The Court of Appeals for the first appellate district in California recently published a new case that will be of interest to Personal Injury Attorneys in Sacramento:

Yanez v. Soma Environmental Engineering, Inc.

Citation for Yanez v. Soma: (2010) 185 Cal.App.4th 1313

pdf(Download a PDF of Yanez v. Soma)

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Why is This Case Important to Personal Injury Lawyers?

In California, there is an unsettled questions as to how much of a person’s medical bills they are entitled to recover in a personal injury lawsuit.  To use a very simple example, imagine that Peter Plaintiff gets injured in a car collision by Danny Defendant.  Peter spends $100,000.00 on medical bills recovering from his injuries.  The law in California says that a defendant who causes a car collision owes the injured plaintiff the reasonable value of his incurred medical bills.  So what does Danny owe Peter?

$100,000.00 right?  Wrong.  The correct answer is every lawyer’s favorite:  “It depends.”

Let’s say Peter had medical insurance through his job.  Let’s also pretend that the medical insurance company paid the medical providers (the hospital, doctors, etc.) the full $100,000.00.  Peter has not had to pay any of his own money.  So what does Danny Owe Peter?

$0.00 right?  Wrong again.   In California, we follow a law called the “Collateral Source Rule.”  This rule says that even if your medical bills, or “damages,” are paid by someone else, you can still recover their full value in court.  Put simply, if you have a rich uncle that pays all your medical bills, the defendant is still on the hook for the full value of the bills in court.

So what does Danny owe Peter?

It gets more complicated.  In all likelihood, the medical providers would be willing to accept far less than $100,000.00 in satisfaction of their bills.  This is due to all sorts of reasons.  First, it is more valuable to the hospital to have some money now rather than the chance at getting all the money later.  Second, the Hospital and the Insurance company have likely made a deal:  the Medical Insurance company sends all their patients to a certain hospital (increasing the hospital’s business) and in exchange the hospital charges the insurance company less.

So let’s say the medical providers are willing to accept $60,000.00 from Danny’s insurance in full satisfaction of their $100,000.00 bill.  Now what can Peter recover in court?  $60,000.00?  $100,000.00?

Plaintiff’s personal injury attorneys and defense and insurance company attorneys have been fighting about that for years.

The latest case, Yanez v. Soma, suggests that Peter can recover the whole $100,000.00.

Summary:  Yanez v. Soma

Facts: Plaintiff Ana Yanez was injured when an employee of defendant SOMA Environmental Engineering struck her vehicle while driving his pickup truck.

As a result of the collision, Yanez needed medical treatment, for a total charge of $44,519.01.  Yanez’s private health insurance (aetna) paid the medical providers $18,368.24 in satisfaction of these bills.

At trial, Yanez presented evidence of the full charges of her medical bills, and she was awarded $150,000.00, including $44,519.01 for her medical bills.

After trial, the court reduced the verdict so that Yanez would only recover $18,368.24 for her medical bills – the amount accepted by Yanez’s medical providers.

Plaintiff had made a code of civil procedure 998 offer to compromise before trial for $150,000.00

Issues:  Did the trial court err by  (1) reducing the jury’s award from the full value of medical charges to the amount of medical bills paid by insurance, and accepted by medical providers?  And (2) by denying plaintiffs costs under CCP 998 pursuant to the post-trial reduction?

Holdings:  (1)  The trial court erred in reducing Yanez’s damages to the amount actually paid by her insurers.  (2)  The 998 issue was remanded to the trial court.

Legal Analysis:

The Collateral Source Rule – The court began with a restatement and re-affirmation of the collateral source rule, stating “The courts generally have held that benefits received by the plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer.”

The court also quoted Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, stating “courts consider insurance a form of investment.  If we were to permit a tortfeasor to mitigate damages with payments from plaintiff’s insurance, plaintiff would be in a position inferior to that of having bought no insurance.”

Evidence of Medical Damages – The court re-affirmed the position that in California, “absent special circumstances, the jury should not hear evidence concerning collateral source benefits received by the plaintiff.”

