Last year, the California Supreme Court held in Howell v. Hamilton Meats & Provisions, Inc. that an injured plaintiff whose medical expenses were paid through private health insurance could not recover as economic damages against a tortfeasor any more than the amounts paid by the plaintiff’s insurer for those medical services, and that this discounted amount did not fall within the collateral source rule.  We reported on that decision at the time.

The California Court of Appeal has now extended that holding to the analogous situation in which the insured employee’s medical expenses are paid through workers’ compensation. The decision is Sanchez v. Brooke, decided March 8, 2012 by the Second Appellate District of the Court of Appeal.

In Sanchez, the plaintiff was a home health care worker who provided care for an elderly woman. The woman was smoking in bed and, after the bed caught fire, the plaintiff was seriously injured in her efforts to rescue the woman, who died in the fire. The workers’ compensation insurer for plaintiff’s employer paid her medical benefits at the statutory workers’ compensation rates, and plaintiff was not responsible for the costs of her medical case above those paid amounts. At trial, the jury found that the employer and the estate of the deceased woman were both 50% at fault. The workers’ compensation carrier filed a lien against plaintiff’s potential recovery against the estate.

While plaintiff argued that the amount of her damages should be the total amount of her economic damages (as then offset by the amount of workers’ compensation benefits received as attributable to the employer’s liability), the defendant trustees contended that the starting amount must be further reduced to reflect the fact that the injured person’s medical expenses have been paid in full by workers’ compensation and the injured employee is not liable for the unpaid balance. The trial court ruled in favor of plaintiff, but the Court of Appeal reversed.

Noting that the Howell decision was pending while the trial court case proceeded, the Court of Appeal concluded that Howell should be extended to the workers’ compensation context:

“Applying the court’s reasoning in Howell to this case, we conclude that where an employer is required under the workers’ compensation laws to pay in full an injured employee’s medical expenses, the injured employee may not recover, as economic damages from a third party tortfeasor, medical fees that the provider is precluded, either by agreement or by law (including the statutory fee schedule), from collecting from the employer.  Because fees that the provider may not collect from the employer under the workers’ compensation law do not represent an economic loss for the employee, they are not recoverable in the first instance.”

The appellate court remanded the case back to the trial court to determine the limited issue as to whether the workers’ compensation insurer paid the full amount sought by the medical providers and, if so, then that amount would establish the past medical expenses recoverable by the plaintiff as economic damages from defendants, which amount would then need to be offset to reflect the percentage attributable to the employer’s negligence.

While the extension of the Howell holding into the workers’ compensation context appears to be the correct result, undoubtedly the plaintiff will seek Supreme Court review of the unanimous Court of Appeal decision. We will report on any further developments.