Damages: Gratuitous Write-Off by Medical Provider

Posted in Damages on March 9, 2012

Sanchez v. Strickland, (Fifth District, November 4, 2011) 133 Cal.Rptr.3d 342, 11 Cal. Daily Op. Serv. 13,660, 2011 Daily Journal D.A.R. 16230

The heirs of three individuals who were killed when their car collided with a truck hauling two semi-trailers filed an action for wrongful death against the owner and operator of the truck. One of the decedents had been hospitalized for four months following the accident, and as a result, his estate had incurred substantial medical bills.

Following a jury verdict in favor of the plaintiffs, the defendants filed a motion to reduce the amount of verdict representing medical expenses to the actual amounts paid or owed. The verdict had included over $7,000 which had been gratuitously written off by one of the decedent’s medical care providers. The trial court granted the motion but the court of appeal modified the award, holding that the limitation on recovery in Howell v. Hamilton Meats (2011) 52 Cal.4th 541 with respect to amounts providers have agreed to accept from insurers, does not extend to amounts gratuitously written off:

“In Howell, the California Supreme Court stated that the Restatement Second of Torts reflects the widely held view that the collateral source rule applies to gratuitous payments and services, but that California law was less clear on the point. (citations) The court also stated that the case presented did not require it to decide the question concerning gratuitous write-offs. Nevertheless, the court discussed whether its holding was inconsistent with a rule of law that would allow a plaintiff to recover the reasonable value of service rendered gratuitously and stated:

“We see no anomaly, even assuming we would recognize the gratuitous-services exception to the rule limiting recovery to the plaintiff’s economic loss. The rationale for that exception—an incentive to charitable aid (Arambula v. Wells [ (1999) ] 72 Cal.App.4th [1006,] 1013 [85 Cal.Rptr.2d 584] )—has, as just explained, no application to commercially negotiated price agreements like those between medical providers and health insurers. Nor, as discussed below, does the tort law policy of avoiding a windfall to the tortfeasor suggest the necessity of treating the negotiated rate differential as if it were a gratuitous payment by the medical provider.”
. . .
Based on the discussion of gratuitous payments and services in Howell, Hanif, and Arambula as well as the view contained in the Restatement Second of Torts, we adopt the following rule of law: Where a medical provider has (1) rendered medical services to a plaintiff, (2) issued a bill for those services, and (3) subsequently written off a portion of the bill gratuitously, the amount written off constitutes a benefit that may be recovered by the plaintiff under the collateral source rule.

Under this rule of law, the $7,020 written off by Vibra Healthcare for medical services provided to Pedro Hueso at Kentfield Rehabilitation & Specialty Hospital is recoverable as damages because that amount was included in the past medical expenses awarded by the jury.”