Case Title: Howell v. Hamilton Meats

Citation: 

Docket Number: s179115

State: california

Court: California Supreme Court

Date: 2011-08-18T00:00:00Z

Document:
1 
Filed 8/18/11 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
REBECCA HOWELL, 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S179115 
 
v. 
) 
 
 
) 
Ct.App. 4/1 D053620 
HAMILTON MEATS & PROVISIONS, 
) 
INC., 
) 
 
) 
San Diego County 
 
Defendant and Respondent. 
) 
Super. Ct. No. GIN053925 
 
____________________________________) 
 
When a tortiously injured person receives medical care for his or her 
injuries, the provider of that care often accepts as full payment, pursuant to a 
preexisting contract with the injured person‘s health insurer, an amount less than 
that stated in the provider‘s bill.  In that circumstance, may the injured person 
recover from the tortfeasor, as economic damages for past medical expenses, the 
undiscounted sum stated in the provider‘s bill but never paid by or on behalf of the 
injured person?  We hold no such recovery is allowed, for the simple reason that 
the injured plaintiff did not suffer any economic loss in that amount.  (See Civ. 
Code, §§ 3281 [damages are awarded to compensate for detriment suffered], 3282 
[detriment is a loss or harm to person or property].)   
The collateral source rule, which precludes deduction of compensation the 
plaintiff has received from sources independent of the tortfeasor from damages the 
plaintiff ―would otherwise collect from the tortfeasor‖ (Helfend v. Southern Cal. 
Rapid Transit Dist. (1970) 2 Cal.3d 1, 6 (Helfend)), ensures that plaintiff here may 
 
2 
recover in damages the amounts her insurer paid for her medical care.  The rule, 
however, has no bearing on amounts that were included in a provider‘s bill but for 
which the plaintiff never incurred liability because the provider, by prior 
agreement, accepted a lesser amount as full payment.  Such sums are not damages 
the plaintiff would otherwise have collected from the defendant.  They are neither 
paid to the providers on the plaintiff‘s behalf nor paid to the plaintiff in indemnity 
of his or her expenses.  Because they do not represent an economic loss for the 
plaintiff, they are not recoverable in the first instance.  The collateral source rule 
precludes certain deductions against otherwise recoverable damages, but does not 
expand the scope of economic damages to include expenses the plaintiff never 
incurred. 
FACTUAL AND PROCEDURAL BACKGROUND 
Plaintiff Rebecca Howell was seriously injured in an automobile accident 
negligently caused by a driver for defendant Hamilton Meats & Provisions, Inc. 
(Hamilton).  At trial, Hamilton conceded liability and the necessity of the medical 
treatment plaintiff had received, contesting only the amounts of plaintiff‘s 
economic and noneconomic damages. 
Hamilton moved in limine to exclude evidence of medical bills that neither 
plaintiff nor her health insurer, PacifiCare, had paid.  Hamilton asserted that 
PacifiCare payment records indicated significant amounts of the bills from 
plaintiff‘s health care providers (the physicians who treated her and Scripps 
Memorial Hospital Encinitas, where she was treated) had been adjusted downward 
before payment pursuant to agreements between those providers and PacifiCare 
and that, under plaintiff‘s preferred provider organization (PPO) policy with 
 
3 
PacificCare, plaintiff could not be billed for the balance of the original bills 
(beyond the amounts of agreed patient copayments).  Relying primarily on Hanif 
v. Housing Authority (1988) 200 Cal.App.3d 635 (Hanif),1 Hamilton argued that 
because only the amounts paid by plaintiff and her insurer could be recovered, the 
larger amounts billed by the providers were irrelevant and should be excluded.  
The trial court denied the motion, ruling that plaintiff could present her full 
medical bills to the jury and any reduction to reflect payment of reduced amounts 
would be handled through ―a posttrial Hanif motion.‖ 
Plaintiff‘s surgeon and her husband each testified that the total amount 
billed for her medical care up to the time of trial was $189,978.63, and the jury 
returned a verdict awarding that same amount as damages for plaintiff‘s past 
medical expenses.   
Hamilton then made a ―post-trial motion to reduce past medical specials 
pursuant to [Hanif],‖ seeking a reduction of $130,286.90, the amount assertedly 
―written off‖ by plaintiff‘s medical care providers, Scripps Memorial Hospital 
Encinitas (Scripps) and CORE Orthopaedic Medical Center (CORE).  In support 
of the motion, Hamilton submitted billing and payment records from the providers 
and two declarations, the first by Scripps‘s collections supervisor, the second by 
an employee of CORE‘s billing contractor.  The Scripps declaration stated that of 
                                              
1  
In Hanif, the plaintiff introduced evidence that the reasonable value of the 
medical services he received was greater than the amount Medi-Cal had paid on 
his behalf, and the trial court awarded him the greater sum.  (Hanif, supra, 200 
Cal.App.3d at p. 639.)  The appellate court held this was error, for ―when the 
evidence shows a sum certain to have been paid or incurred for past medical care 
and services, whether by the plaintiff or by an independent source, that sum 
certain is the most the plaintiff may recover for that care despite the fact it may 
have been less than the prevailing market rate.‖  (Id. at p. 641.) 
 
4 
the $122,841 billed for plaintiff‘s surgeries, PacifiCare paid $24,380, plaintiff paid 
$3,566, and the remaining $94,894 was ― ‗written off‘ or waived by [Scripps] 
pursuant to the agreement between [Scripps] and the patient‘s private healthcare 
insurer, in this case Pacificare PPO.‖  The CORE declaration stated that of the 
surgeon‘s bill for $52,915, PacifiCare paid $9,665, and $35,392 was waived or 
written off pursuant to CORE‘s agreement with PacifiCare.2  Both declarants 
stated the providers had not filed liens for, and would not pursue collection of, the 
written-off amounts. 
In opposition, plaintiff argued reduction of the medical damages would 
violate the collateral source rule.  She supported her opposition with copies of the 
patient agreements she had signed with Scripps, in which she agreed to pay 
Scripps‘s ―usual and customary charges‖ for the medical care she was to receive, 
and with CORE, in which she agreed to pay any part of the physician‘s fee her 
insurance did not pay. 
The trial court granted Hamilton‘s motion, reducing the past medical 
damages award ―to reflect the amount the medical providers accepted as payment 
in full.‖  Accordingly, the court reduced the judgment by $130,286.90. 
The Court of Appeal reversed the reduction order, holding it violated the 
collateral source rule.  Because it viewed the reduction of the award as 
substantively improper, the Court of Appeal did not resolve plaintiff‘s additional 
                                              
2  
For simplicity, we have rounded these amounts to the nearest dollar, 
leading to a $1 discrepancy in the Scripps total.  The $7,858 difference between 
the total CORE bill and the sum of the PacifiCare payments and write-offs is not 
explained in the CORE declaration. 
 
5 
contentions that the procedures used in the trial court were statutorily unauthorized 
and the evidence Hamilton presented was insufficient.   
We granted Hamilton‘s petition for review. 
DISCUSSION 
Compensatory damages are moneys paid to compensate a person who 
―suffers detriment from the unlawful act or omission of another‖ (Civ. Code, 
§ 3281), and the measure of damages generally recoverable in tort is ―the amount 
which will compensate for all the detriment proximately caused‖ by the tort (id., 
§ 3333).  Civil Code section 3282, in turn, defines ―detriment‖ as ―a loss or harm 
suffered in person or property.‖  A person who undergoes necessary medical 
treatment for tortiously caused injuries suffers an economic loss by taking on 
liability for the costs of treatment.  Hence, any reasonable charges for treatment 
the injured person has paid or, having incurred, still owes the medical provider are 
recoverable as economic damages.  (See Melone v. Sierra Railway Co. (1907) 151 
Cal. 113, 115 [plaintiff is entitled to ―[s]uch reasonable sum . . . as has been 
necessarily expended or incurred in treating the injury‖].) 
When, as here, the costs of medical treatment are paid in whole or in part 
by a third party unconnected to the defendant, the collateral source rule is 
implicated.  The collateral source rule states that ―if an injured party receives some 
compensation for his injuries from a source wholly independent of the tortfeasor, 
such payment should not be deducted from the damages which the plaintiff would 
otherwise collect from the tortfeasor.‖  (Helfend, supra, 2 Cal.3d at p. 6.)  Put 
another way, ―Payments made to or benefits conferred on the injured party from 
other sources [i.e., those unconnected to the defendant] are not credited against the 
tortfeasor‘s liability, although they cover all or a part of the harm for which the 
tortfeasor is liable.‖  (Rest.2d Torts, § 920A, subd. (2).)  The rule thus dictates that 
 
6 
an injured plaintiff may recover from the tortfeasor money an insurer has paid to 
medical providers on his or her behalf. 
Helfend, like the present case, involved a health insurer‘s payments to 
medical providers on the plaintiff‘s behalf.  In these circumstances, we explained, 
the collateral source rule ensures plaintiffs will receive the benefits of their 
decision to carry insurance and thereby encourages them to do so.  (Helfend, 
supra, 2 Cal.3d at pp. 9-10.)  Since insurance policies frequently allow the insurer 
to reclaim the benefits paid out of a tort recovery by refund or subrogation, the 
rule, without providing the plaintiff a double recovery, ensures the tortfeasor 
cannot ―avoid payment of full compensation for the injury inflicted . . . .‖  (Id. at 
p. 10.) 
In Helfend, we addressed a challenge to the continued acceptance of the 
collateral source rule.  After considering the rule‘s operation and consequences, 
we rejected that challenge, concluding that ―in the context of the entire American 
approach to the law of torts and damages, . . . the rule presently performs a number 
of legitimate and even indispensable functions.‖  (Helfend, supra, 2 Cal.3d at 
p. 13.)  Helfend did not, however, call on this court to consider how the collateral 
source rule would apply to damages for past medical expenses when the amount 
billed for medical services substantially exceeds the amount accepted in full 
payment.  While Helfend unequivocally reaffirmed California‘s acceptance of the 
rule, it did not explain how the rule would operate in the circumstances of the 
present case. 
The collateral source rule has an evidentiary as well as a substantive aspect.  
Because a collateral payment may not be used to reduce recoverable damages, 
evidence of such a payment is inadmissible for that purpose.  Even if relevant on 
another issue (for example, to support a defense claim of malingering), under 
Evidence Code section 352 the probative value of a collateral payment must be 
 
