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Collateral Source vs. Hanif – The Fight for Plaintiff’s Damages

By Sara B. Morgan, Esq.

The legal community in California is astir with news of the developments towards abrogation of the Hanif/Nishihama reduction. With several cases pending decision by California’s Supreme Court, the question for the would-be plaintiff is: what is the difference between Hanif and the Collateral Source Rule?

The answer depends on whether the plaintiff has health insurance. For example, if a plaintiff is injured by a defendant in an auto accident, his/her health insurance company will provide coverage for the plaintiff to treat those injuries. If the plaintiff and defendant cannot reach a settlement, the case may go to trial.

Under Hanif, the trial ends. A jury finds that the defendant committed some wrong upon the plaintiff, from which the plaintiff was harmed. The jury awards the plaintiff an amount it determines appropriate to compensate the plaintiff, including a specific amount for the plaintiff’s past medical expenses, which is usually based on the amount of plaintiff’s medical bills.

Because the health insurance companies contract with the health care providers for discounted rates, the insurance companies end up paying a lower rate than the rates billed by the provider.

After trial, the defendant asks the judge to change – reduce – the jury’s award for past medical expenses to the amount actually paid by the plaintiff’s health insurance company, under its contracts for reduced rates with the health care providers.

Thus, irrespective of the amount the jury has determined is necessary to compensate plaintiffs, the wrong-doing party can use plaintiffs’ medical insurance against them to deprive plaintiffs of their rightful benefit flowing from payment of their monthly insurance premium.

Additionally, this results in an unfair and unjust benefit to tortfeasors. Foremost, a jury has determined that the tortfeasors conduct was wrongful, and harmed the plaintiff. Why are the wrongdoers then put in the driver’s seat? It is a miscarriage of justice to allow defendants to call the shots after their conduct has been determined to be wrongful, and to harm plaintiffs yet again by depriving them of their jury awards.

Conversely, under the Collateral Source Rule, the defendant is not permitted to reduce the jury’s award for past medical expenses. Plaintiffs are not punished for having health insurance, or for obtaining treatment under that health insurance policy for injuries they sustain from defendant’s wrongful conduct. Nor do tortfeasors benefit from plaintiff’s decision to maintain health insurance for themselves and their families. Instead, plaintiffs retain the benefit of their health insurance, and are able to pay their past medical expenses and their costs of trial, and have some money left over to compensate themselves for their pain and suffering.

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