Valiavacharska v. Celaya et al

Filing 129

ORDER RE: COMPUTATION OF PLAINTIFFS MEDICAL DAMAGES (Dkt. Nos. 113, 118). Signed by Magistrate Judge Jacqueline Scott Corley on 2/2/2012. (ahm, COURT STAFF) (Filed on 2/2/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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Northern District of California

United States District Court

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ZHIVKA VALIAVICHARSKA,
Plaintiff,

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v.

Case No.: CV 10-4847 JSC
ORDER RE: COMPUTATION OF
PLAINTIFF’S MEDICAL DAMAGES
(Dkt. Nos. 113, 118)

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BRENDAN TINNEY,
Defendant.

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Now pending before the Court are the parties‘ letter briefs on whether medical

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damages in this case should be limited to amounts actually paid to satisfy Plaintiff‘s medical

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bills. (Dkt. Nos. 113, 118.) Defendant raised this issue in his motions in limine, and the Court

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asked for further briefing following the January 19, 2012 pretrial conference. (Dkt. No. 112 at

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3.) Citing the California Supreme Court‘s recent decision in Howell v. Hamilton Meats &

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Provisions, Inc., 52 Cal.4th 541 (Cal. 2011), Defendant maintains that Plaintiff should only be

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allowed to recover medical expenses paid on Plaintiff‘s behalf or for which Plaintiff is liable

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and not the full amount billed by medical providers. Plaintiff counters that the ―award of

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damages in Section 1983 actions are governed by federal common law which has always

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recognized the collateral source rule.‖ (Dkt. No. 118.) Neither party disputes the applicability

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of the collateral source rule to section 1983 cases in federal court; rather, the question before

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the Court is whether under the collateral source rule a Plaintiff may recover billed medical

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costs or only the actual payments made in satisfaction of these medical bills regardless of the

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source of the payments. After reviewing the briefing by both parties, the Court concludes that

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only amounts paid by or on behalf of Plaintiff in full satisfaction of her medical bills pursuant

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to prior agreement are relevant to determine medical damages.
DISCUSSION

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In general, the collateral source rule provides that ―‗benefits received by the plaintiff

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from a source collateral to the defendant may not be used to reduce that defendant‘s liability

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for damages.‘‖ Henderson v. Peterson, 2011 WL 2838169 at *4 (N.D. Cal. July 15, 2011)

Northern District of California

(quoting McLean v. Runyon, 222 F.3d 1150, 1155–1156 (9th Cir. 2000) (internal quotations

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United States District Court

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marks and citations omitted)). The rule therefore allows ―an injured party to recover medical

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expenses from a tortfeasor, notwithstanding reimbursement of such expenses by the injured

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party from a third party, if such reimbursement is from a ‗collateral source‘ and not from a

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tortfeasor.‖ Siverson v. United States, 710 F.2d 557, 559 (9th Cir. 1983). The rule‘s intention

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is to ―prevent the defendant from receiving a windfall by avoiding liability for damages

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suffered by the plaintiff as a result of the defendant's conduct.‖ Henderson, 2011 WL 2838169

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at *4.

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Defendant states that Plaintiff was billed $32,222.53 for medical treatment, but

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Plaintiff‘s insurance paid only $17,088.60 to fully satisfy this bill. (Dkt. No. 113 at 3.)

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Howell held that where a medical provider ―accepts as full payment, pursuant to a preexisting

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contract with the injured person‘s health insurer, an amount less than that stated in the

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provider‘s bill,‖ the injured person may not recover ―as economic damages for past medical

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expenses the undiscounted sum stated in the provider‘s bill but never paid by or on behalf of

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the injured person.‖ Howell, 52 Cal.4th at 548. This holding reflects the reality that the

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―plaintiff did not incur liability for her provider‘s full bills, because at the time the charges

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were incurred the providers had already agreed on a different price schedule,‖ and thus

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―[h]aving never incurred the full bill, [t]he plaintiff could not recover it in damages for

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economic loss.‖ Id. at 563. In essence, while the collateral source rule clearly covers

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payments made on the plaintiff‘s behalf by a collateral source such as insurance, the rule does

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not extend to hypothetical money that was never paid or owed1 due to an independent third-

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party arrangement between an insurer and a medical provider that predated the plaintiff‘s

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injury.
In support of her position that Howell is irrelevant to this federal law action and that

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under federal law Plaintiff should be allowed to recover for all billed medical expenses,

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Plaintiff cites cases in which the collateral source rule was applied to actual amounts paid on a

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plaintiff‘s behalf in the form of unemployment benefits or reimbursement for medical

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expenses. See, e.g., Nat‘l Labor Relations Bd. v. Gullett Gin, Co., 340 U.S. 361, 363-65

Northern District of California

(1951) (back pay award not reduced by unemployment benefits); Kauffman v. Sidereal Corp.,

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United States District Court

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695 F.2d 343, 357 (9th Cir. 1982) (same); Gil v. Maciejewski, 546 F.3d 557, 564 (8th Cir.