7 
―carefully weigh[ed] . . . against the inevitable prejudicial impact such evidence is 
likely to have on the jury‘s deliberations.‖  (Hrnjak v. Graymar, Inc. (1971) 4 
Cal.3d 725, 732.)  Admission of evidence of collateral payments may be reversible 
error even if accompanied by a limiting instruction directing the jurors not to 
deduct the payments from their award of economic damages.  (Id. at pp. 729, 734.) 
The Legislature has abrogated or altered the collateral source rule for two 
classes of actions.  First, in a professional negligence action against a health care 
provider, the defendant may introduce evidence of collateral payments and 
benefits provided to the plaintiff for his or her injury; the plaintiff, in turn, may 
introduce evidence of premiums paid or contributions made to secure the benefits.  
(Civ. Code, § 3333.1, subd. (a).)  Second, a public entity defendant may move, 
after trial, to reduce a personal injury award against it by the amount of certain 
collateral source payments.  (Gov. Code, § 985, subd. (b).)  The trial court has 
discretion to reduce the judgment, though its discretion is guided and limited in 
several respects, including that the total deduction may not exceed one-half of the 
plaintiff‘s net recovery.  (Id., subd. (g).)  Neither statute applies here. 
The California history of the substantive question at issue—whether 
recovery of medical damages is limited to the amounts providers actually are paid 
or extends to the amounts of their undiscounted bills—begins with Hanif, supra, 
200 Cal.App.3d 635. 
The injured plaintiff in Hanif was a Medi-Cal recipient,3 and the amounts 
Medi-Cal paid for his medical care were, according to his evidence, substantially 
                                              
3  
Medi-Cal is California‘s implementation of the federal Medicaid program.  
(See Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 804.)  The amounts paid 
by Medicaid programs are ―usually, if not always‖ less than a provider‘s ordinary 
charges.  (Id. at p. 820.) 
 
8 
lower than the ―reasonable value‖ of the treatment (apparently the same as the 
hospital bill, as the opinion notes the hospital had ― ‗written off‘ ‖ the difference).  
(Hanif, supra, 200 Cal.App.3d at p. 639.)  Although there was no evidence the 
plaintiff was liable for the difference, the court in a bench trial awarded the 
plaintiff the larger, ―reasonable value‖ amount.  (Ibid.)  The appellate court held 
the trial court had overcompensated the plaintiff for his past medical expenses; 
recovery should have been limited to the amount Medi-Cal had actually paid on 
his behalf.  (Id. at pp. 639, 643-644.)  The court ordered the judgment modified to 
reflect the proper reduction.  (Id. at p. 646.) 
Hanif‘s rationale was straightforward.  While California courts have 
referred to the ―reasonable value‖ of medical care in delineating the measure of 
recoverable damages for medical expenses, in this context ― ‗[r]easonable value‘ is 
a term of limitation, not of aggrandizement.‖  (Hanif, supra, 200 Cal.App.3d at 
p. 641.)  The ―detriment‖ the plaintiff suffered (Civ. Code, § 3281), his pecuniary 
―loss‖ (id., § 3282), was only what Medi-Cal had paid on his behalf; to award 
more was to place him in a better financial position than before the tort was 
committed.  (Hanif, at pp. 640-641.)  A tort plaintiff‘s recovery for medical 
expenses, the Hanif court opined, is limited to the amount ―paid or incurred for 
past medical care and services, whether by the plaintiff or by an independent 
source . . . .‖  (Id. at p. 641.) 
We cited Hanif‘s holding with approval in Olszewski v. Scripps Health, 
supra, 30 Cal.4th 798, in which we held California‘s provider lien statute (Welf. & 
Inst. Code, § 14124.791) was preempted by federal law and invalid as applied to a 
Medi-Cal beneficiary‘s tort recovery.  In so doing, we observed that because a 
provider‘s lien for its full fees was not permissible, pursuant to Hanif the Medi-Cal 
beneficiary may recover as damages from the tortfeasor only the amount payable 
to the provider under Medi-Cal.  (Id. at pp. 826-827.) 
 
9 
In Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 
298 (Nishihama), the Court of Appeal applied Hanif‘s rationale to payments made 
by a private health insurer.  The jury awarded the injured plaintiff $17,168 for her 
hospital expenses, an amount based on the hospital‘s ―normal rates.‖  (Id. at 
p. 306.)  The record, however, showed the plaintiff participated in a health plan 
administered by Blue Cross, which had an agreement with the hospital pursuant to 
which the hospital had accepted $3,600 in full payment for its services to the 
plaintiff.  (Id. at pp. 306-307.)  Relying on Hanif‘s holding that only the amount 
actually paid or incurred is recoverable as compensation for medical expenses, and 
rejecting the plaintiff‘s argument that the hospital might take a larger sum (its 
normal rate) out of her recovery under a lien it had filed,4 the Nishihama court 
ordered the judgment reduced to reflect only the amount the hospital had received 
from Blue Cross.  (Nishihama, at pp. 306-309.) 
This court subsequently reached the same conclusion in Parnell v. 
Adventist Health System/West (2005) 35 Cal.4th 595, 598, holding the hospital 
could not assert a lien against a patient‘s tort recovery for its full bill when it had 
agreed to accept an insurer‘s lesser reimbursement as full payment.  At the same 
time, however, we reserved judgment on whether Hanif, supra, 200 Cal.App.3d 
635, and Olszewski v. Scripps Health, supra, 30 Cal.4th 798, ―apply outside the 
Medicaid context and limit a patient‘s tort recovery for medical expenses to the 
amount actually paid . . . .‖  (Parnell, at pp. 611-612, fn. 16.) 
                                              
4  
The appellate court held that under the Hospital Lien Act (Civ. Code, 
§§ 3045.1-3045.6) the hospital‘s lien rights ―do not extend beyond the amount it 
agreed to receive from Blue Cross as payment in full for services provided to 
plaintiff.‖  (Nishihama, supra, 93 Cal.App.4th at p. 307.)   
 
10 
Hanif and Nishihama were distinguished in Katiuzhinsky v. Perry (2007) 
152 Cal.App.4th 1288.  There, although the injured plaintiffs‘ medical providers 
had sold some of their bills at a discount to a medical finance company, the 
plaintiffs remained liable to the finance company for the original amounts of the 
bills.  (Id. at pp. 1290-1291.)  The appellate court concluded the trial court, in 
limiting recovery to the discounted amounts, ―did not correctly apply Hanif and 
Nishihama.  The intervention of a third party in purchasing a medical lien does not 
prevent a plaintiff from recovering the amounts billed by the medical provider for 
care and treatment, as long as the plaintiff legitimately incurs those expenses and 
remains liable for their payment.‖  (Id. at p. 1291, italics added.) 
None of the above decisions discussed the question, central to the 
arguments in this case, of whether restricting recovery to amounts actually paid by 
a plaintiff or on his or her behalf contravenes the collateral source rule.  These 
arguments, although extensive, can be reduced to a few central disputed issues:  
(1) Was Hanif correct that a tort plaintiff can recover only what has been paid or 
incurred for medical care, even if that is less than the reasonable value of the 
services rendered?  (2) Even if Hanif, which involved Medi-Cal payments, 
reached the right result on its facts, does its logic extend to plaintiffs covered by 
private insurance?  (3) Does limiting the plaintiff‘s recovery to the amounts paid 
and owed on his or her behalf confer a windfall on the tortfeasor, defeating the 
policy goals of the collateral source rule?  (4) Is the difference between the 
providers‘ full billings and the amounts they have agreed to accept from a 
patient‘s insurer as full payment—what the appellate court below called the 
―negotiated rate differential‖—a benefit the patient receives from his or her health 
insurance policy subject to the collateral source rule?  We address these questions 
below. 
 
11 
A.  Hanif and the Measure of Damages for Past Medical Expenses   
We agree with the Hanif court that a plaintiff may recover as economic 
damages no more than the reasonable value of the medical services received and is 
not entitled to recover the reasonable value if his or her actual loss was less.  
(Hanif, supra, 200 Cal.App.3d at p. 641.)  California decisions have focused on 
―reasonable value‖ in the context of limiting recovery to reasonable expenditures, 
not expanding recovery beyond the plaintiff‘s actual loss or liability.  To be 
recoverable, a medical expense must be both incurred and reasonable.  (See 
Melone v. Sierra Railway Co., supra, 151 Cal. at p. 115 [proper measure of 
damages for medical expenses is ―[s]uch reasonable sum . . . as has been 
necessarily expended or incurred in treating the injury‖ (italics added)]; Townsend 
v. Keith (1917) 34 Cal.App. 564, 566 [trial court‘s failure to instruct the jury ―to 
limit its finding to the reasonable value of the expenses incurred‖ did not prejudice 
defendant, as the expenses incurred were, on their face, not unreasonable (italics 
added)].)   
The rule that a plaintiff‘s expenses, to be recoverable, must be both 
incurred and reasonable accords, as well, with our damages statutes.  ―Damages 
must, in all cases, be reasonable . . . .‖  (Civ. Code, § 3359.)  But if the plaintiff 
negotiates a discount and thereby receives services for less than might reasonably 
be charged, the plaintiff has not suffered a pecuniary loss or other detriment in the 
greater amount and therefore cannot recover damages for that amount.  (Id., 
§§ 3281, 3282.)  The same rule applies when a collateral source, such as the 
plaintiff‘s health insurer, has obtained a discount for its payments on the plaintiff‘s 
behalf. 
The Restatement rule is to the same effect.  While the measure of recovery 
for the costs of services a third party renders is ordinarily the reasonable value of 
those services, ―[i]f . . . the injured person paid less than the exchange rate, he can 
 
12 
recover no more than the amount paid, except when the low rate was intended as a 
gift to him.‖  (Rest.2d Torts, § 911, com. h, pp. 476-477, italics added.)   
Plaintiff argues section 911 of the Restatement is irrelevant, as it deals only 
with the wrongful taking of services and damage to property.  Not so.  Section 911 
articulates a rule, applicable to recovery of tort damages generally, that the value 
of property or services is ordinarily its ―exchange value,‖ that is, its market value 
or the amount for which it could usually be exchanged.  Comment h to section 
911, on the ―[v]alue of services rendered,‖ applies, inter alia, to services the 
plaintiff must purchase from third parties as a result of the tort, noting that if the 
plaintiff obtains these for less than the exchange value, only the amount paid may 
be recovered.  The expenses of medical care, although not specifically mentioned, 
are logically included in the rule articulated.  Thus the general rule under the 
Restatement, as well as California law, is that a personal injury plaintiff may 
recover the lesser of (a) the amount paid or incurred for medical services, and 
(b) the reasonable value of the services.  
Contrary to the view of the dissent (dis. opn., post, at pp. 10-11), section 
924 of the Restatement, which provides that a tort plaintiff may recover 
―reasonable medical and other expenses,‖ expresses no different principle.  
(Rest.2d Torts, § 924.)  To be recoverable as ―expenses,‖ monies must generally 
have been expended, or at least incurred; that they must also be reasonable does 
not alter this general rule.5 
                                              