Hanif and Subsequent Cases – The court next examined the last 20 years of cases which have discussed the present issue.

Hanif v. Housing Authority (1988) 200 Cal.App.3d 35 – In this case the court held that an injured Medi-Cal patient could receive no more than the amount that Medi-Cal paid for medical care.  The court also “went further” and held that any compensation in excess of the amount paid or incurred was excessive.

Nishihama v. City and County of Sanfransisco (2001) 93 Cal.App.4th 298 – In this case, a plaintiff/patient with private medical insurance sued a public entity.  Plaintiff requested compensation for the full charges, because even though plaintiff’s insurance paid a lower rate for medical services, the hospital attempted to assert a lien for the remaining charges against plaintiff under Civil Code 3045.1.  The court held that the plaintiff and the hospital were held to the lower, negotiated rate.  This case did not specifically address whether Hanif should apply outside of the Medi-Cal context, but assumed, without discussion, that the Hanif Decision DID apply to private insurance.  In the later case of Parnell v. Adventist Health System/West (2005( 35 Cal.4th 595 the court specifically declined to decide whether Hanif applied outside of the Medi-Cal context – seemingly leaving the question open.

Greer v. Buzgheia (2006) 141 Cal.App.4th 1150 – This case implicitly upheld Nishihamas premise that “it is error for the plaintiff to recover medical expenses in excess of the amount paid or incurred.”  However the court did not apply that rule in this particular case because the issue was not preserved due to a special jury verdict form which lumped special and general damages into one indistinguishable number.

Olsen v. Reid (2008) 164.Cal.App4th 200 – The court was asked to reconsider Hanif and Nishihama, however the court did not reach the question due to insufficient evidence.  A concurring opinion by Justice Moore did reach that issue, and she decried judicial abrogation of the Collateral Source rule absent a law passed by the legislature.  A concurring opinion from Justice Faybel endorsed the Hanif/Nishihama view.

People v. Millard (2009) 175 Cal.App.4th 7 – In this criminal restitution case, the court upheld (on an abuse of discretion standard) the trial court’s decision to use the Hanif methodology to valuate a victim’s restitution award.

Out of State Cases

The court next reviewed multiple out of state cases for persuasive authority.  The court concluded that the “great majority” of other states endorsed the Collateral Source rule, and allowed recovery of the full amount of medical bills, with no reduction for contractually negotiated rates.

Final Analysis

Hanif used overly broad language, and the extension of the Hanif doctrine to private insurance violates the collateral source rule.  The issue of whether the hospital’s full “charges” is equal to the “reasonable value” of medical expenses is a question of fact for the jury.

The Hanif court, and much of the following discussion, did not appear to contemplate the fact that plaintiffs with private health insurance may be charged a lower rate as an insurance benefit, negotiated between the health care provider and the insurance.  This key fact appears to have been ignored by many of the previous discussion on this issue.

The Yanez court articulated two important collateral source benefits that a person with private health insurance obtains: (1) The insurance company benefits from lower negotiated rate, which in turn lowers the insured’s insurance costs (premiums, and co-payments), and (2) The health care providers benefit from the negotiated rates because they save on administrative and collection costs, which results in less expensive medical care for the insured.  These are both collateral benefits, protected under the collateral source rule.

This case declined to decide whether Hanif was correctly decided, because the facts of the underlying cases are sufficiently different.

Rule of Law:  Rate discounts negotiated between health insurers and providers must be deemed collateral benefits which, under the collateral source rule, should accrue to the insured plaintiff, not the defendant.

Important Dicta: The court noted that “it could be argued” that a jury should receive evidence of both the actual bills, and the amount paid by insurance, however that issue was beyond the scope of the present appeal.

Justice Banke wrote a long Concurring Opinion, which I will cover in a future post.

This article was written by  Sacramento Personal Attorney Noah Schwinghamer.  You may re-post the article, however any re-posts must include this final paragraph.  Noah Schwinghamer’s Sacramento Injury Law Blog NfsEsq can be found at