In Howell v. Hamilton Meats & Provisions, Inc. the California Supreme Court ruled that a plaintiff’s recovery of medical damages is limited to the amount paid by the plaintiff’s health insurer and accepted by the health care provider as full payment. The Supreme Court’s ruling was discussed by Larry Golub in Collateral Source Rule Inapplicable When Injured Person's Medical Expenses are Discounted by Health Insurer.

In its April 8, 2013, decision in Luttrell v. Island Pacific Supermarkets, Inc., the California Court of Appeal, First Appellate District held that the Howell rule applied to a case where the plaintiff’s health care was paid by Medicare.

The Court of Appeal’s decision also explains how the Howell rule should be applied when the plaintiff’s recovery is reduced because of his failure to mitigate damages.

James Luttrell suffered a fractured hip when he was struck by an automated door at Island Pacific Supermarket. He underwent hip surgery. Three months after the surgery, he was admitted to the hospital for treatment of an ulcer that had developed on his buttocks.

Luttrell sued Island Pacific for failing to maintain the automated door. At trial, Luttrell submitted an exhibit which itemized the bills from his health care providers totaling $179,443.72 for the fractured hip and $511,105.21 for the ulcer.

Luttrell’s medical treatment was paid by Medicare.

Based on the Howell rule, the trial court limited Luttrell’s recovery for medical damages to $138,082.25 ($50,348.49 for the hip and $87,733.76 for the ulcer), which was the amount that Medicare paid to his health care providers as full payment for their services pursuant to their contracts with Medicare.

The trial court then reduced Luttrell’s recovery for treatment of his ulcer by 50 percent because it concluded that Luttrell’s failure to reasonably care for himself contributed to his developing a much more severe ulcer. The trial court’s ruling was appealed.

The published portion of the Court of Appeal’s decision, which may be cited as precedent, addressed two issues:

  1. Is the Howell rule limited to cases where medical treatment is paid by private health insurance?
  2. Should the court first apply the 50 percent mitigation reduction to the amount billed, and then impose the Howell amount-paid cap, or should the court first impose the Howell amount-paid cap, with the 50 percent mitigation reduction then applied to that amount?

On the first issue, Luttrell argued that Howell was inapplicable to his case because Howell involved private insurance. The court responded that Luttrell failed to articulate any reason why Howell should not apply when Medicare makes payments and concluded that Luttrell’s argument

does not account for the fact that, whatever 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.”

On the second issue, the court held that the trial court was correct in applying the 50 percent mitigation reduction to Howell’s amount-paid cap.

The court explained that if the trial court had taken the 50 percent reduction

first from the amounts billed (reducing the $511,105.21 award to $255,552.60), and then the court applied the Howell cap equal to the amounts paid ($87,733.76), Luttrell would have recovered the entire amount paid ($87,733.76), and his failure to mitigate would have had no consequence whatsoever.”

According to the court, that would have provided Luttrell with a “windfall.”

The Court of Appeal concluded, “In our view, 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.”