A Discussion of the Appellate Court’s Recent Decision in Varela v. Birdi
Gabriel Varela, who had just been selected to serve as the Commander of a Navy missile destroyer ship after rising through the ranks over his 26–year Navy career, was riding his bicycle home from work at the Naval base on the evening of February 8, 2010, when Moninder Birdi drove his vehicle into an intersection directly into Varela’s path of travel. Varela hit the front end of the vehicle on the driver’s side, he flew up and landed on the ground in the middle of the intersection. Varela suffered significant injuries. The parties stipulated Birdi was “negligent in the operation of his vehicle in failing to see [Varela],” “Birdi violated [Varela’s] right of way under the law” and Birdi was “one of the causes of the collision.” However, Birdi asserted Varela was comparatively negligent based on Varela’s speed and inattention prior to entering the intersection.
Varela sustained significant and multiple injuries including a concussion, upper and lower lip lacerations, a fracture of his right hip, a fracture of his right thighbone and a sprain with a meniscal tear in the right knee. He underwent six surgeries to repair his femur, hip, lips and right knee as well as scar revision procedures. He developed pain on the left side of his head, headaches, chronic pain disorder and sleep disorder due to chronic pain. Varela recovered to the point he was able to report to duty and assumed his positions as the Executive Officer and then as Commander of a Navy missile destroyer ship.
The jury heard evidence Varela suffers chronic pain in the occipital region of his head as well as in the hip, thigh, knee and lower lip. He will require future medical care including surgeries for knee replacement, removal of the plates and screws in his hip, removal of the rod in his right femur and possibly hip replacement. To control Varela’s pain, pain specialists recommend a regimen of medications for the rest of his life as well as other possible therapies including steroidal injections, radiofrequency ablation of the nerve branch, nerve stimulation and/or neurectomy to treat the chronic occipital pain.
Varela did not seek compensatory damages for past medical expenses. Instead, Varela presented evidence from medical experts regarding the future medical care he will require along with estimated costs for the future care. An economist compiled the anticipated costs and calculated the present value of the future cost of medical care would be approximately $1.8 million.
The jury returned a verdict finding Birdi solely negligent and a substantial factor in causing harm to Varela. The jury awarded: (1) $1,355,598 for future medical expenses; (2) $405,801 for future loss of earnings; (3) $800,000 for past noneconomic loss; and (4) $2.2 million for future non-economic loss. The jury awarded Varela’s wife $14,000 for her loss of consortium claim.
Birdi moved for new trial asserting, among other things, excessive future economic damages claiming the damages should be reduced to amounts likely to be paid by Varela’s insurer. Birdi proposed showing this amount by comparing the differential between the amounts billed and amounts paid for Varela’s past medical expenses. Birdi sought a remittitur awarding Varela one-third of the amount of damages awarded by the jury purportedly based on a comparison of the amounts billed and the amounts paid for past medical expenses. The court denied the motion.
Evidence Regarding Future Medical Costs
Birdi contends the holdings of Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541(Howell ) and Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308 (Corenbaum ) require a plaintiff asserting a claim for damages in the form of future medical expenses to limit the amount sought to that which may be paid by the plaintiff’s insurance rather than amounts anticipated to be billed by medical providers. Relying on these authorities, Birdi contends the trial court erred in admitting evidence of Varela’s future care costs and in applying the collateral source rule to preclude Birdi from examining witnesses regarding what the future care costs would be if they were obtained using Varela’s military insurance.
Collateral Source Rule
California has long adhered to the collateral source rule, which provides “if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor. It applies to payments made by insurers and through social legislative benefits.
Howell and Corenbaum
In Howell, supra, 52 Cal.4th at page 566, the Supreme Court determined, for past medical expenses, “an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial.” The court explained it was not abrogating or modifying the collateral source rule, it simply found it inapplicable.
“The rule … has no bearing on amounts that were included in a provider’s bill but for which the plaintiff never incurred liability because the provider, by prior agreement, accepted a lesser amount as full payment. Such sums are not damages the plaintiff would otherwise have collected from the defendant. They are neither paid to the providers on the plaintiff’s behalf nor paid to the plaintiff in indemnity of his or her expenses. Because they do not represent an economic loss for the plaintiff, they are not recoverable in the first instance.” (Howell, supra, 52 Cal.4th at p. 548–549.) If a provider accepted less than the full amount billed, the full amount billed is not relevant to the issue of damages.