5  
The reporter‘s note for section 924 (Rest.2d Torts (appen.) § 924, reporter‘s 
notes, p. 445) cites in support of its rule, among other cases, Birmingham 
Amusement Co. v. Norris (Ala. 1927) 112 So. 633, which stated, quoting an earlier 
Alabama case, that ― ‗[w]hile it is true that the defendant is not liable for any more 
than the reasonable value of the services of a physician, yet neither is it liable for 
 
(footnote continued on next page) 
 
13 
B.  Hanif and Private Health Insurance 
Plaintiff contends Hanif‘s limitation on recovery, even if correct as to 
Medi-Cal recipients, does not logically apply to plaintiffs, like her, with private 
medical insurance.  The appellate court below agreed, reasoning that ―Howell, 
who was privately insured, incurred personal liability for her medical providers‘ 
usual and customary charges,‖ whereas the plaintiff in Hanif ―incurred no personal 
liability for the medical charges billed to Medi-Cal.‖  Observing that Hanif stated 
the measure of recovery for medical expenses was the amounts actually ―paid or 
incurred‖ (Hanif, supra, 200 Cal.App.3d at p. 641), plaintiff argues she incurred 
liability for the full amount of Scripps‘s and CORE‘s bills when she signed patient 
agreements with those providers and accepted their services. 
We find the distinction unpersuasive.  Evidence presented at the posttrial 
hearing showed Scripps and CORE accepted the discounted amounts as full 
payment pursuant to preexisting agreements with PacifiCare, plaintiff‘s managed 
care plan.  Since those agreements were in place when plaintiff sought medical 
care from the providers and signed the patient agreements, her prospective liability 
was limited to the amounts PacifiCare had agreed to pay the providers for the 
services they were to render.  Plaintiff cannot meaningfully be said ever to have 
incurred the full charges.  (See Parnell v. Adventist Health System/West, supra, 35 
Cal.4th at p. 609 [where hospital had agreed with plaintiff‘s health plan to accept 
                                                                                                                                                              
(footnote continued from previous page) 
any more than has actually been paid or is due.  So it is necessary to prove both 
. . . .‘ ‖  (Id. at p. 636, italics added.)  Comment f to section 924, on which the 
dissent relies (dis. opn., post, at p. 11), notes the exception for donated medical 
services (discussed further below) but does not suggest that recovery for medical 
expenses may otherwise generally exceed the amount reasonably paid or incurred.  
(Rest.2d Torts, § 924, com. f, pp. 526-527.) 
 
14 
discounted amounts as payment in full, plaintiff owed hospital nothing beyond 
those discounted payments]; cf. People v. Bergin (2008) 167 Cal.App.4th 1166, 
1170 [for purposes of Pen. Code § 1202.4, subd. (f)(3), requiring restitution in the 
amount of the ―economic loss incurred,‖ crime victim incurred loss only in the 
amount medical provider accepted as payment from private insurer].)  In this 
respect, plaintiff here was in the same position as the Hanif plaintiff, who also 
bore no personal liability for the providers‘ charges.  This is not a case like 
Katiuzhinsky v. Perry, supra, 152 Cal.App.4th at page 1296, where the plaintiffs 
―remain[ed] fully liable for the amount of the medical provider‘s charges for care 
and treatment.‖ 
Hanif noted one exception to its rule, viz., for medical services that are 
gratuitously provided or discounted, an exception included in the Restatement 
section on which the court relied (Rest.2d Torts, § 911, com. h, pp. 476-477).  (See 
Hanif, supra, 200 Cal.App.3d at p. 643 [no evidence the low rate charged Medi-
Cal ―was intended as a gift to the plaintiff‖].)  The question arises whether this 
exception, if accepted, limits Hanif‘s logic in a manner important to the present 
issue.  That is, if a plaintiff, as the Restatement provides, may recover the 
reasonable value of donated medical services—services for which neither the 
plaintiff nor the plaintiff‘s insurer paid—should a plaintiff also be permitted to 
recover other amounts that were not paid but were reasonably billed by the 
provider, including the negotiated rate differential?  If the amount of a gratuitous 
discount would be considered a collateral source payment, should the amount of a 
negotiated discount be treated in the same way? 
The Restatement reflects the widely held view that the collateral source rule 
applies to gratuitous payments and services.  (Rest.2d Torts, § 920A, com. c, subd. 
(3), p. 515 [―Thus the fact that the doctor did not charge for his services or the 
plaintiff was treated in a veterans hospital does not prevent his recovery for the 
 
15 
reasonable value of the services.‖]; see also Rest.2d Torts, § 924, com. f, pp. 526-
527.)  California law is less clear on the point.  In Helfend, we suggested in dictum 
that the collateral source rule applies to unpaid services only when those are 
rendered ―with the expectation of repayment out of any tort recovery.‖  (Helfend, 
supra, 2 Cal.3d at p. 7, fn. 5.)  But in Arambula v. Wells (1999) 72 Cal.App.4th 
1006, the Court of Appeal declined to follow this dictum, finding it inconsistent 
with other California cases, the law of sister states, and the policy of encouraging 
charitable action:  ―We doubt such gifts would continue if, notwithstanding a 
donor‘s desire to aid the injured, the person who caused the injury ultimately stood 
to gain a windfall.  Donors should not have to consult with a lawyer to make sure 
their largesse is not hijacked by the tortfeasor.‖  (Id. at p. 1013.)  Thus, although in 
Arambula the injured plaintiff‘s employer had continued to pay his salary, the 
appellate court held the jury should have been permitted to award damages for lost 
earnings.  (Id. at pp. 1008-1009, 1016.)  This court has neither approved nor 
disapproved Arambula‘s holding, nor does this case require that we do so. 
Assuming California follows the Restatement‘s view that a plaintiff may 
recover the value of donated services under the collateral source rule, this 
exception to Hanif‘s limitation on recovery does not, we believe, militate against 
applying Hanif‘s rule—that only amounts paid or incurred are recoverable—to 
medical expenses paid by the plaintiff‘s insurer.  Medical providers that agree to 
accept discounted payments by managed care organizations or other health 
insurers as full payment for a patient‘s care do so not as a gift to the patient or 
insurer, but for commercial reasons and as a result of negotiations.  As plaintiff 
herself explains, hospitals and medical groups obtain commercial benefits from 
their agreements with health insurance organizations; the agreements guarantee 
the providers prompt payment of the agreed rates and often have financial 
incentives for plan members to choose the providers‘ services.  (See Stanley v. 
 
16 
Walker (Ind. 2009) 906 N.E.2d 852, 863-864 (dis. opn. of Dickson, J.) [detailing 
administrative and marketing advantages medical providers derive from managed 
care agreements, particularly those with preferred provider plans].)  That plaintiffs 
are not permitted to recover undiscounted amounts from those who have injured 
them creates no danger these negotiations and agreements will disappear; the 
medical provider has no financial reason to care whether the tortfeasor is charged 
with or the plaintiff recovers the negotiated rate differential.  Having agreed to 
accept the negotiated amount as full payment, a provider may not recover any 
difference between that and the billed amount through a lien on the tort recovery.  
(Parnell v. Adventist Health System/West, supra, 35 Cal.4th at p. 598.) 
In jurisdictions where donated services are considered to fall within the 
collateral source rule, the plaintiff is presumably entitled to recover the reasonable 
value of the services even though he or she did not incur liability in that amount.  
The dissent argues that to limit the recovery of a plaintiff with medical insurance, 
such as Howell, to the amounts paid or incurred is anomalous, given that he or she 
could have recovered a hypothetically larger reasonable value had the services 
been gratuitously provided.  (Dis. opn., post, at p. 6.)  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, supra, 72 Cal.App.4th at 
p. 1013)—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 
 
17 
suggest the necessity of treating the negotiated rate differential as if it were a 
gratuitous payment by the medical provider.6  (See pt. C, post.)   
The dissent‘s repeated description of the negotiated rate differential as a 
write-off from the provider‘s bill illustrates the confusion between negotiated 
prices and gratuitous provision of medical services.  (See dis. opn., post, at pp. 2, 
5, 7, 12.)  Where a plaintiff has incurred liability for the billed cost of services and 
the provider later ―writes off‖ part of the bill because, for example, the plaintiff is 
unable to pay the full charge, one might argue that the amount of the write-off 
constitutes a gratuitous benefit the plaintiff is entitled to recover under the 
collateral source rule.  But in cases like that at bench, the medical provider has 
agreed, before treating the plaintiff, to accept a certain amount in exchange for its 
services.  That amount constitutes the provider‘s price, which the plaintiff and 
health insurer are obligated to pay without any write-off.  There is no need to 
determine a reasonable value of the services, as there is in the case of services 
gratuitously provided.  ―[W]here, as here, the exact amount of expenses has been 
established by contract and those expenses have been satisfied, there is no longer 
any issue as to the amount of expenses for which the plaintiff will be liable.  In the 
latter case, the injured party should be limited to recovering the amount paid for 
                                              
6  
The dissent also argues that since an uninsured plaintiff would be entitled 
to recover the reasonable value of medical services received, an insured plaintiff 
like Howell should be entitled to the same.  The dissent‘s premise is erroneous; a 
plaintiff who lacks health insurance would not be entitled to recover the 
reasonable value of the medical services if that amount exceeded the liability he or 
she incurred for the services.  The rule that medical expenses, to be recoverable, 
must be both incurred and reasonable (Civ. Code, §§ 3281, 3282, 3359; Melone v. 
Sierra Railway Co., supra, 151 Cal. at p. 115) applies equally to those with and 
without medical insurance. 
 
