Daily Blast March 8, 2012

Here is one for those of you interested in seeing how appellate court’s are applying the principles set forth by the California Supreme Court in Howell. Attached is a brand new case decided today by Division Four of the Second Appellate District Court of Appeal (LA) – Sanchez v. Brooke (March 8, 2012; B224835) __ Cal.App.4th __ holding that the Howell rationale applies where an injured employee’s provider accepts a discounted amount as payment in full from the employer under workers’ compensation law. Just like in Howell, because the injured person/employee is not liable for the undiscounted sum stated in the provider’s bill, the unpaid balance does not represent an economic loss to the plaintiff and is not recoverable as damages. (Slip opn., p. 3.)

The Sanchez opinion provides a very nice synopsis of Howell and its rationale. Howell held that where a private medical insurance carrier pays an injured person’s medical expenses at a reduced rate pursuant to a preexisting contract with the provider, the injured person may not recover from the tortfeasor, as economic damages, for past medical expenses, the unpaid balance stated in the provider’s bill. (Slip opn., p. 16.) No such recovery is permitted because the injured person simply did not suffer any economic loss in that amount.  The collateral source rule has no bearing on amounts that are included in the provider’s bill in this circumstance because the provider, by prior agreement, accepted a lesser amount as full payment. Therefore, such sums do not represent an economic loss for the plaintiff and cannot be recovered in the first instance. (Id. at pp. 16-17.)

According to the court in Sanchez, the same rationale applies in the context of workers’ compensation. Where an employer is required under the workers’ compensation laws  to pay in full an injured employee’s medical expenses, the injured employee may not recover, as economic damages from a third party tortfeasor, medical fees that he or she is precluded from collecting from the employer either by way of agreement or by law (including the statutory fee schedule). (Slip opn., p. 17.)  Fees the provider may not collect from the employer under the workers’ comp law do NOT represent an economic loss for the employee plaintiff. (Ibid.)

Sanchez represents a common-sense application of the Howell rationale beyond private insurance contracts. This rationale can be argued in most any setting where the injured plaintiff is not on the hook for the unpaid balance in a medical provider’s bill.

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