California's Top Court Diminishes Wrongdoer Liability

The California Supreme Court reduced the recovery awarded to a victim of a company's wrongdoing and in that ruling delivered a serious blow to victims' rights.

Background

Rebecca Howell successfully sued for injuries suffered in a car accident with an agent of Hamilton Meats and Provisions, which sought to limit damages to that actually paid by Howell's insurance company to the hospital. Insurance companies often negotiate lower rates for services directly with individual hospital providers, and in fact the insurer in this case did precisely that. Defendants sought to limit Howell's damages to only the amount that the insurance company paid to the hospital for her care — a significantly smaller sum than the amount that the hospital billed Howell for her care. She argued that such a result would violate a longstanding legal principle that a wrongdoer should not be rewarded with a smaller damage award just because a victim has insurance. This principle serves the dual purpose of compensating the injured and deterring future bad acts.

AARP Foundation Litigation attorneys filed AARP's "friend of the court" brief pointing out that calculating damages solely on the basis of actual costs paid limits access to court since tort cases usually involve contingency fees and lawyers will not find it in their interest to invest the time and expense in a lawsuit where total recovery will be relatively small. Also the brief describes how the deterrent effect on future wrongdoers will be limited because even if held to account they would have minimal damage to their wallet. Finally, the brief emphasizes the fact that decreasing the plaintiff's damages to the amount that insurance will pay punishes people for foresight and responsibility in purchasing insurance in advance of an accident.

The court disagreed, finding that the defendants were not obligated to pay "expenses the plaintiff never incurred … only amounts paid or incurred are recoverable.

A dissent echoed many of AARP's arguments, noting that the court's ruling would interfere with the deterrence of tortuous conduct; the difference between value received and cost charged was a negotiated benefit that should favor plaintiff and not defendant. Also, by ruling as it did, the California Supreme Court set the state apart both from longstanding legal principle and the majority of the courts in the United States — a decision perhaps best left to the legislature.

What's at Stake

This issue is particularly important for older people because their recovery in a personal injury action is already limited by the fact that their future earnings drop the closer they get to retirement. Allowing defendants to limit damages in the way the California court did not only punishes people who plan ahead and purchase insurance, but also worsens the position of older victims.

Case Status

Howell v. Hamilton Meats & Provisions was decided by the California Supreme Court and returns to trial court for reconsideration of damages.

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