18 
the medical services.‖  (Moorhead v. Crozer Chester Medical Center (Pa. 2001) 
765 A.2d 786, 789.) 
C.  Windfall to the Tortfeasor 
Nor does the tortfeasor obtain a ―windfall‖ (Arambula v. Wells, supra, 72 
Cal.App.4th at p. 1013) merely because the injured person‘s health insurer has 
negotiated a favorable rate of payment with the person‘s medical provider.  When 
an injured plaintiff has received collateral compensation or benefits as a gift, 
allowing a deduction from damages in that amount would result in a windfall for 
the tortfeasor and underpayment for the injury.  Because the tortfeasor would not 
pay the full cost of his or her negligence or wrongdoing, the deduction would 
distort the deterrent function of tort law.  (See Katz, Too Much of a Good Thing:  
When Charitable Gifts Augment Victim Compensation (2003) 53 DePaul L.Rev. 
547, 564  [if a charitable gift to the plaintiff reduces the tort recovery, the 
defendant ―pays less than the full social costs of his conduct and is 
underdeterred‖].)  Analogously, if it were established a medical provider‘s full bill 
generally represents the value of the services provided, and the discounted price 
negotiated with the insurer is an artificially low fraction of that true value, one 
could make a parallel argument that relieving the defendant of paying the full bill 
would result in underdeterrence.  The complexities of contemporary pricing and 
reimbursement patterns for medical providers, however, do not support such a 
generalization.  We briefly explore those complexities below. 
A 2005 study of hospital cost setting conducted for the Medicare Payment 
Advisory Commission concluded:  ―Hospital charge setting practices are complex 
and varied.  Hospitals are generally faced with competing objectives of balancing 
budgets, remaining competitive, complying with health care and regulatory 
standards, and continuing to offer needed services to the community. . . .  
 
19 
[¶] Disparities between charges and costs [have] been growing over time as many 
existing charges were set before hospitals had a good idea of their costs and/or 
were set in response to budgetary and competitive considerations rather than 
resource consumption.  Hospital charges are set within the context of hospitals‘ 
broader communities, including their competitors, payers, regulators, and 
customers. . . .  These competing influences and hospitals‘ efforts to address them 
often produce charges which may not relate systematically to costs.‖  (Dobson et 
al., A Study of Hospital Charge Setting Practices (2005) p. v, 
 (as of Aug. 18, 
2011).) 
The rise of managed care organizations, which typically restrict payments 
for services to their members, has reportedly led to increases in the prices charged 
to uninsured patients, who do not benefit from providers‘ contracts with the plans.  
As one article explains:  ―Before managed care, hospitals billed insured and 
uninsured patients similarly.  In 1960, ‗there were no discounts; everyone paid the 
same rates‘—usually cost plus ten percent.  But as some insurers demanded deep 
discounting, hospitals vigorously shifted costs to patients with less clout.‖  (Hall & 
Schneider, Patients as Consumers:  Courts, Contracts, and the New Medical 
Marketplace (2008) 106 Mich. L.Rev. 643, 663, fns. omitted (hereafter Patients as 
Consumers).)  As a consequence, ―only uninsured, self-paying U.S. patients have 
been billed the full charges listed in hospitals‘ inflated chargemasters,‖7 so that a 
                                              
7  
A hospital charge description master, or chargemaster, is ―a uniform 
schedule of charges represented by the hospital as its gross billed charge for a 
given service or item, regardless of payer type.‖  (Health & Saf. Code, § 1339.51, 
subd. (b)(1).)  California hospitals are required to make their chargemasters public 
 
(footnote continued on next page) 
 
20 
family might find itself ―paying off over many years a hospital bill of, say, 
$30,000 for a procedure that Medicaid would have reimbursed at only $6,000 and 
commercial insurers somewhere in between.‖  (Reinhardt, The Pricing of U.S. 
Hospital Services:  Chaos Behind a Veil of Secrecy (2006) 25 Health Affairs 57, 
62 (hereafter The Pricing of U.S. Hospital Services).)  Some physicians, too, have 
reportedly shifted costs to the uninsured, resulting in significant disparities 
between charges to uninsured patients and those with private insurance or public 
medical benefits.  (Patients as Consumers, at pp. 661-663.) 
Nor do the chargemaster rates (see fn. 7, ante) necessarily represent the 
amount an uninsured patient will pay.  In California, medical providers are 
expressly authorized to offer the uninsured discounts, and hospitals in particular 
are required to maintain a discounted payment policy for patients with high 
medical costs who are at or below 350 percent of the federal poverty level.  (Bus. 
& Prof. Code, § 657, subd. (c); Health & Saf. Code, § 127405, subd. (a)(1)(A).)  
Nationally, ―many hospitals now have means-tested discounts off their 
chargemasters for uninsured patients, which bring the prices charged the uninsured 
closer to those paid by commercial insurers or even below.‖  (The Pricing of U.S. 
Hospital Services, supra, 25 Health Affairs at p. 62.)  Because so many patients, 
insured, uninsured, and recipients under government health care programs, pay 
discounted rates, hospital bills have been called ―insincere, in the sense that they 
would yield truly enormous profits if those prices were actually paid.‖  (Id. at 
p. 63.) 
                                                                                                                                                              
(footnote continued from previous page) 
and to file them with the Office of Statewide Health Planning and Development.  
(Id., §§ 1339.51, subds. (a)(1), (b)(3), 1339.55, subd. (a).) 
 
21 
We do not suggest hospital bills always exceed the reasonable value of the 
services provided.  Chargemaster prices for a given service can vary 
tremendously, sometimes by a factor of five or more, from hospital to hospital in 
California.  (See The Pricing of U.S. Hospital Services, supra, 25 Health Affairs at 
p. 58, exhibit No. 1 [prices for a chest x-ray at selected California hospitals, 
showing low of around $200 and high of around $1,500].)8  With so much 
variation, making any broad generalization about the relationship between the 
value or cost of medical services and the amounts providers bill for them—other 
than that the relationship is not always a close one—would be perilous. 
Finally, private health insurers are well equipped to conduct sophisticated 
arm‘s-length price negotiations, whereas patients individually suffer inherent 
disadvantages that significantly impede negotiating prices with medical care 
providers:  difficulty in gathering information, lack of choice and bargaining 
power, and possible physical and emotional disabilities relating to the injury or 
illness.  (See Patients as Consumers, supra, 106 Mich. L.Rev. at pp. 648-659.)  If 
we seek, then, the exchange value of medical services the injured plaintiff has 
been required to obtain (see Rest.2d Torts, § 911 & com. h, pp. 476-477), looking 
to the negotiated prices providers accept from insurers makes at least as much 
sense, and arguably more, than relying on chargemaster prices that are not the 
result of direct negotiation between buyer and seller.  For this reason as well, it is 
                                              
8  
Hospitals‘ chargemaster prices can be accessed on the Web site of the 
Office of Statewide Health Planning and Development at 
 (as of Aug. 18, 2011).  Updating 
Reinhardt‘s 2004 survey using 2010 data, one finds the listed price for a two-view 
chest x-ray was $176 at San Francisco General Hospital and $1,390 at Doctors 
Medical Center of Modesto. 
 
22 
not possible to say generally that providers‘ full bills represent the real value of 
their services, nor that the discounted payments they accept from private insurers 
are mere arbitrary reductions.  Accordingly, a tortfeasor who pays only the 
discounted amount as damages does not generally receive a windfall and is not 
generally underdeterred from engaging in risky conduct. 
The dissent argues that unless the insured plaintiff is permitted to recover 
the reasonable value or ―market value‖ of the medical services, the tortfeasor will 
not pay the full cost of its negligence, ―distort[ing] the deterrent function of tort 
law.‖  (Dis. opn., post, at pp. 1, 5.)  But as discussed above, pricing of medical 
services is highly complex and depends, to a significant extent, on the identity of 
the payer.  In effect, there appears to be not one market for medical services but 
several, with the price of services depending on the category of payer and 
sometimes on the particular government or business entity paying for the services.  
Given this state of medical economics, how a market value other than that 
produced by negotiation between the insurer and the provider could be identified 
is unclear.9 
The dissent‘s proposal that the insured plaintiff recover the ―reasonable 
value‖ of his or her care, to be proven in each case by expert testimony (dis. opn., 
post, at pp. 1, 12-14), is also troubling because it would routinely involve 
                                              
9  
The Restatement (Rest.2d Torts, § 911, com. h, p. 476) notes the 
―customary rate‖ for services governs tort recovery ―[i]f the services are rendered 
in a business or profession in which there is a rate for them definitely established 
by custom . . . .‖  But how may such a rate be determined when the ―custom‖ is to 
bill for medical services at chargemaster rates that are paid by relatively few 
patients and to discount those rates to varying degrees for various government, 
insurance, and individual payers according to a complex system of regulation and 
negotiation?  
 
23 
violations of the evidentiary aspect of the collateral source rule.  If the jury were 
required to decide whether the price actually paid for medical care was lower than 
reasonable, the defense could not in fairness be precluded from showing the 
circumstances by which that price was determined, including that it was negotiated 
and paid by the plaintiff‘s health insurer.  In contrast, our conclusion, that the 
plaintiff may recover no more than the medical providers accepted in full payment 
for their services, allows for proof of the amount paid without admitting evidence 
of the payment‘s source.  (See p. 28, post.) 
D.  The Negotiated Rate Differential as Insurance Benefit 
If the negotiated rate differential is not a gratuitous payment by the provider 
to the injured plaintiff (recoverable, at least in the Restatement‘s view, under the 
collateral source rule), nor an arbitrary reduction (arguably recoverable to prevent 
a defense windfall and underdeterrence), is it, as plaintiff contends and the Court 
of Appeal held, recoverable as a benefit provided to the insured plaintiff under her 
policy?  Plaintiff contends the negotiated rate differential represents the monetary 
value of the administrative and marketing advantages a provider obtains through 
its agreement with the insurer.  Having incurred liability for the full price of her 
medical care, plaintiff maintains, she then received the benefit of having her 
insurer extinguish that obligation through a combination of cash payments and 
noncash consideration in the amount of the negotiated rate differential.  Both parts 
of this consideration being benefits accruing to her under her policy, for which she 
paid premiums, both parts should assertedly be recoverable under the collateral 
source rule. 
We disagree.  As previously discussed, plaintiff did not incur liability for 
her providers‘ full bills, because at the time the charges were incurred the 
providers had already agreed on a different price schedule for PacifiCare‘s PPO 
 
