The insured ran a red light and crashed into Shirley Reid, who then careened into another car. The insured is indisputably liable and Ms. Reid had injuries later valued at $5.9 million, dwarfing the insured’s $100,000 limits. Nevertheless, the insurer failed to initiate settlement discussions or offer its limits until 10 months after the accident, at which point Ms. Reid’s attorney said it was too late, and proceeded to get a multimillion dollar judgment, and an assignment of bad faith rights against the insurer.
In Corenbaum v. Lampkin, — Cal.Rptr.3d —-, 2013 WL 1801996 (Cal.App. 2 Dist.), the court made it clear that when calculating damages in a personal injury lawsuit, the projected value of future medical services must be based upon the amount paid, rather than the amount billed, for prior medical services. This statement of the law has an extremely important financial effect for defendants and their insurers, and erodes the potential for plaintiffs to collect unfair awards based upon future medical billing estimates that would inflate their medical damages to amounts that would likely never be incurred.
Twelve years ago, the Massachusetts Institute of Technology and a technology company named Convolve sued Seagate Technology and Compaq Computers claiming $800 million in damages, alleging that Seagate and Compaq had infringed their disk drive patents.
National Union Fire Ins. Co. insured Seagate, and defended the case for many years until a federal district court judge ruled in 2007 in a related declaratory judgment action that National Union’s duty to defend had terminated. Unsurprisingly, National Union stopped paying. Seagate kept litigating, using expensive attorneys, and appealed the “no duty to defend” order to the Ninth Circuit.
The Federal Ins. Co. v. Steadfast Ins. Co, et al decision last week from the Second District Court of Appeal for the State of California provided helpful clarification for insurers regarding the scope of coverage under the “personal injury” coverage part of a general liability policy by finding that insurers had no duty to defend a complaint for federal housing discrimination against California apartment owners.
Last August in Howell v. Hamilton Meats, 52 Cal.4th 541 (2011), the California Supreme Court confirmed what appears fairly obvious – that the quantum of a personal injury plaintiff’s medical expenses potentially recoverable in tort litigation are those amounts actually paid for the medical services, plus any amounts still owed.
But a significant block of legislators backed by the Consumer Attorneys of California are actively pushing Senate Bill 1528 in an attempt to limit, or gut, the Howell decision. They argue that the actual recoverable value of medical costs should be based upon “the reasonable value of medical services provided without regard to the amount actually paid,” which would be based upon evidence of the gross amounts billed, even if those amounts were never paid.
Continue reading In California Personal Injury Tort Litigation, Compensatory Medical Damages Are The Actual Paid Cost Of The Medical Services; But The California Legislature May Change That, To Something Much Higher
On March 13, 2012 in DeWitt v. Monterey Ins. Co., 204 Cal.App.4th 233 (2012), the California Court of Appeal, Fourth District, held that an insurer which erroneously failed to defend an insured “real estate manager” under a commercial general liability policy in a serious social host liquor liability case was not liable for bad faith damages. There was no bad faith because the failure to defend was not unreasonable, and because the manager never proved it was a covered claim. But the insurer still paid several million dollars to satisfy a default judgment against him.