Since the Hanif v. Housing Authority (1988) and Nishihama v. City and County of San Francisco (2001) cases have been decided, the insurance companies have successfully argued over and over that the personal injury claimants should not be entitled to recover damages based on the actual charges for the necessary medical services received, but only for those actually billed to the private health insurer.
In other words, if you have been injured in an accident, have received emergency room care and other medical care totalling $20,000 in medical expenses, but your health insurance provider (such as Blue Cross) that has a special arrangement with the hospital, reduced the bill to $8,000, the third party insurance company for the driver at fault would normally argue that your damages should be based on the latter figure of $8,000 rather than actual billing charges.
However, this argument on reduction of damages might not have much validity any longer. In a recent case Olsen v. Reid, filed on 6/23/2008, the above case decisions and their logic has been condemned and practically shattered by the fourth district appellate court. The court passionately supported the rationale of the long standing “collateral source rule” in California, which states that the recovery of the victim in an injury case should not be reduced just because some of the damages were coverd by a collateral source (such as health insurance company). The court criticized Hanif and Nishihama decisions, insisting that it is appropriate for the jury at an injury case trial to hear evidence as to the full amount of the injured claimant’s damages and not the reduced amount that was billed.
The forth district emphasized that the more recent cases held that if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor (for example, the driver at fault), such payment should not be deducted from the damages which the plaintif would otherwise collect from the defendant.
This recent decision significantly weakens if not eradicates, at least for now – until and unless the California Supreme Court makes a ruling on this issue, the Hanif/Nishihama argument that the insurance companies like to use to reduce their settlement offers.