24 
members.  (See Parnell v. Adventist Health System/West, supra, 35 Cal.4th at 
p. 609.)  Having never incurred the full bill, plaintiff could not recover it in 
damages for economic loss.  For this reason alone, the collateral source rule would 
be inapplicable.  The rule provides that ―if an injured party receives some 
compensation for his injuries from a source wholly independent of the tortfeasor, 
such payment should not be deducted from the damages which the plaintiff would 
otherwise collect from the tortfeasor.‖  (Helfend, supra, 2 Cal.3d at p. 6, italics 
added.)  The rule does not speak to losses or liabilities the plaintiff did not incur 
and would not otherwise be entitled to recover.  As was explained by an Oregon 
justice, ―The collateral source doctrine does not address the amount of damages 
that a plaintiff can recover in the first instance.‖  (White v. Jubitz Corp. (Or. 2009) 
219 P.3d 566, 584 (dis. opn. of Kistler, J.); see also Goble v. Frohman (Fla. 2005) 
901 So.2d 830, 833 (conc. opn. of Bell, J.) [collateral source rule has no 
application where plaintiff ―has not paid, nor is he obligated to pay, the 
prediscount amount of his medical bills‖].)  ―Certainly, the collateral source rule 
should not extend so far as to permit recovery for sums neither the plaintiff nor 
any collateral source will ever be obligated to pay.‖  (Beard, The Impact of 
Changes in Health Care Provider Reimbursement Systems on the Recovery of 
Damages for Medical Expenses in Personal Injury Suits (1998) 21 Am. J. Trial 
Advoc. 453, 489.) 
The negotiated rate differential lies outside the operation of the collateral 
source rule also because it is not primarily a benefit to the plaintiff and, to the 
extent it does benefit the plaintiff, it is not provided as ―compensation for [the 
plaintiff‘s] injuries.‖  (Helfend, supra, 2 Cal.3d at p. 6.)  Insurers and medical 
providers negotiate rates in pursuit of their own business interests, and the benefits 
of the bargains made accrue directly to the negotiating parties.  The primary 
 
25 
benefit of discounted rates for medical care goes to the payer of those rates—that 
is, in largest part, to the insurer.   
Nor does the insurer negotiate or the medical provider grant a discounted 
payment rate as compensation for the plaintiff’s injuries.  As one amicus curiae 
observes, sellers in almost any industry may, for a variety of reasons, discount 
their prices for particular buyers, ―[b]ut a discounted price is not a payment. . . .  
[¶] . . .  [¶] Nor has the value of damages the plaintiff avoided ever been the 
measure of tort recovery.‖  And even when the overall savings a health insurance 
organization negotiates for itself can be said to benefit an insured indirectly—
through lower premiums or copayments, for example—it would be rare that these 
indirect benefits would coincidentally equal the negotiated rate differential for the 
medical services rendered the plaintiff.   
Finally, while the providers presumably did obtain some commercial 
advantages by virtue of their agreements with PacifiCare, plaintiff‘s insurer, the 
global value of those advantages cannot be equated to the amount of the 
negotiated rate differential for plaintiff‘s individual care.  As we have seen, a 
medical care provider‘s billed price for particular services is not necessarily 
representative of either the cost of providing those services or their market value.  
Within a single hospital‘s chargemaster, for example, ―[m]ark-ups tend to vary by 
service line, with high cost items receiving a lower mark-up than low cost items.‖  
(Dobson et al., A Study of Hospital Charge Setting Practices, supra, at p. v.)  The 
price schedules for PacifiCare members, meanwhile, were negotiated for the entire 
PPO membership, not individually for plaintiff, and covered a range of medical 
services Scripps and CORE provided, not only those rendered to plaintiff.  For a 
given medical service to a given plaintiff, therefore, the amount of the negotiated 
rate differential may be higher or lower than the average discount over the range 
of services offered.  The negotiated rate differential in a particular case thus does 
 
26 
not necessarily reflect the commercial advantages the provider obtained in 
exchange for accepting a discounted payment in that case.   
We conclude the negotiated rate differential is not a collateral payment or 
benefit subject to the collateral source rule.  We emphasize, however, that the rule 
applies with full force here and in similar cases.  Plaintiff here recovers the 
amounts paid on her behalf by her health insurer as well as her own out-of-pocket 
expenses.  No ―credit[] against the tortfeasor‘s liability‖ (Rest.2d Torts, § 920A, 
subd. (2)) and no deduction from the ―damages which the plaintiff would 
otherwise collect from the tortfeasor‖ (Helfend, supra, 2 Cal.3d at p. 6) is allowed 
for the amount paid through insurance.  Plaintiff thus receives the benefits of the 
health insurance for which she paid premiums:  her medical expenses have been 
paid per the policy, and those payments are not deducted from her tort recovery.   
Plaintiff‘s insurance premiums contractually guaranteed payment of her 
medical expenses at rates negotiated by the insurer with the providers; they did not 
guarantee payment of much higher rates the insurer never agreed to pay.  Indeed, 
had her insurer not negotiated discounts from medical providers, plaintiff‘s 
premiums presumably would have been higher, not lower.  In that sense, plaintiff 
clearly did not pay premiums for the negotiated rate differential.  Recovery of the 
amount the medical provider agreed to accept from the insurer in full payment of 
her care, but no more, thus ensures plaintiff ―receive[s] the benefits of [her] thrift‖ 
and the tortfeasor does not ―garner the benefits of his victim‘s providence.‖  
(Helfend, supra, 2 Cal.3d at p. 10.)   
In holding plaintiff may not recover as past medical damages the amount of 
a negotiated rate differential, then, we do not alter the collateral source rule as 
articulated in Helfend and the Restatement.  Rather, we conclude that because the 
plaintiff does not incur liability in the amount of the negotiated rate differential, 
which also is not paid to or on behalf of the plaintiff to cover the expenses of the 
 
27 
plaintiff‘s injuries, it simply does not come within the rule.  ―[A] rule limiting the 
measure of recovery to paid charges (where the provider is prohibited from 
balance billing the patient) . . . provides certainty without violating the principles 
protected by the collateral source rule.  Even with a limit of recovery to the net 
loss there is no lessening of the deterrent force of tort law, the defendant does not 
gain the benefit of the plaintiff‘s bargain, and the plaintiff receives full 
compensation for the amount of the expense he was obligated to pay.‖  (Beard, 
The Impact of Changes in Health Care Provider Reimbursement Systems on the 
Recovery of Damages for Medical Expenses in Personal Injury Suits, supra, 21 
Am. J. Trial Advoc., at p. 489.) 
There is, to be sure, an element of fortuity to the compensatory damages the 
defendant pays under the rule we articulate here.  A tortfeasor who injures a 
member of a managed care organization may pay less in compensation for medical 
expenses than one who inflicts the same injury on an uninsured person treated at a 
hospital (assuming the hospital does not offer the person a discount from its 
chargemaster prices).  But, as defendant notes, ―[f]ortuity is a fact in life and 
litigation.‖  To use an example provided by amicus curiae League of California 
Cities, when a driver negligently injures a pedestrian the amount of lost income 
the injured plaintiff can recover depends on his or her employment and income 
potential, a matter of complete fortuity to the negligent driver.  In that situation as 
in this, ―[i]dentical injuries may have different economic effects on different 
victims.‖  We should not order one defendant to pay damages for an economic 
loss the plaintiff has not suffered (Civ. Code, §§ 3281, 3282) merely because a 
 
28 
different defendant may have to compensate a different plaintiff who has suffered 
such a loss.10 
We hold, therefore, that an injured plaintiff whose medical expenses are 
paid through private insurance may recover as economic damages no more than 
the amounts paid by the plaintiff or his or her insurer for the medical services 
received or still owing at the time of trial.  In so holding, we in no way abrogate or 
modify the collateral source rule as it has been recognized in California; we 
merely conclude the negotiated rate differential—the discount medical providers 
offer the insurer—is not a benefit provided to the plaintiff in compensation for his 
or her injuries and therefore does not come within the rule.  For this reason, 
plaintiff‘s argument that any reform of the collateral source rule should come from 
the Legislature rather than this court misses the mark.  Government Code section 
985 and Civil Code section 3333.1, which limit or eliminate the collateral source 
rule for cases involving, respectively, public entity defendants and negligence of a 
health care provider, simply do not speak to the issue presented here.  Our holding 
                                              
10  
Plaintiff cites several decisions from other states in which courts have 
declined to follow Hanif, expressed the view that a negotiated rate differential 
should be recoverable as a collateral source payment, or both.  (See, e.g., Lopez v. 
Safeway Stores, Inc. (Ariz.Ct.App. 2006) 129 P.3d 487, 491-497; Bynum v. Magno 
(Hawaii 2004) 101 P.3d 1149, 1155-1162; Wills v. Foster (Ill. 2008) 892 N.E.2d 
1018, 1029-1031; White v. Jubitz Corp., supra, 219 P.3d at pp. 576-583.)  By and 
large, however, these decisions rest on reasoning we have considered and rejected 
above, or on statutory provisions without California parallel.  And while ours may 
presently be the minority view, several other courts have reached the same 
conclusion.  (See, e.g., Boutte v. Kelly (La.Ct.App. 2003) 863 So.2d 530, 552-553; 
Kastick v. U-Haul Co. of Western Michigan (N.Y.App.Div. 2002) 740 N.Y.S.2d 
167, 169; Moorhead v. Crozer Chester Medical Center, supra, 765 A.2d at pp. 
789-791; see also Goble v. Frohman, supra, 901 So.2d at pp. 833-835 (conc. opn. 
of Bell, J.); Robinson v. Bates (Ohio 2006) 857 N.E.2d 1195, 1200 [a negotiated 
rate differential does not come within the collateral source rule].)   
 
29 
neither contradicts or undermines these statutes nor alters their operation.  Trial 
courts continue to have authority to reduce a plaintiff‘s recovery against a public 
entity under Government Code section 985; in an action arising from the 
professional negligence of a health care provider, evidence of indemnity payments 
made to the plaintiff, and premiums paid by the plaintiff, continues to be 
admissible under the circumstances set out in Civil Code section 3333.1. 
It follows from our holding that when a medical care provider has, by 
agreement with the plaintiff‘s private health insurer, accepted as full payment for 
the plaintiff‘s care an amount less than the provider‘s full bill, evidence of that 
amount is relevant to prove the plaintiff‘s damages for past medical expenses and, 
assuming it satisfies other rules of evidence, is admissible at trial.  Evidence that 
such payments were made in whole or in part by an insurer remains, however, 
generally inadmissible under the evidentiary aspect of the collateral source rule.  
(Hrnjak v. Graymar, Inc., supra, 4 Cal.3d at p. 732.)  Where the provider has, by 
prior agreement, accepted less than a billed amount as full payment, evidence of 
the full billed amount is not itself relevant on the issue of past medical expenses.  
We express no opinion as to its relevance or admissibility on other issues, such as 
noneconomic damages or future medical expenses.  (The issue is not presented 
here because defendant, in this court, conceded it was proper for the jury to hear 
evidence of plaintiff‘s full medical bills.)   
Where a trial jury has heard evidence of the amount accepted as full 
payment by the medical provider but has awarded a greater sum as damages for 
past medical expenses, the defendant may move for a new trial on grounds of 
excessive damages.  (Code Civ. Proc., § 657, subd. 5.)  A nonstatutory ―Hanif 
motion‖ is unnecessary.  The trial court, if it grants the new trial motion, may 
permit the plaintiff to choose between accepting reduced damages or undertaking 
a new trial.  (Id., § 662.5, subd. (b).) 
 
