How can insurance companies and defense lawyers deal with Nevada courts’ reluctance to follow California’s Howell doctrine, specifically with regard to the admissibility of medical liens and write-downs to third party insurance providers? Formulate your investigation of medical expenses to highlight what the plaintiff actually has to pay for the medical services they received, or is legally liable to repay, and what the market value of the services is in the geographic area.
Currently, medical liens and evidence of insurance write-downs are inadmissible to prove the reasonable value of the medical services a plaintiff received, even though the medical provider may have accepted much less as payment in full, than what was originally billed to the patient. Proving the reasonable value of a medical service, with evidence that the service was provided on a lien, or that the lien was sold for much less than what the service was billed, seems like the most direct way to prove the value of the service. Such evidence is inadmissible under the collateral source rule, and Nevada courts seem to disfavor attempts to admit such evidence on other issues, such as to prove bias.
The Nevada Supreme Court’s decision in Khoury v. Seastrand, 132 Nev. 520 (2016) carved out a small window allowing for admissibility of medical liens in a personal injury action to show bias on the part of a doctor or medical provider. However, the decision also left discretion to trial judges to exclude evidence of medical liens, even as to issues of bias, by downplaying the probative value of lien evidence in deciding the reasonable value of the medical services provided. Most concerning, is the court’s reasoning that liens sold by medical providers to third parties are functionally similar to write-downs made to a third party-insurer. Such language reflects that a case sufficiently nuanced as Howell has yet to reach Nevada’s Supreme Court.
Last year, a popular Nevada law blog went as far as to say that Khoury “may well have foreclosed the possibility that the Nevada Supreme Court will follow California’s Howell doctrine.” Personal injury lawyers are advertising on their websites that Khoury affirms the state’s rigid adherence to the collateral source rule, and the holding in Tri-City Equip. & Leasing v. Allstate, 128 Nev.352, 360 (2012), that evidence of payments showing medical provider discounts, or write-downs, to third party insurance providers is irrelevant to a jury’s determination of the reasonable value of medical services. The “billed vs. paid” issue still has not been as squarely addressed in Nevada as it has in California. However, Nevada courts have characterized the issues as ones of “pre-negotiated discounts” and “litigation lender write-downs” which may be muddying the waters and preventing adoption of a Howell-like doctrine.
All of that said, Nevada jury instructions on recoverable personal injury medical expenses, however, require that medical expenses to be “reasonable” and “incurred” in order to be recoverable! The admissibility problem lies in attempting to use a lien, or the sale of a lien, to support the argument that the medical bill is unreasonable or inflated above the reasonable value, which violates the collateral source rule. A fundamental takeaway of the Howell decision was that recoverable damages must have been incurred, i.e., the plaintiff cannot recover more than they are legally liable to pay for the medical services they received. Thus, by focusing your investigation and discovery on what the plaintiff incurred, or is legally liable to repay, and on the market value of similar services in the geographic area in which plaintiff lives, evidence discovered with this focus is more likely to be admitted, though it may touch on or reveal information about a medical lien, or the sale of a medical lien.
The practice pointer for insurance professionals and defense lawyers is that it may be awhile before Howell comes to Nevada, if at all, because the issues are being framed somewhat differently in Nevada. Going back to the basics of what is a recoverable item of monetary damage under Nevada law in your investigation and discovery on a plaintiff’s medical expenses will bring the focus back to what the law really is, and how it should be applied. This could include retaining an expert on the reasonable value of a plaintiff’s medical expenses, and gearing your written discovery and investigation questions to learn what the plaintiff incurred, or is legally liable to repay, versus what they were charged. Such an inquiry does not always invoke the collateral source rule.
- Khoury v. Seastrand, 132 Nev. 520 (2016)
- Proctor v. Castelletti, 112 Nev. 88 (1996)
- Tri-City Equipment & Leasing, LLC v. Klinke, 128 Nev. 352 (2012)
- Nevada Jury Instruction 10.02