California Court of Appeals: Medical Bill Adjustment and/or Writeoff Not Enough to Sustain Collateral Source Attack

San Diego injury victims have repeatedly had their cases undervalued by insurance companies and their attorneys who reduce the victims’ medical bills by the amount paid or written off by medical insurance companies. This process, arising from the misapplication of two Court of Appeal opinions–Hanif and Nishihama–have allowed insurance companies directly attack and gut the collateral source rule.

Under the collateral source rule, evidence that a person or entity other than the tortfeasor has paid for the injured person’s medical care is excluded from evidence in determining the reasonable value of medical damages. In short, the medical damages is the fully billed amount of medical bills.

Earlier today, the Court of Appeal handed down an opinion in the case of Olsen v. Reid that defendants cannot seek reductions of medical damages simply by presenting a bill indicating that an adjustment or write-off was applied to a medical bill. The Court reversed the trial court’s post-trial ruling reducing Ms. Olsen’s medical damages from $62,475.81 to just over $5,000. The Court held that the defendant had not presented sufficient evidence to support the ruling when all it did was present a copy of Ms. Olsen’s medical bill with some amounts indicating a write-off and adjustment of most of the bill.

The Court also issued two concurring opinions which dramatically attack the insurance companies’ ability to obtain a reduction in medical damages. First, Judge Moore summarizes the case history of the collateral source rule and the subsequent attacks by Hanif and Nishihama before finally concluding that Hanif/Nishihama unjustly abrogates the collateral source rule and is, therefore, impermissible. Secondly, Judge Fybel’s concurring opinion lists a number of missing evidentiary items that were presented in Nishihama to obtain the reduction of medical damages–all of which were missing in this case. Most of the items that Judge Fybel describes are very hard for anyone–whether the plaintiff or defendant–to obtain as they contain trade secrets of the medical insurance companies.

We are still reviewing the Court’s opinion and will provide additional information after that review.