The Cost of Tort Reform–for Both Winners and Losers

Back in 1975 Gov. Jerry Brown signed a law limiting pain and suffering damages in medical malpractice cases. Since then other laws have been enacted which have affected tort reform– in 1997 a period known as the “napkin deal” took effect, and lasted 5 years, whereby insurance companies received protection from lawsuits, doctors were able to keep their liability protections and allowed a higher standard of proof that a victim had to meet; in 1988 a ballot war over auto insurance took place; in 2000 a referendum backed by insurers to repeal a “bad faith” law sponsored by lawyers won, and in 2004 a battle took place at the ballot box that curbed unfair business practice suits against small businesses. For many years, personal injury lawyers have been involved in a battle with insurance companies and their business clients over the rules that decide who can sue and collect for injuries. Millions of dollars have been spent on campaign contributions, lobbying fees, public relations tactics and other political manuevering, all of which are nothing compared to the billions insurance companies shuffle out each year.

A case exemplifying this battle is http://www.courtinfo.ca.gov/opinions/documents/S179115.PDF, a case, up until yesterday, was waiting for a state Supreme Court case decision. It was argued in May, and since that time the legal community has been analyzing the comments of the justices hearing the case and debating how the case would play out. The main issue of the case is whether someone who suffers injuries in an auto collision or other incident is entitled to collect the full amount of the medical bills issued by doctors, hospitals and other care providers, or if they are limited to the amount actually paid by insurers for that treatment, which is often a fraction of the supposed bill. The case stems from a 2005 San Diego County collision in which a Hamilton Meat truck seriously injured Rebecca Howell. Howell’s medical bills approached $200,000 but medical insurance settled with the care providers for $60,000 and the trial judge reduced the medical part of her judgment to that amount. The full amount was restored by an appellate court, and whatever happens in Howell’s case will also settle several other cases hinging on the same issue.

Yesterday the state Supreme Court issued their ruling on behalf of the handed insurers and business groups a major legal victory and for personal injury lawyers big setback by imposing limits on medical damages in one of the era’s most closely watched civil cases. The issue in the case, Howell v. Hamilton Meats & Provisions, was whether an injured party could collect the full medical care costs billed by doctors and hospitals, or the lesser amount that the medical providers accepted from an insurance company. The majoritie’s decision was stated like this: “We hold no such recovery is allowed, for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.” The majority also held 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.” Insures said that if they had lost case, it would add as much as $3 million a year to their payouts in auto accidents and other personal injury cases, from which Plaintiffs’ attorneys would have been entitled to about a third.