30 
In the case at bench, the trial court correctly ruled plaintiff could recover as 
damages for her past medical expenses no more than her medical providers had 
accepted as payment in full from plaintiff and PacifiCare, her insurer.  The Court 
of Appeal, believing incorrectly that this ruling violated the collateral source rule, 
reversed the trial court‘s ruling on the merits and thus had no occasion to resolve 
plaintiff‘s claims of procedural and evidentiary error.  As these issues were not 
resolved in the Court of Appeal, they were not included in defendant‘s petition for 
review, and we do not address them.  (Cal. Rules of Court, rule 8.516(b)(1).)  On 
remand the Court of Appeal may, as appropriate, consider any remaining issues 
regarding the procedures and evidence on which the trial court ordered the 
damages reduced. 
DISPOSITION 
The judgment of the Court of Appeal is reversed.  The matter is remanded 
to that court for further proceedings consistent with our opinion. 
 
 
 
 
WERDEGAR, J. 
WE CONCUR: 
CANTIL-SAKAUYE, C. J. 
KENNARD, J. 
BAXTER, J. 
CHIN, J. 
CORRIGAN, J. 
 
 
 
1 
 
 
 
 
 
 
 
 
DISSENTING OPINION BY KLEIN, J. 
 
I respectfully dissent.  I agree Rebecca Howell (Howell), who was insured 
by PacifiCare under a preferred provider organization (PPO) health insurance 
policy, is not entitled to recover the gross amount of her potentially inflated 
medical bills.  However, I disagree with the majority insofar as it concludes 
Howell‘s recovery of medical damages must be capped at the discounted amount 
her medical providers agreed to accept as payment in full from her insurer.  
Rather, Howell should be entitled to recover the reasonable value or market value 
of such services, as determined by expert testimony at trial, just as would be the 
case if the injured person had not purchased insurance or if the medical services 
had been donated. 
The majority, while it states ―we do not alter the collateral source rule as 
articulated in Helfend [v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1] and 
the Restatement‖ (maj. opn., ante, at p. 26), creates a significant exception to this 
state‘s long-standing collateral source rule.  The majority draws a bright line and 
limits Howell‘s recovery of medical damages to ―no more than the medical 
providers accepted in full payment for their services.‖  (Id. at p. 23.)  Thus, Howell 
is left in a worse position than an uninsured individual or one who was a donee of 
medical services, persons who are entitled to recover the full reasonable value of 
their medical care.  (Arambula v. Wells (1999) 72 Cal.App.4th 1006, 1012 
(Arambula) [tortfeasor cannot mitigate damages because of a third party‘s 
charitable gift]).  Neither law nor policy supports such an anomalous outcome. 
 
 
2 
The majority holds the ―negotiated rate differential‖ (the difference between 
the original billed amount of $189,978.63 and the lesser amount accepted by the 
providers as payment in full) lies outside the operation of the collateral source rule 
because the plaintiff did not suffer any economic loss in the amount of the 
negotiated rate differential and therefore said sum is not recoverable by plaintiff. 
The majority fails to recognize the difference between the reasonable value 
of Howell‘s care (hypothetically, $75,000) and the lesser sum Howell‘s preferred 
providers agreed to accept as payment in full ($59, 691.73), did constitute a 
payment by others, namely, the medical providers, toward the cost of treating 
Howell.  Howell‘s medical providers, as participants in PacifiCare‘s PPO network, 
wrote off a portion of her bills, pursuant to their agreements with PacifiCare.  By 
acquiring the PPO policy, Howell purchased not only indemnity coverage but also 
access to the negotiated discounts between her health insurer and her medical 
providers.  Therefore, any difference between the reasonable value of Howell‘s 
treatment, and the lesser amount the providers agreed to accept as payment in full, 
was a benefit Howell is entitled to retain under the collateral source rule.  There is 
little justification for allowing a defendant tortfeasor to avoid liability for the 
reasonable value of a plaintiff‘s medical expenses, where such value exceeds the 
negotiated payment. 
The task before this court is twofold.  In the era of managed care, the court 
is grappling with the problem of injured plaintiffs recovering compensatory 
damages based on allegedly inflated medical bills, while continuing to adhere to 
the collateral source rule and the policies underlying the rule. 
The Court of Appeal held Howell is entitled to recover the gross 
undiscounted amount of her medical bills (i.e., $189,978.63), including the full 
amount of the ―negotiated rate differential‖ (i.e., the difference between the 
original billed amount and the lesser amount accepted by the providers as payment 
in full). 
 
 
3 
In contrast, the majority limits Howell‘s recovery as economic damages 
for past medical expenses to ―no more than the medical providers accepted in full 
payment for their services‖ (maj. opn., ante, at p. 23), amounting to $59,691.73. 
There is an intermediate position between these two ends of the spectrum, 
one more consistent with both the collateral source rule and with the deterrent 
function of tort law:  For purposes of determining the application of the collateral 
source rule, a plaintiff who has purchased private health insurance, just like a 
plaintiff who is a donee or is uninsured, should be entitled to recover from the 
defendant tortfeasor economic damages for past medical expenses an amount not 
to exceed the reasonable value of medical expenses which the plaintiff incurred 
for tortiously caused injuries.  Howell should be entitled to recover the reasonable 
value of her medical care, no more and no less.  That the plaintiff may have 
purchased a negotiated rate benefit is not, for purposes of the collateral source 
rule, relevant. 
By limiting the plaintiff‘s recovery to the reasonable value of the treatment 
(an amount which the plaintiff is required to prove at trial), I would eliminate the 
potential mischief created by the Court of Appeal‘s opinion, which enables a 
plaintiff to recover damages for medical expenses based on potentially inflated 
medical bills, while still preserving the full protection of the collateral source rule 
for all injured plaintiffs, whether or not covered by private insurance. 
Under the reasonable value approach, in the event the reasonable value of a 
plaintiff‘s treatment exceeds the amount the medical providers have agreed to 
accept as payment in full from plaintiff‘s insurer, such difference would be 
allocated to the plaintiff, rather than to the defendant tortfeasor.  This approach 
preserves the long-standing collateral source rule, and at the same time, prevents a 
plaintiff from recovering excessive damages based on potentially inflated medical 
bills. 
 
 
4 
1.  Policy considerations underlying the collateral source rule. 
      a.  The collateral source rule represents the sound policy judgment of 
encouraging citizens to purchase insurance and denying the tortfeasor the benefits 
of the victim’s providence. 
It has long been settled in California that ― ‗[d]amages recoverable for a 
wrong are not diminished by the fact that the party injured has been wholly or 
partly indemnified for his loss by insurance effected by him, and to the 
procurement of which the wrongdoer did not contribute. . . .‘ ‖  (Loggie v. 
Interstate Transit Co. (1930) 108 Cal.App. 165, 169; accord Helfend v. Southern 
Cal. Rapid Transit Dist., supra, 2 Cal.3d at p. 6 (Helfend); Peri v. L. A. Junction 
Ry. (1943) 22 Cal.2d 111, 131.) 
In Helfend, this court engaged in an extensive review of the policy 
arguments for and against the collateral source rule and reaffirmed its adherence to 
the rule as it has developed in California.  In the context of insurance payments for 
medical treatment, where the rule is most frequently applied, the court stated the 
collateral source rule ―embodies the venerable concept that a person who has 
invested years of insurance premiums to assure his medical care should receive 
the benefits of his thrift.  The tortfeasor should not garner the benefits of his 
victim’s providence.  [¶]  The collateral source rule expresses a policy judgment in 
favor of encouraging citizens to purchase and maintain insurance for personal 
injuries and for other eventualities.  Courts consider insurance a form of 
investment, the benefits of which become payable without respect to any other 
possible source of funds.  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, because his payment of premiums would 
have earned no benefit.  Defendant should not be able to avoid payment of full 
compensation for the injury inflicted merely because the victim has had the 
foresight to provide himself with insurance.‖ (Helfend, supra, 2 Cal.3d at pp. 9-10, 
italics added.) 
 
 
5 
      b.  Deterrence of tortious conduct; the collateral source rule ensures 
the tortfeasor pays the full cost of its negligence or wrongdoing. 
When an injured plaintiff has received collateral compensation from 
insurance, a gift, or other sources (such as the expense borne by the preferred 
providers, which wrote off a portion of their bills pursuant to the PPO contract), 
allowing a deduction for damages in that amount would result in a windfall for the 
tortfeasor and underpayment for the injury.  (Helfend, supra, 2 Cal.3d at p. 10; 
Arambula, supra, 72 Cal.App.4th at pp. 1013-1014.)  Because the tortfeasor would 
not be paying the full cost of its negligence or wrongdoing, a deduction for 
collateral compensation would distort the deterrent function of tort law.  
(See Katz, Too Much of a Good Thing:  When Charitable Gifts Augment Victim 
Compensation (2003) 53 DePaul L.Rev. 547, 564 [if a charitable gift to the 
plaintiff reduces tort recovery, the defendant ―pays less than the full social costs of 
his conduct and is underdeterred‖].) 
2.  The difference between the reasonable value of the medical services and 
the lesser sum the medical provider agreed to accept as payment in full constitutes 
a “payment by others” on behalf of the injured person and therefore is a benefit 
within the meaning of the collateral source rule. 
The majority acknowledges the negotiated rate differential is not a gift by 
the provider to the injured plaintiff, but it regards the negotiated rate differential as 
merely a price discount.  However, because the issue at bench is the application of 
the collateral source rule, involving (1) an injured party, (2) the injured party‘s 
PPO health insurance policy, and (3) a negligent tortfeasor, treating the negotiated 
rate differential as nothing more than a discount is, in my view, inappropriate. 
The majority properly recognizes:  ―Medical providers that agree to accept 
discounted payments by managed care organizations or other health insurers as 
full payment for a patient‘s care do so not as a gift to the patient or insurer, but for 
commercial reasons and as a result of negotiations.  As plaintiff herself explains, 
hospitals and medical groups obtain commercial benefits from their agreements 
 
