In Luttrell v. Island Pacific Supermarkets, Inc. (April 8, 2013, A134089), California’s First District Court of Appeal held that Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541 specifically applies to limit a plaintiff’s recovery of past medical expenses to the amounts paid by Medicare/Medi-Cal as it would to amounts paid by a private insurer. In addition, the court held that the Howell reduction should be imposed before any additional reduction due to a plaintiff’s failure to mitigate damages. The court stated that if the reduction were made to the total amount billed, (1) the plaintiff's failure to mitigate would have no consequence, (2) he would be receiving a windfall and (3) the defendant would be held liable for more than the damage it caused.

Background

Plaintiff (Luttrell) fractured his hip after becoming stuck in the defendant’s automatic doors. He later developed pressure ulcers requiring medical treatment. The amount billed by Luttrell’s medical providers for treatment totaled approximately $690,000, which was divided into $180,000 for the fractured hip and $510,000 for the ulcers. Medicare and Medi-Cal settled with Luttrell’s medical providers for substantially less than the billed amounts: $50,000 for the hip and $88,000 for the ulcers. Before trial, the defendant moved in limine to exclude reference to the amounts billed pursuant to Hanif v. Housing Authority (1988) 200 Cal.App.3d 635. Howell was still pending in the California Supreme Court at the time the motion was filed. The court denied the motion without prejudice to the defendant raising the issue after trial.

The amounts billed for Luttrell’s medical treatments were introduced at trial. Ultimately, the jury awarded Luttrell all of his past medical expenses for his hip injury in the amount billed as well as damages for future medical care and noneconomic loss. However, the jury awarded only 15 percent of Luttrell’s past medical expenses relating to his ulcers, claiming he had a preexisting condition.

Luttrell and the defendant filed post-trial motions. The trial court held that the 85 percent reduction in his expenses relating to his ulcers based on a preexisting condition was improper, but it found that a 50 percent reduction was warranted based on Luttrell’s failure to mitigate his damages. The defendant brought a motion to reduce Luttrell’s award based on Howell, which by this time had been decided. In Howell, the California Supreme Court held that a plaintiff in a tort action may recover the lesser of the reasonable value of the medical services received and the amount paid by the plaintiff or private insurance on the plaintiff’s behalf. [See Wilson Elser client alert “California Supreme Court Saves Defendants Millions in Limiting Negotiated Rates as the Measure of Medical Expenses in Personal Injury Cases,” August 2011.]

The trial court granted the defendant’s motion and reduced Luttrell’s award for past medical expenses to the amount paid to satisfy those expenses. After applying the Howell reduction, the trial court reduced the amount paid relating to treatment of Luttrell’s ulcers by 50 percent for the plaintiff’s failure to mitigate, leaving an award of $44,000. Luttrell appealed, claiming that Howell, involving payments made by a private insurer, should not apply to a case involving Medicare payments. He further argued that, if Howell did apply, the 50 percent reduction should have been made to the amount billed, before the Howell reduction was applied.

Decision

The California Court of Appeal upheld the trial court’s ruling (1) that Howell applied to the action involving Medicare payments as it would when payments were made by a private insurer and (2) that any reduction in an award for past medical expenses attributed to a plaintiff’s failure to mitigate those expenses must be taken from the amount paid to satisfy those expenses – not the amount billed.

In an opinion by Justice Needham, the court first declared that Howell applied whether payments were made by Medicare or by a private insurer. The court reiterated the principles set forth in Howell and stated: “[W]hatever the source of the payments – private insurer or Medicare – the end result is the same: Luttrell has no liability for past medical services in excess of those payments, so he is not entitled to recover anything more than the payment amount.”

Second, when reducing an award for past medical expenses due to a plaintiff’s failure to mitigate damages, the court stated “it is clear that the Howell cap must be applied first, since the amount actually paid on the plaintiff's behalf represents the maximum amount a plaintiff could recover.” [Emphasis in original.]

In Luttrell’s case, if the 50 percent reduction were made to the amount billed for medical services relating to his ulcers, the remaining amount would still exceed the amount that had been paid for those services. Thus, after the Howell reduction, Luttrell would have recovered the entire amount paid “and his failure to mitigate would have had no consequence whatsoever.” The court stated that such a result “would have provided a windfall to Luttrell and imposed liability upon [the defendant] in excess of the damage it caused.” In so holding, the court emphasized that “the point of the Hanif-Howell line of cases is that the tortfeasor should be held to pay the full cost of its negligence or wrongdoing – no more and no less.” [Citing Howell, 52 Cal.4th at 560, 566.]

Comment

This case is the most recent in a line of cases limiting a plaintiff’s recovery of past medical expenses to the amount paid for services rendered. Because Howell dealt with private insurance, plaintiffs have continued to argue that the Howell cap should not apply where payments have been made by Medicare or Medi-Cal. This case refutes that argument. In addition, Justice Needham states in dicta that evidence of amounts billed for medical treatment should not be admitted to prove past medical expenses. However, he does not address the question raised in Howell of whether such amounts could be admitted for other reasons, for example, to support the amount of pain and suffering being claimed. Nonetheless, Justice Needham concisely sets forth his analysis strengthening the arguments set forth in Howell that a plaintiff may recover only what he has lost – and no more.