efforts to reduce a plaintiff’s damages claims.7

So let’s review the basics: At common law, the collateral source rule prohibits defendants from introducing evidence of compensation received by plaintiffs from outside sources, such as insurance.8 The rule allows a plaintiff to “seek recovery for the reasonable value of medical services without consideration of insurance payments made to the injured party.”9 However, in light of modern healthcare schemes, many state legislatures and courts are beginning to abrogate the common law collateral source rule in cases where only discounted rates from the full billed amounts are paid and the patient/victim is relieved from personal responsibility for the balance or unpaid amount.10

Kentucky is an example of a pure collateral source jurisdiction. Its Court of Appeals in Schwartz v. Hasty explained why the collateral source rule exists:

First, the wrongdoer should not receive a benefit by being relieved of payment for damages because the injured party had the foresight to obtain insurance. Second, as between the injured party and the tortfeasor, any so-called windfall by allowing a double recovery should accrue to the less culpable injured party rather than relieving the tortfeasor of full responsibility for his wrongdoing. Third, unless the tortfeasor is required to pay the full extent of the damages caused, the deterrent purposes of tort liability will be undermined.11

As further stated by the Kentucky Supreme Court in Baptist Healthcare Systems, Inc. v. Miller, “it is absurd to suggest that the tortfeasor should receive a benefit from a contractual arrangement between Medicare and the health care provider.”12 The court determined that the fact that Medicare contracted with the plaintiff’s physician to provide care at a rate below the usual fees should not relieve a tortfeasor from negligence or the duty to pay the reasonable value of the plaintiff’s medical expenses. 13

Although the majority of states characterize the difference between the amounts charged by medical providers and the amounts paid to those providers by plaintiffs as “collateral source benefits,” some states believe this characterization ignores the realities of modern healthcare and the relationship between medical providers and medical payers, especially in light of the Affordable Care Act.14

When the plaintiff seeks to recover for expenditures made or liability incurred to third persons for services rendered, normally the amount recovered is the reasonable value of the services rather than the amount paid or charged. If, however, the injured person is responsible for less than the billed rate, recovery is allowed for no more than the amount paid, except when the low rate was intended as a gift.15

Several courts have recently considered this issue of how to determine the reasonable value of medical services when the injured plaintiff’s medical expenses are paid by an insurer or government payor at a discounted rate. Generally, jurisdictions that do not adhere strictly to the collateral source rule address the issue in one of two ways:

(1) An injured person may not recover as economic damages the undiscounted sum of medical expenses stated in the provider’s bill but never paid by or on behalf of the injured person. This is because damages are awarded to compensate for loss, and therefore recovery is for paid amounts only. Howell, in California, is an example of this approach.

(2) Both the amount billed and the amount paid should be allowed into evidence to enable the jury to determine the reasonable value of medical services at either of those amounts or some amount in between.16

For example, the Supreme Court of Indiana in Stanley v. Walker considered how to determine the reasonable value of medical services when an injured plaintiff’s medical treatment is paid from a collateral source at a discounted rate.17 The court in Stanley found that holding the defendant liable for the reasonable value of the services was the fairest approach.18 As stated by the court:

Given the current state of the health care pricing system where, to repeat, authorities suggest that a medical provider’s billed charges do not equate to cost, the jury may well need the amount of the payments, amounts billed by medical service providers, and other relevant and admissible evidence to be able to determine the amount of reasonable medical expenses.19

Thus, the Supreme Court of Indiana held that damages based on the “reasonable value of the services provided” is a jury determination to be made with evidence of both paid and billed amounts including write-offs.