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2008)(applying the federal common law collateral source rule and not deducting ―$9,906.98

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[received by plaintiff] from his insurer to cover the cost of medical treatment‖ from a $10,000

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damages award). Plaintiff does not cite any case in which a plaintiff was allowed to recover

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as medical expenses an amount never actually owed because of insurance agreements that pre-

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existed the plaintiff‘s injury, which is the issue here.
―[T]he common law of torts provides the appropriate starting point for the [damages]

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inquiry under §1983.‖ Ditullio v. Boehm, 662 F.2d 1091, 1097 (9th Cir. 2011). The Court

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has not located any federal common law that squarely addresses whether a plaintiff in a

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personal injury action should be able to recover as medical expenses all amounts billed

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regardless of any pre-existing agreement as to what amount would actually be paid by an

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insurance company. At least one California federal trial court has applied Howell, but it did

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so in a diversity jurisdiction state-law action. Van Maanen v. Youth With a Mission, 2011

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WL 5838185 (E.D. Cal. Nov. 21, 2011) (applying Howell to a negligence case where plaintiff

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was a Dutch citizen). Another district court applied the rule later set forth in Howell (based

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on California appellate decisions) in a Federal Tort Claims Act case while Howell was

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Howell notes further that billed rates do not even ―necessarily represent the amount an
uninsured patient will pay‖ due to discounts hospitals routinely offer. Howell, 52 Cal.4th at
561.
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pending before the California Supreme Court. Quintero v. U.S., 2011 WL 836735 at *2 (E.D.

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Cal. Mar. 2, 2011) (upholding initial damages award despite plaintiff‘s claim of entitlement to

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higher damages ―equal to the full amount billed for his medical services, not the amount

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accepted by health care providers in full satisfaction of his medical debts‖).
The Court will instruct the jury that in determining the amount of Plaintiff‘s damages,

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and services received to the present time.‖ Ninth Circuit Civil Model Jury Instruction No. 5.2;

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see also Quintero, 2011 WL 836735 at *6 (stating that ―[t]he normal measure of [medical]

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damages for a person injured by another‘s tortious conduct is the reasonable value of medical

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care and services reasonably required and attributable to the tort‖). The critical question, then,

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Northern District of California

if any, the jury should consider the ―reasonable value of necessary medical care, treatment,

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United States District Court

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is whether the amount billed is relevant to the ―reasonable value of necessary medical care‖

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inquiry when the amount billed is unrelated to the amount actually owed for the medical

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services due to pre-existing agreements between the plaintiff‘s medical provider and insurer.

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The Court agrees with Howell and Quintero that the amount actually paid on behalf of

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Plaintiff by her insurers pursuant to prior agreements with her medical providers is the

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reasonable value of her medical care. Plaintiff has not cited any case law to the contrary, and

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this rule makes common sense. The dilemma, however, is how to present such evidence to

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the jury without—perhaps unintentionally—inducing them to reduce the amount of medical

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damages by the amount paid by the insurers in violation of the collateral source rule. 2 The

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parties are therefore ordered to meet and confer to determine if they can reach an agreement

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on how to present such evidence.

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Another potential solution is to follow the procedure that occurred in Howell, namely

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―where a trial jury has heard evidence of the amount accepted as full payment by the medical

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provider but has awarded a greater sum as damages for past medical expenses, the defendant

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may move for a new trial on grounds of excessive damages,‖ and the plaintiff may ―choose

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The Quintero court admitted evidence of both the amounts billed and paid but noted that as
Quintero was a bench trial, ―there was no jury hearing‖ and thus ―the risk of undue prejudice
under Rule 403 resulting from the evidence was nonexistent.‖ Quintero, 2011 WL 836735 at
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between accepting reduced damages or undertaking a new trial.‖ Howell, 52 Cal.4th at 567.

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The Court will address this issue with the parties on Monday, February 6, 2012 following the

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dismissal of the jury.

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IT IS SO ORDERED.
Dated: February 2, 2012

_________________________________
JACQUELINE SCOTT CORLEY
UNITED STATES MAGISTRATE JUDGE

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Northern District of California

United States District Court

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