Reason Was That Only Negotiated Medical Expenses Actually Paid By Her Insurer Should Have Been Considered At The Time Of The Offer.
In Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541, 548 (2011), the California Supreme Court decided that a negotiated rate differential included in a jury’s award in a personal injury award—meaning the larger amount of medical expenses billed to the claimant versus the actual smaller amounts actually paid by claimant’s insurer in satisfaction of the medical expenses (usually under an insurer-provider contract)—should be subtracted from a judgment because the injured plaintiff did not suffer any economic loss in that amount. Put differently, any delta between the payments accepted by medical providers and those amounts billed should be excluded from calculation of a jury verdict or award.
This negotiated rate differential played a big part in why the Fifth District affirmed a lower court’s ultimate decision to not award expert witness fees of $100,300 to a plaintiff winning $1.027 million jury verdict, when the amount was reduced down to $887,098.26 after subtracting out the negotiated rate differential, following the defense’s earlier rejection of plaintiff’s 998 offer of $1 million. (The reviewing court also found that Howell had not been decided at the time of the offer, but this uncertainty should have led plaintiff to conclude the issue was unsettled on whether the negotiated rate differential was to be subtracted from her ultimate recovery.)
The appellate panel in Lee v. Silveira, Case No. F067723 (4th Dist., Div. 3 May 15, 2015) (published) distinguished a different result reached in Guerrero v. Rodan Termine Control, Inc., 163 Cal.App.4th 1435, 1441 (2008), which decided not to count a later offset of money from another defendant for purposes of evaluating whether plaintiff obtained a more favorable judgment after rejecting an earlier 998 offer in a smaller amount offered by the primary defendant. (Put another way, only offsets to which plaintiff were subject at the time of the 998 offer should be considered.) In contrast to Guerrero, plaintiff received no money from another defendant and had suffered no economic loss based upon the negotiated rate differential. So, here is the rule formulated by the Fifth District in this instance: “When a jury’s verdict awards damages for losses not suffered by the plaintiff or for damages not allowed by law, those damages must be excluded when determining whether the defendant failed ‘to obtain a more favorable judgment or award’ for purposes of [Code of Civil Procedure] section 998, subdivision (d).” (Slip Opn., p. 11.)
GOOD OBSERVATION IN OPINION—Justice Franson, the author of the opinion and prior Fresno litigation attorney before he was appointed to the bench, also pragmatically observed, as practicing litigators well know, that one economic incentive deriving from section 998 “involves expert witness fees, which ordinarily are not recoverable as costs”—but can be quite high and can be shifted if the 998 offer is carefully crafted by the offeree. (Slip Opn., p. 7.)