Additionally, the Supreme Court of Ohio in Robinson v. Bates provided the following guidance on the issue:

To avoid the creation of separate categories of plaintiffs based on individual insurance coverage, we decline to adopt a categorical rule. Because different insurance arrangements exist, the fairest approach is to make the defendant liable for the reasonable value of plaintiff’s medical treatment. Due to the realities of today’s insurance and reimbursement system, in any given case, that determination is not necessarily the amount of the original bill or the amount paid. Instead, the reasonable value of medical services is a matter for the jury to determine from all relevant evidence. Both the original medical bill rendered and the amount accepted as full payment are admissible to prove the reasonableness and necessity of charges rendered for medical and hospital care. The jury may decide that the reasonable value of medical care is the amount originally billed, the amount the medical provider accepted as payment, or some amount in between. Any difference between the original amount of a medical bill and the amount accepted as the bill’s full payment is not a “benefit” under the collateral-source rule because it is not a payment, but both the original bill and the amount accepted are evidence relevant to the reasonable value of medical expenses.20

While in Howell, the California Supreme Court held that once the medical provider accepts payment of an amount that is less than the sum billed, the injured plaintiff may recover only that amount as economic damages in the injury action,21 the rule in California is different when the victim is uninsured. The Court in Howell refused to apply the collateral source rule in this circumstance.

If the plaintiff is uninsured for medical services, the plaintiff (who has been imprudent in going without health coverage, particularly following the advent of “Obamacare”), can recover the entire amount billed since that is what is owed as there is no discount negotiated by a health insurer. In this case there is a higher value because the medical specials are now considered at full value (or a least their reasonable value, which is not necessarily the discounted sum). Does this make sense?

Let me hear your views. Send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

Good Mediating. . .


Guy Kornblum has been a specialist in civil trials, arbitrations and appeals since graduating from the University of California, Hastings College of the Law, in 1966. He is a partner in the civil litigation firm of Kornblum, Cochran, Erickson & Harbinson, LLP, with offices in San Francisco and Santa Rosa, California. He is certified in Civil Trial Law and Civil Pretrial Practice Advocacy by the National Board of Trial Advocacy and is a Charter Fellow of the American College of Board Certified Attorneys. Mr. Kornblum is also a Charter Fellow of the Litigation Counsel of America where he is now a Senior Fellow. He is also a Life Member of the Multi-Million Dollar and Million Dollar Advocates Forum, a Platinum Member of The Verdict Club, a Silver Member of the Elite Lawyers of America, and a Legends Society Top Lawyer (Personal Injury). He has been a Super Lawyer each year since 2006. He is co-author of “Negotiating and Settling Tort Cases: Reaching the Settlement,” published by Thomson West and the American Association for Justice (formerly Association of Trial Lawyers of America), with a Third Edition released for 2015-16. See also the review of his book HERE. He has also co-authored two books on insurance coverage and bad-faith and over 200 published articles on topics relating to law practice and procedure. His firm’s website is



1 257 P.3d 1130 (Cal. 2011).

2 Id. at 1141.


4 Howell, 257 P.3d at 1142. Other jurisdictions have reached similar conclusions. See Moorhead v. Crozer Chester Med. Ctr., 765 A.2d 786, 789-90 (Pa. 2001) (abrogated on other grounds) (holding that in situations where the exact amount of expenses has been established by contract and those expenses have been satisfied, there is no longer any issue as to the amount of expenses for which the plaintiff will be liable, and therefore as a result, the injured party should be limited to recovering the amount paid for the medical services); Haygood v. De Escabedo, 356 S.W.3d 390, 396 (Tex. 2011) (holding that Section 41.0105 of the Texas Civil Practice and Remedies Code provides that, “recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.”)

5 Id.

6Balance billing happens after a patient has paid the deductible, coinsurance, or copayment and the insurance company has also paid everything it is obligated to pay toward the medical charges. If there is still a balance owed on that bill, the provider may try to bill the patient for the unpaid sum. There is no balance billing in California. In an unanimous decision in Prospect Med. Group v. Northridge Med., 198 P.3d 86 (Cal. 2009), the California Supreme Court declared balance billing unlawful in the context of emergency medical care. Where a health plan (i.e., an “HMO”) does not pay, in whole or in part, the amount charged by emergency room doctors, the doctors now must resolve billing disputes solely with the health plans. The providers may seek dispute resolution, or even sue the health plans if they wish, but they may no longer bill patients with a health plan for the disputed amount.

