Personal Injury Recovery Limits Under Insurance To Change?

One of the difficulties plaintiffs have had to deal with in recovering their “fair” damages in a personal injury lawsuit has been, ironically, insurance. Under a line of California cases, a plaintiff who has medical insurance, has essentially been penalized by the courts.

Under the holding of Hanif v Housing Authority (1988) 200 Cal.App.3d 635 and the cases which have followed it, a plaintiff may only recover “up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable.” Hanif at 643.

To understand the application of this “rule,” we need to look at a hypothetical. Assume a woman is in a car accident, sustains injuries and requires $20,000 in medical care to treat her injuries. If the woman does not have insurance, her damages may be $20,000. However, if she has insurance, her insurance may have contracted with the hospital and thus only paid $6,000 for her medical care. Under Hanif, the insured woman would thus only be able to recover $6,000 despite her suffering the same injuries as the uninsured woman who recovered $20,000.

The Fourth Appellate District-Division Three (Orange County) on Monday handed down it’s ruling in Olsen v. Reid (G038478). While the ruling itself broke no new ground, bypassing the issues of both Hanif and the contrary collateral source rule, the Concurring Opinion by Presiding Judge Moore “sound[ed] the bell of alarm.” Judge Moore’s concurring opinion examined the history of the collateral source rule which has long been part of California law. In Judge Moore’s opinion, and that of just about every plaintiffs’ attorney in California, Hanif and the cases which follow it have tried to judicially abrogate the law as set forth by the Legislature, the collateral source rule.

In some ways, this is a victory for those who represent injured consumers. Judge Moore’s concurring opinion provides a basis upon which we can argue against post-trial Hanif motions by which defense attorneys may try to reduce the damages awarded by juries. On the other hand, Olsen does not overrule Hanif, as it cannot, but does ask the California Supreme Court to hear the issue and reaffirm, as it should, that the collateral source rule should prevail.