 
6 
with health insurance organizations; the agreements guarantee the providers 
prompt payment of the agreed rates and often have financial incentives for plan 
members to choose the providers‘ services.‖  (Maj. opn., ante, at p. 15, italics 
added.) 
However, the fact that Howell‘s medical providers, as participants in a PPO 
network, agreed to accept discounted payments motivated by their economic self-
interest, rather than with a donative intent, should not make a difference in the 
analysis of the issues presented herein.  The majority‘s analysis rests upon a 
distinction between commercial motive and donative intent, a distinction the 
majority has failed to explain.  Had Howell been uninsured, or had Howell‘s 
providers donated their services, Howell would be entitled to recover the 
reasonable cost of her medical care.  It is anomalous to limit Howell‘s recovery of 
medical damages to the deeply discounted amount her providers accepted as 
payment in full, merely because Howell was insured under a PPO policy, rather 
than being uninsured or a donee.  Howell should not be penalized, nor should the 
negligent tortfeasor be rewarded, based on the manner in which her PPO policy is 
structured. 
Clearly, medical providers in a PPO network benefit from their status as 
preferred providers in significant ways:  the preferred providers obtain access to an 
expanded client base; the preferred providers have greater certainty of being paid 
for their services; and the preferred providers can expect relatively prompt 
reimbursement.  In return for these commercial benefits, the preferred providers 
agree with the insurer to accept reduced fees for their services.  The insurer 
likewise derives a commercial benefit from the PPO system through greater cost 
control and reduced costs for patient care.  At the same time, the PPO system has 
advantages for the consumer who enjoys reduced fees when obtaining care 
through a preferred provider. 
This recognition of the existence of a tripartite negotiated relationship 
among the insured, the insurer, and the medical providers, informs the proper 
 
 
7 
characterization of the ―negotiated rate differential.‖  It is undisputed the 
negotiated rate differential was not a gratuitous payment by the providers.  
Nor should the negotiated rate differential be deemed a mere price discount by a 
vendor.  Rather, the negotiated rate differential was, in effect, a ―payment by a 
third party,‖ namely, the medical providers, which wrote off a portion of Howell‘s 
bills.  It is undisputed that ―[w]hen, as here, the costs of medical treatment are 
paid in whole or in part by a third party unconnected to the defendant, the 
collateral source rule is implicated.‖  (Maj. opn., ante, at p. 5, italics added.)  
Accordingly, to the extent the reasonable value of Howell‘s care exceeded the 
amount accepted by her providers in full payment, that sum should be considered a 
benefit covered by the collateral source rule. 
Although the majority recognizes the collateral source rule is implicated 
whenever the costs of medical treatment are paid in whole or in part by a 
nontortfeasor third party, it takes the position the negotiated rate differential, i.e., 
the discount medical providers offer the insurer, was ―never paid by or on behalf 
of the injured person‖ (maj. opn., ante, at p. 1, italics added), and therefore does 
not come within the collateral source rule. 
Said conclusion overlooks the fact the preferred providers absorbed a 
portion of the reasonable cost of treating Howell by writing off a portion of her 
bills.  The fee reduction, a benefit to which Howell was entitled under the PPO 
policy, was purchased with costly health insurance premiums and was an essential 
part of the bargain between Howell and PacifiCare.  Thus, it is entirely 
appropriate to recognize the difference between the reasonable value of the 
medical services and the lesser amount the providers agreed to accept in full 
payment for their services, as a payment made by others, namely, the providers, 
on Howell‘s behalf.  A consistent application of the collateral source rule, as it 
prevails in the United States, entitles Howell to retain that benefit.  (See pt. 5, 
post.) 
 
 
8 
3.  Limiting plaintiff’s recovery to the reasonable cost of care prevents a 
windfall recovery by the victim based on potentially inflated medical bills. 
The problem in the instant case arises due to the practice of inflating 
medical charges and then deeply discounting them, which has become the norm in 
this era of managed care. 
―Before managed care, hospitals billed insured and uninsured patients 
similarly.  In 1960, ‗[t]here were no discounts; everyone paid the same rates‘ – 
usually cost plus ten percent.  But as some insurers demanded deep discounting, 
hospitals vigorously shifted costs to patients with less clout.‖  (Hall & Schneider, 
Patients as Consumers:  Courts, Contracts, and the New Medical Marketplace 
(2008) 106 Mich. L.Rev. 643, 663, fns. omitted.)  As a consequence, ―only 
uninsured, self-paying U.S. patients have been billed the full charges listed in 
hospitals‘ inflated chargemasters.‖  (Reinhardt, The Pricing of U.S. Hospital 
Services:  Chaos Behind a Veil of Secrecy (2006) 25 Health Affairs 57, 62; 
see Health & Saf. Code, § 1339.51, subd. (b)(1) [chargemaster, or hospital charge 
description master is ―a uniform schedule of charges represented by the hospital as 
its gross billed charge for a given service or item, regardless of payer type‖].) 
Therefore, to reconcile the collateral source rule with the problem posed by 
potentially inflated medical bills, a uniform rule should apply.  Irrespective of 
whether a plaintiff has private health insurance, is a donee or is uninsured, the 
plaintiff should be entitled to recover as economic damages for past medical 
expenses the reasonable value of the medical expenses the plaintiff incurred for 
tortiously caused injuries. 
With this approach, in the event the reasonable value of the plaintiff‘s 
treatment exceeds the amount the medical providers agreed to accept as payment 
in full from plaintiff‘s insurer, that difference is allocated to the plaintiff, rather 
than to the tortfeasor.  This fully preserves the collateral source rule, and at the 
same time prevents a plaintiff from recovering excessive damages pursuant to 
potentially inflated medical bills. 
 
 
9 
4.  Collateral source rule does not yield a double recovery. 
Helfend observed that insurance policies increasingly provide for either 
subrogation or refund of benefits upon recovery from the tortfeasor, thus 
transferring the risk from the victim‘s insurer to the tortfeasor by way of the 
victim‘s tort recovery.  (Helfend, supra, 2 Cal.3d at pp. 10-11.)  Helfend explained 
that viewed from this perspective, the collateral source rule does not permit the 
plaintiff a double recovery, as critics of the rule have charged.  (Ibid.)  Further, 
―[t]he collateral source rule partially serves to compensate for the attorney‘s share 
and does not actually render ‗double recovery‘ for the plaintiff.‖  (Id. at p. 12.) 
Consequently, it should be recognized that where an insured plaintiff 
prevails and obtains an award of economic damages for past medical expenses 
from a third party, the insured generally is contractually required to reimburse the 
health insurer to the extent the insured recovers on her judgment against the 
tortfeasor.  In addition to having to reimburse the health insurer, the plaintiff will 
have incurred attorney fees to prosecute the claim for economic damages. 
Thus, because the plaintiff‘s award of economic damages for past medical 
expenses is likely to be largely transferred from the defendant (or from the 
defendant‘s insurer) to the plaintiff‘s insurer and to the plaintiff‘s attorney, the 
award is not likely to yield a windfall to the plaintiff. 
In addition, it should be recognized the collateral source rule serves to 
protect the ―person who has invested years of insurance premiums to assure [her] 
medical care.‖  (Helfend, supra, 2 Cal.3d at pp. 9-10.)  However, the award of 
compensatory damages does not expressly include reimbursement to the plaintiff 
for those premiums.  It is only through the application of the collateral source rule 
that the plaintiff is rewarded for maintaining his or her own health insurance for 
personal injuries. 
 
 
10 
For all these reasons, any perceived windfall to the plaintiff as a 
consequence of the collateral source rule represents a relatively minor portion of 
plaintiff‘s overall recovery of economic damages.  Further, as between the injured 
person and the tortfeasor, the equities dictate such benefit should be allocated to 
the injured party, not to the negligent tortfeasor.  Indeed, it is difficult to 
understand just what policy considerations justify denying the thrifty or prudent 
plaintiff who has purchased private health insurance the full benefit of his or her 
own foresight, and instead, transferring that benefit to the tortfeasor. 
5.  This court should follow the majority rule in the United States, which is 
consistent with the Restatement Second of Torts. 
The majority, limiting plaintiff‘s recovery of medical damages to the 
amount her medical providers accepted as payment in full from plaintiff‘s insurer, 
has failed to explain why California should align itself with the minority view in 
the United States. 
By way of background, courts across the country have considered the issue 
of whether the collateral source rule allows a plaintiff to recover insurance write-
offs.  Three general approaches have emerged:  (1) the reasonable value of 
services; (2) the benefit of the bargain; and (3) the actual amounts paid.  (See, e.g. 
Martinez v. Milburn Enterprises, Inc. (2010) 290 Kan. 572, 591-592.) 
― ‗[T]he vast majority of courts to consider the issue‘ follow the common-
law rule articulated in section 924 of the Restatement and permit plaintiffs to seek 
the reasonable value of their expenses without limitation to the amount that they 
pay or that third parties pay on their behalf.  See Wills v. Foster, 229 Ill.2d 393, 
414, 323 Ill.Dec. 26, 892 N.E.2d 1018, 1031 (2008) (so stating).‖  (White v. Jubitz 
Corp. (Or. 2009) 347 Or. 212, 237.) 
The Restatement Second of Torts, section 924, is entitled ―Harm to the 
Person.‖  It provides, in part, that ―[o]ne whose interests of personality have been 
tortiously invaded is entitled to recover damages for past or prospective [¶] . . . [¶] 
(c) reasonable medical and other expenses[.]‖  (Ibid., italics added.)  Comment f 
 
