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Limiting Windfall Damages

By David Axelrad and Robert Wright

As many consumers of medical care can attest, a medical provider's “usual and customary” rates as shown on its invoices are often several times higher than the amount the provider agrees to accept as payment in full from health insurers and others. In Howell v. Hamilton Meats & Provisions Inc., 52 Cal. 4th 541 (2011), the California Supreme Court recently decided a recurring issue concerning such damages in personal injury cases: whether the plaintiff can recover as damages the undiscounted “usual and customary” rates that medical providers bill for the plaintiff's medical care, or only the discounted amounts that providers accept as full payment for that care. The Supreme Court held the plaintiff may recover only the discounted amount, stating that the plaintiff “may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received ' .” Id. at 566 (emphasis added).

Howell was one of 2011's most important damages cases. It will have a significant impact on personal injury damages in California and may offer a model for challenging windfall damages in other states. Yet it leaves unanswered numerous questions that are likely to challenge the appellate courts in 2012 and beyond.

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