7 Cuevuas v. Contra Costa County, 2017 DJDAR 4018 (2017), in which the First California Appellate District reversed an award of $9,577,000 as the present cash value of plaintiff’s future medical and rehabilitation care expenses in an action for medical malpractice against Contra County Costa, arising out of injuries plaintiff sustained at birth. The trial court erred in excluding evidence that health insurance benefits under the Patient Protection and Affordable Care Act (ACA),124 Stat. 119, would be available to mitigate plaintiff’s future medical costs. Plaintiff suffered irreversible brain damage in utero while his mother’s pregnancy was being managed by a physician employed by the County. Plaintiff has a very low verbal IQ and will never be a functional reader. He has serious language communication difficulties, significant behavioral problems, and has been diagnosed with cerebral palsy. Plaintiff’s theory at trial was that he sustained his injury because the doctor breached the applicable standard of care by failing to schedule his delivery prior to 37 weeks’ gestation. The County did not appeal with respect to liability. The case sets the stage for a defendant to argue that not only should past damages be reduced if there is insurance or other benefits available to pay the costs, but that any future projections should be subject to reductions on this basis even though there is no guarantee that such collateral benefits will be available to the plaintiff.

8 The collateral source rule precludes deduction of payments the plaintiff has received from sources independent of the tortfeasor from damages the plaintiff “would otherwise collect from the tortfeasor.” Helfend v. S. Cal. Rapid Transit Dist., 465 P.2d 61, 63 (Cal. 1970). Some states have passed laws overturning the collateral source rule. See, e.g., N.J. STAT. ANN. §2A:15-97 (where a plaintiff receives or is entitled to receive benefits for injuries from other than a joint tortfeasor, the benefits, excluding workers compensation payments, are deducted from any award to the extent of any duplication minus premiums paid for this coverage). As noted, the approach in Howell ignores the policy behind the collateral source rule. So what if there is a windfall for the plaintiff? The issue should be what is the reasonable value of the medical services which is an issue different from a) what was billed, or b) what the discounted rate was. The tortfeasor should not benefit from what the victim worked for or paid for personally, which allowed his medical expenses to be covered by insurance.


10 See Howell, 257 P.3d at 1141.

11 175 S.W.3d 621, 626 (Ky. App. 2005).

12 177 S.W.3d 676, 683 (Ky. 2005).

13 Id. at 683-84.

14 This is being written at a time when the Affordable Care Act is still applicable. Patient Protection and Affordable Care Act, Public Law 111-148 (March 23, 2010).


16 "Where a plaintiff has incurred liability for the billed cost of services and the provider later ‘writes off’ part of the bill because, for example, the plaintiff is unable to pay the full charge, one might argue that the amount of the write-off constitutes a gratuitous benefit the plaintiff is entitled to recover under the collateral source rule. But in cases like that at bench, the medical provider has agreed, before treating the plaintiff, to accept a certain amount in exchange for its services. That amount constitutes the provider’s price, which the plaintiff and health insurer are obligated to pay without any write off. There is no need to determine a reasonable value of the services, as there is in the case of services gratuitously provided.” Howell, 257 P.3d at 1140.

17 906 N.E.2d 852, 855 (Ind. 2009).

18 Id. at 858.

19 Id.

20 857 N.E.2d 1195, 1200-01 (Ohio 2006). Other jurisdictions have reached the same conclusion. See Martinez v. Milburn Enter., 233 P.3d 205, 229 (Kan. 2010) (holding that pursuant to Kan. Stat. Ann. § 40-3117 the jury could consider both the charges assessed by the medical care provider as well as the amount actually accepted to determine the reasonable value of the medical care that the insured received); Bozemand v. State, 879 So.2d 692, 694 (La. 2004) (holding that a Medicaid recipient was “unable to collect the Medicaid ‘write-off’ amounts as damages because no consideration is provided for the benefit. Thus, plaintiff’s recovery is limited to what was paid by Medicaid.”)

21 See also, Corenbaum v. Lampkin, 215 Cal.App.4th 1308, at 1325-26 (2013) (holding that “[d]amages for past medical expenses are limited to the lesser of (1) the amount paid or incurred for past medical expenses and (2) the reasonable value of the services.) (Citation omitted).” Quoting Howell, the Corenbaum court said that when a sum certain is paid, that is what the plaintiff can recover even if it is below prevailing market rates. 215 Cal.App.4th at 1326.