 
11 
to that section, entitled ―Expenses,‖ provides that an ―injured person is entitled to 
damages for all expenses and for the value of services reasonably made necessary 
by the harm.‖  (Rest. 2d Torts, § 924, com. f, p. 526, italics added.)  Comment f 
then instructs that ―[t]he value of medical services made necessary by the tort can 
ordinarily be recovered although they have created no liability or expense to the 
injured person, as when a physician donates his services.‖  (Id., at p. 527, italics 
added, referring to Rest. 2d Torts, § 920A.)  Thus, ―the Restatement permits a 
plaintiff to recover from a tortfeasor the reasonable value of the medical treatment 
that he or she receives whether plaintiff is liable to pay or pays the medical 
providers‘ charges for that treatment, the providers waive those charges, or a third 
party pays or otherwise satisfies those charges.‖  (White v. Jubitz Corp., supra, 
347 Or. at p. 236, italics added.)  Under the Restatement rule, ―plaintiffs who incur 
the same injuries as a result of a defendant‘s tort[i]ous actions may claim and 
recover the same damages.‖  (Ibid.; see also Martinez v. Milburn Enterprises, Inc., 
supra, 290 Kan. at p. 602 [reasonable value of medical services is the fairest 
approach; ― ‗to do otherwise would create separate categories of plaintiffs based 
on the method used to finance medical expenses‘ ‖ (italics omitted)].) 
The majority‘s rationale for eschewing the majority rule is that those out-
of-state decisions ―rest on reasoning we have considered and rejected above, or on 
statutory provisions without California parallel.‖  (Maj. opn., ante, at p. 28, fn. 10, 
italics added.)  However, insofar as the majority does not discuss how the statutes 
of our sister states differ from our damages statutes (see, e.g., Civ. Code, § 3281, 
3282, 3333), it is unpersuasive. 
6.  Statutory provisions in the Civil Code do not bar plaintiff’s recovery of 
the difference between the reasonable value of the medical services and the lesser 
amount the providers agreed to accept as full payment. 
The majority takes the position that unlike the law of other states, 
California‘s damages statutes bar Howell from recovering as damages for medical 
expenses anything in excess of the amount her medical providers agreed to accept 
 
 
12 
as payment in full.  That conclusion is unwarranted.  Our damages statutes do not 
preclude this court from following the majority rule and authorizing compensation 
to Howell for the reasonable value of her medical treatment. 
The pertinent statutes are as follows:  Every person ―who suffers detriment 
from the unlawful act or omission of another, may recover from the person in fault 
a compensation therefor in money, which is called damages.‖  (Civ. Code, 
§ 3281.)  The measure of damages generally recoverable in tort is ―the amount 
which will compensate for all the detriment proximately caused‖ by the tort.  
(Id., § 3333.)  Detriment is ―a loss or harm suffered in person or property.‖  
(Id., § 3282.) 
The maxims embodied in these statutory provisions do not dictate the 
conclusions reached by the majority.  It is undisputed that ―[w]hen, as here, the 
costs of medical treatment are paid in whole or in part by a third party 
unconnected to the defendant, the collateral source rule is implicated.‖  
(Maj. opn., ante, at p. 5, italics added.) 
As this dissent has sought to explain, in the instant case the costs of 
Howell‘s medical treatment were partially borne by third parties, namely, 
Howell‘s preferred medical providers, which wrote off a significant portion of her 
bills pursuant to a tripartite contract for which valuable consideration was paid.  
Therefore, any difference between the reasonable value of Howell‘s care and the 
lesser amount the providers accepted as payment in full constitutes detriment, 
which is recoverable by Howell from the tortfeasor. 
7.  Determining the reasonable value of plaintiff’s medical care; procedure 
in future cases. 
The majority precludes any inquiry into the reasonable value of the 
patient‘s care and limits the plaintiff‘s recovery of medical damages to the amount 
her preferred providers accepted as payment in full.  The majority‘s bright-line 
approach rests on the assumption ―the negotiated prices providers accept from 
insurers‖ is equivalent to the reasonable value, or ―exchange value of medical 
 
 
13 
services the injured plaintiff has been required to obtain.‖  (Maj. opn., ante, at 
p. 21.) 
However, the reasonable value of the patient‘s care is a question for the 
trier of fact.  It may be that the sum the providers accepted in full payment is 
equivalent to the reasonable value of the care, or it may be that the reasonable 
value of the care is a higher figure.  Preferred providers discount their fees to PPO 
members because the providers ―obtain commercial benefits from their 
agreements with health insurance organizations‖ (maj. opn., ante, at p. 15), such as 
an expanded clientele.  This court should not speculate that the amount a preferred 
provider accepts as payment in full from the insurer is equivalent to the reasonable 
value of the services rendered. 
The inquiry at trial should be the same, irrespective of whether the injured 
plaintiff was covered by a PPO health insurance policy, was a donee, or was 
uninsured.  The plaintiff‘s burden is to prove the reasonable value of the medical 
care needed to treat his or her tortiously caused injuries. 
―Due to the realities of today‘s insurance and reimbursement system, in any 
given case, that determination is not necessarily the amount of the original bill or 
the amount paid.  Instead, the reasonable value of medical services is a matter for 
the jury to determine from all relevant evidence. Both the original medical bill 
rendered and the amount accepted as full payment are admissible to prove the 
reasonableness and necessity of charges rendered for medical and hospital care.  
[¶]  The jury may decide that the reasonable value of medical care is the amount 
originally billed, the amount the medical provider accepted as payment, or some 
amount in between.‖  (Robinson v. Bates (Ohio 2006) 112 Ohio St.3d 17, 23 [857 
N.E.2d 1195, 1200].)  California jurors are as capable as jurors in Ohio or 
elsewhere of making that determination. 
A plaintiff may attempt to rely on the undiscounted medical bills to 
establish economic damages, but if such billing is inflated, it would be exposed on 
cross-examination and through defense expert testimony.  For example, if a chest 
 
 
14 
X-ray was billed at $1,500 but the evidence shows the provider has rarely, if ever, 
obtained that sum in payment, or if the evidence shows the billed amount 
significantly exceeds the charges by other medical providers for such treatment, 
the trier of fact would take such evidence into consideration in assessing the 
reasonable value of the treatment.  A jury, with the help of expert opinion 
testimony, is capable of weighing the evidence and determining the reasonable 
value of the medical services provided to the plaintiff. 
Finally, in the event the verdict as to past medical expenses is excessive, 
the defendant can move for a new trial on that basis.  (Code Civ. Proc., § 657, 
subd. 5.) 
8.  Any modification to the collateral source rule should be left to the 
Legislature. 
There is nothing unique about PPO insurance coverage that requires this 
court to carve out a special rule governing the negotiated rate differential in this 
type of health insurance.  An injured person with PPO coverage, like uninsured 
plaintiffs or donees, should be able to recover the reasonable value of care 
required to treat the tortiously caused injuries. 
Any change to the collateral source rule should be left to the Legislature.  
(Olsen v. Reid (2008) 164 Cal.App.4th 200, 213-214 (conc. opn. of Moore, J.).)  
The Legislature twice has abrogated or modified the collateral source rule, in the 
Medical Injury Compensation Reform Act (Civ. Code, § 3333.1, subd. (a) [health 
care providers]) and in Government Code section 985 (public entity defendants), 
and can do so again if it sees fit. 
―It may well be that the collateral-source rule itself is out of sync with 
today‘s economic realities of managed care and insurance reimbursement for 
medical expenses.  However, whether plaintiffs should be allowed to seek 
recovery for medical expenses . . . only for the amount negotiated and paid by 
insurance is for the [Legislature] to determine.‖  (Robinson v. Bates, supra, 857 
N.E.2d at p. 1201.) 
 
 
15 
9.  Proposed disposition. 
The judgment of the Court of Appeal should be reversed with directions to 
remand the matter to the trial court for a limited new trial to determine, and award, 
the reasonable value of the medical services which Howell received for her 
tortiously caused injuries. 
 
 
 
 
 
 
 
 
KLEIN, J.* 
                                              
*  
Presiding Justice of the Court of Appeal, Second Appellate District, 
Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of 
the California Constitution.  
 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Howell v. Hamilton Meats & Provisions, Inc. 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 179 Cal.App.4th 686 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S179115 
Date Filed: August 18, 2011 
__________________________________________________________________________________ 
 
Court: Superior 
County: San Diego 
Judge: Adrienne A. Orfield 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Law Office of Gary L. Simms, Gary L. Sims; LaFave & Rice, John J. Rice; Basile Law Firm, J. Jude 
Basile; Law Offices of J. Michael Vallee and J. Michael Vallee for Plaintiff and Appellant. 
 
Barbara A. Jones; Michael Schuster, Kelly Bagby and Bruce Vignery for AARP as Amicus Curiae on 
behalf of Plaintiff and Appellant. 
 
Hinton, Alfert & Sumner, Scott H. Z. Sumner, Jeremy N. Lateiner; Liberson & Wolford and Joel K. 
Liberson for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Appellant. 
 
Tyson & Mendes, Robert F. Tyson, Mark T. Petersen and Kristi Deans for Defendant and Respondent. 
 
McCormick, Barstow, Sheppard, Wayte & Carruth, Dean Petrulakis, John M. Dunn and Jeffrey R Olson for 
CSAC Excess Insurance Authority and Central Region School Insurance Group as Amici Curiae on behalf 
of Defendant and Respondent. 
 
Hayes, Scott, Bonino, Ellingson & McLay and Mark G. Bonino for Association of Defense Counsel of 
Northern California and Nevada as Amicus Curiae on behalf of Defendant and Respondent. 
 
Sedgwick, Detert, Moran & Arnold, Christina J. Imre and Kirk Jenkins for Allstate Insurance Company as 
Amicus Curiae on behalf of Defendant and Respondent. 
 
Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant 
and Respondent. 
 
Greines, Martin, Stein & Richland and Robert A. Olson for Association of Southern California Defense 
Counsel and DRI-The Voice of the Defense Bar as Amici Curiae on behalf of Defendant and Respondent. 
 
 
 
 
 
 
 
 
 
 
Page 2 – S179115 – counsel continued: 
 
 
Horvitz & Levy, David S. Ettinger and H. Thomas Watson for American Insurance Association, 
Association of California Insurance Companies, Personal Insurance Federation of California, California 
State Automobile Association Inter-Insurance Bureau, Chartis, Inc., Farmers Insurance Exchange, Infinity 
Insurance Company, Interinsurance Exchange of the Automobile Club, Mercury Insurance Group, State 
Farm General Insurance Company and State Farm Mutual Automobile Insurance Company as Amici 
Curiae on behalf of Defendant and Respondent. 
 
Cole Pedroza, Curtis A. Cole, Kenneth R. Pedroza for California Medical Association, California Dental 
Association and California Hospital Association as Amici Curiae on behalf of Defendant and Respondent. 
 
Newdorf Legal, David B. Newdorf and Vicki F. Van Fleet for The League of California Cities as Amicus 
Curiae. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Gary L. Sims 
Law Office of Gary L. Simms 
2050 Lyndell Terrace, Suite 240 
Davis, CA  95616-6206 
(530) 564-1640 
 
Robert F. Tyson 
Tyson & Mendes 
5661 La Jolla Blvd. 
La Jolla, CA  92037 
(858) 459-4400 
 
Robert A. Olson 
Greines, Martin, Stein & Richland 
5900 Wilshire Boulevard, 12th Floor 
Los Angeles, CA  90036 
(310) 859-7811