Howell affirmed the vitality of the evidentiary aspect of the collateral source rule stating evidence that “payments were made in whole or in part by an insurer remains … generally inadmissible.” However, the court expressed “no opinion as to its relevance or admissibility [of the full billed amount] on other issues, such as noneconomic damages or future medical expenses.”
The court in Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308 which followed Howell, and held evidence of “the full amount billed for a plaintiff’s medical care is not relevant to the determination of a plaintiff’s damages for past medical expenses, and therefore is inadmissible for that purpose” whereas “evidence of the amount accepted by medical providers as full payment does not violate the collateral source rule and is admissible provided that the source of payment is not disclosed to the jury and the evidence satisfies the other rules of evidence.”
Addressing some of issues left open by Howell, the Corenbaum court concluded the full amount billed for past medical services is not relevant to the determination of damages for future medical expenses and cannot support expert opinion regarding the reasonable value of future medical expenses. For a jury to consider both evidence of the amount accepted as full payment, for the purpose of determining the amount of past economic damages, and the full amount billed, for some other purpose, would most certainly cause jury confusion and suggest the existence of a collateral source payment, contrary to the evidentiary aspect of the collateral source rule. Similarly, “for an expert to base an opinion as to the reasonable value of future medical services, in whole or in part, on the full amount billed for past medical services provided to a plaintiff would lead to the introduction of evidence concerning the circumstances by which a lower price was negotiated with that plaintiff’s health insurer, thus violating the evidentiary aspect of the collateral source rule.
The Decision in Varela v. Birdi
In the instant matter, Varela argued the full amount billed for past medical expenses should come into evidence for issues of noneconomic and future medical care costs. Defense counsel argued future medical expenses should be based on amounts that would be payable under the plaintiff’s military insurance. The Court agreed that Corenbaum does not stand for the proposition future medical costs must be based on insurance rates. The court reasoned that the amount an insurer would pay in the future is speculative and would preclude the plaintiff from seeking medical care outside of his plan.
Assuming the cost estimates provided by Varela’s medical experts were based on amounts providers typically charged rather than amounts typically received through insurance or other payment schemes, the court did not agree Howell and Corenbaum, compel the conclusion such charged fees should be inadmissible for the purpose of evaluating future medical expenses.
The Supreme Court in Howell was presented with known quantities: the total amounts billed up to the time of trial and the amounts accepted by the medical providers based on agreements between the provider and the insurer. The Howell court was concerned with identifying an accurate measure of reasonable compensatory damages for past medical expenses.
Future damages are different. “An injured plaintiff is entitled to recover the reasonable value of medical services that are reasonably certain to be necessary in the future.” “However, the ‘requirement of certainty … cannot be strictly applied where prospective damages are sought, because probabilities are really the basis for the award. At the time of trial, the precise medical costs a plaintiff will incur in the future are not known. Nor is it known how a plaintiff will necessarily pay for such expenses. It is unknown for example, what, if any, insurance a plaintiff will have at any given time or what rate an insurer will have negotiated with any given medical provider for a particular service at the time and location the plaintiff will require the medical care.
A policy requiring a plaintiff to present evidence of future medical expenses based only on his or her insurance plan at the time of trial would risk under-compensation for the injury inflicted by the tortfeasor. If the plaintiff were to change or lose insurance or if the negotiated rates are different at the time the medical care is necessary, an award based only on current insurance rates may very well be insufficient. It may also unnecessarily limit the plaintiff’s choice for medical care.
The court stated that the defense is not precluded from offering alternative estimates of future medical costs. In this case, although Birdi’s economist did not offer a response to Varela’s economist regarding the present value of future medical costs, Birdi’s medical experts did offer opinions regarding estimated costs for certain future medical expenses, which were significantly lower than the estimates provided by Varela’s medical experts. The jury evaluated the evidence and came to a unanimous decision regarding the reasonable value of the future medical expenses. The jury awarded nearly half a million dollars less for future medical expenses than requested by Varela.
ABOUT THE AUTHOR: Kimberli C. Raines is senior counsel at Tyson & Mendes, LLP. She specializes in the defense of personal injury, wrongful death, insurance bad faith and general liability matters. Contact Kimberli at 858.263.4134 or firstname.lastname@example.org