A bill from the California legislature that would have potentially overruled the California Supreme Court’s recent holding on the calculation of medical damages has been shelved, for now.

Last August, the California Supreme Court held in the case of Howell v. Hamilton Meats and Provisions, Inc., 52 Cal. 4th 541 (2011) that medical damages should be based on the actual or contracted amount paid to a medical provider, as opposed to the billed amount (which could be significantly higher than the contracted rate).  In so ruling, the Court noted that using the amount accepted by a provider as the basis for damages does not modify or change the existing collateral source rule because “the plaintiff does not incur liability in the amount of the negotiated rate differential.”  The ruling was welcomed by liability insurers as a recognition of the practical reality of health care insurance contracts and discounted rates.

This year, California Senator Darrell Steinberg introduced a bill that, while not mentioning Howell by name, clearly was designed to overrule the case.  Rather than the bright-line “actual amount paid” calculation set forth in Howell, SB 1528 proposed to revise the California Civil Code to state that an injured person whose health care is paid for by insurance shall be entitled to recover “the reasonable value of the medical services provided without regard to the amount paid” (emphasis added).  In May 2012, SB 1528 was approved in amended form (omitting the “without regard to the amount paid”) by the State Senate.

In the State Assembly, the bill underwent several further amendments that limited its scope to injured persons whose insurance plan pays a monthly fee for medical services and who do not receive a separate bill for services.  However, the bill gained very little support in the Assembly.  On August 31, 2012, the bill failed to pass on a third reading by a vote of 13-43 and officially became inactive.