In Arizona, a plaintiff can present the entire billed amount of past economic damages (such as past medical damages), to the jury. Plaintiffs rely on Lopez v. Safeway Stores, Inc.,[1] which applies the collateral source rule to medical expenses. Lopez provides, “plaintiffs are entitled to claim and recover the full amount of reasonable medical expenses charged, based on the reasonable value of medical services rendered, including amounts written off from the bills pursuant to contractual rate reductions.” However, the Arizona District Court’s recent ruling in Jimenez v. Progressive Preferred Ins.[2] goes against the collateral source rule by holding, “reasonable expenses incurred for necessary medical services are those expenses which the healthcare provider accepts as payment in full.”

In Jimenez, the insured was in a car accident and, at the time, did not have health insurance, but did have an auto insurance policy underwritten by Progressive (“Policy”) with medical payment (“Med Pay”) coverage of $5,000 per person. The Policy stated Progressive would pay Med Pay benefits for “reasonable expenses incurred for medical services,” and Progressive would “determine whether the expenses for medical services are reasonable.” Further, Progressive had entirely separate contracts with the Voluntary Provider Networks (“VPN”) of select health providers, which required Contract Providers to deliver medical services at specific reduced rates.

As a result of the collision, the insured sought medical treatment, which he claimed cost $6,719. The Insured sought to recover $5,000 from Progressive, the maximum allowed in Med Pay benefits under the Policy. Progressive determined several of the insured’s providers were part of the VPN and therefore contractually bound to accept reduced rates as payment in full. Based on the Contract Providers’ agreement to accept reduced rates, Progressive sent the insured $3,455.09. Unhappy with the benefits paid under his Policy, the insured sued on behalf of a class of persons, covered by auto insurance carriers, who were paid less than the policy limits due to VPN contracts. Both the insured and Progressive filed motions for summary judgment, and the Court granted Progressive’s motion.

The insured contended he “incurred” $6,719 in expenses, for which he was liable. Under the insured’s theory, Progressive owed him $5,000 (the full policy limit) because the insured independently owed his doctors $6,719. On the other hand, Progressive argued that because the healthcare providers expressly agreed to accept $3,455.09 as payment in full, the insured “incurred” only $3,455.09 in expenses.

The Court stated it has previously noted the “unique payment practices of the health care industry,” wherein “health care providers routinely accept an amount less than the amount billed as payment in full.” In Pierce v. Cent. United Life Ins. Co.,[3] the Arizona District Court focused on the meaning of the phrase “actual charges,” and in Samsel v. Allstate Ins. Co.,[4] the Arizona Supreme Court focused on the meaning of the phrase “actually incurred by the insured.” Neither case addressed the proper interpretation of the word “reasonable” when applied to such charges. The Court went on to note, “few courts have addressed the question whether, in the medical expenses context, ‘reasonable’ expenses are those billed or those accepted as payment in full, and the Court finds persuasive those that have interpreted reasonable expenses as those expenses accepted as payment in full.”

In reaching its conclusion, the Court referenced four cases. One of the cases cited was Howell v. Hamilton Meats & Provisions, Inc.,[5] a case successfully argued by Tyson & Mendes Founding Partner Robert Tyson, wherein the court examined whether a plaintiff is allowed to recover the amount plaintiff’s medical provider submits to plaintiff’s health insurance, or the lower amount the health insurance company pays the provider in full satisfaction of the medical bills. The court noted it did not suggest hospital bills always exceed the reasonable value of the services provided, but it was sensible to rely upon the negotiated prices providers accept from insurers rather than the amount billed. Similar to Jimenez, the court in Howell concluded an injured plaintiff’s recovery is limited to the discounted amount health insurance pays on his or her behalf, rather than the amount medical providers bill to health insurance companies for their services.

The Court also cited West v. Shelby Cty. Healthcare Corp.,[6] wherein the Tennessee court held “reasonable charges” are the amounts accepted as payment in full, and “using the amount billed is unreasonable because ‘no public or private insurer actually pays full charges….’”  The Court also noted, “[i]f a healthcare provider ‘has agreed in a valid and enforceable contract to accept payment for services at a particular rate, that rate would necessarily be a ‘reasonable amount for the services … rendered.’”[7]

Finally, the Court noted it is “absurd to conclude that the amount billed for a certain procedure reflects the ‘reasonable value’ of that medical service…’[b]ecause so many patients, insured, uninsured, and recipients under governmental health care programs, pay discounted rates… the amount billed, is ‘relevant and should be admissible for establishing the reasonable value of medical costs constituting such special damages.’” [8]

Takeaway

Arguing damages is critical when attempting to prevent a nuclear verdict, and it is certainly something we focus on at Tyson & Mendes. Although the Jimenez ruling is not binding since it is a District Court case, it is certainly illustrative and an argument defense attorneys can reference in Arizona Superior Court cases to provide defendants grounds to limit the recovery of plaintiffs’ damages to those medical expenses accepted by medical providers as payment in full, rather than the larger billed amounts.

[1] Lopez v. Safeway Stores, Inc., 129 P.3d 487, 495 (Ariz. App. 2006).

[2] Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113 (D. Ariz. Apr. 28, 2020).

[3] Pierce v. Cent. United Life Ins. Co., 2009 WL 2132690 (D. Ariz. July 15, 2009),

[4] Samsel v. Allstate Ins. Co., 59 P.3d 281, 286, 291 (Ariz. 2002).

[5] Howell v. Hamilton Meats & Provisions, Inc., 257 P.3d 1130, 1142 (Cal. 2011).

[6] West v. Shelby Cty. Healthcare Corp., 459 S.W.3d 33, 44-46 (Tenn. 2014).

[7] Allstate Ins. Co. v. Holy Cross Hosp., Inc., 961 So. 2d 328, 335 (Fla. 2007).

[8] Kenney v. Liston, 760 S.E.2d 434, 451 (W. Va. 2014) quoting Howell, 257 P.3d at 1142; citing Bynum v. Magno, 101 P.3d 1149, 1162 (Haw. 2004).

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