Coordination of Benefits Handbook

The California Penal Law §202.4(f) requires that anyone who is found guilty of a criminal act that results in harm to a victim to provide restitution for economic losses incurred by the victim. A recent decision by a California Court of Appeal required such restitution based on the billed medical expenses incurred rather than on lower rates negotiated by that person’s medical insurer. The case is People v. Scott, 2010 WL 1820181 (Cal. App., 4 Dist., May 7, 2010).

THE FACTS

Cheryl Monreal was injured when her vehicle, which was stopped in traffic at a red light, was rear-ended by a car driven by Peter Scott. Police called to the scene found his blood alcohol level to be almost twice the legal limit. He pleaded guilty to a misdemeanor of driving with a blood alcohol level in excess of the legal limit and received a suspended sentence.

Monreal incurred medical expenses that were billed at more than $39,000. It appears that her expenses were covered by her health plan, which apparently paid the health care providers much less than the $39,000 that they billed because they apparently were network providers who accepted much lower amounts for their services.

The court ruled that Scott had to reimburse Monreal for the more than $39,000 billed by the providers at the rate of $500 per month, but it subsequently reduced his monthly payment to $50 per month, since that was all he could afford. Scott appealed.

THE DECISION

On appeal, the court ruled that, “although a victim restitution order serves the legislative goal of fully reimbursing the victim for economic loss she has incurred as a result of the defendant’s criminal conduct, it is imposed primarily for the benefit of the state to promote the state’s dual interests in rehabilitating the criminal and deterring future criminality.”

Accordingly, the court said that the trial court’s “use of the medical providers’ billed rates rather than the negotiated rates in this case was a rational method for calculating the amount of medical expense losses that Monreal incurred as a result of Scott’s criminal act.” It went on to say that, “the use of either the billed rates or the negotiated rates serves the rehabilitation and deterrent purposes of victim restitution by forcing Scott to confront, in concrete terms, the medical expense harm his actions have caused.” The court concluded:

In light of the rehabilitative and deterrent purposes of California’s victim restitution legislation and the uncontested evidence presented at the restitution hearing showing Monreal continued to suffer pain from the injuries she suffered as a result of Scott’s criminal actions, indicating a need for continuing care, we conclude the court did not abuse its broad discretion by choosing to base the amount of Scott’s section 1202.4(f)(3)(B) victim restitution obligation on the billed rates charged by Monreal’s providers, rather than on the negotiated rates of those providers accepted. Accordingly, we affirm the restitution order.

IMPLICATIONS

California’s penal code requires restitution by individuals who commit criminal acts that result in financial loss to victims. However, the legislature may have an additional objective in mind beyond helping the injured party to recover some or all of the loss. In this case, the applicable statute permits courts to award restitution based on higher billed medical charges than on the actual amounts accepted by the medical providers. According to the opinion, the court found that the legislature intended to impress on the criminal the consequences of his crime by making him liable for more than the actual loss that occurred.

However, this case illustrates the unreality of achieving both objectives. First of all, the court imposed a $39,000 liability, but ended up requiring the criminal to pay that off at the rate of only $50 per month — obviously, the amount it believed that he could actually afford. At the rate of $600 a year, it would take the individual about 65 years to retire that debt.

Further, it’s possible that the victim’s health insurance policy in this case includes some sort of reimbursement provision that would require her to reimburse the insurer or health plan (assuming it is an employer-sponsored health plan) for the amount actually received by the victim. Of course, the court could not consider the impact of such a provision (assuming it existed) because the insurer was not a party to this action.

If the insurer or plan has such a reimbursement provision and found out about this case, it probably would not be worth the effort to try to obtain reimbursement from the victim. The cost of doing so, coupled with the likelihood that the criminal would not pay all installments on time would make such recovery efforts costly and unlikely to achieve very much in the way of reimbursement.

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This entry was posted by Adam V. Russo on Wednesday, August 25th, 2010 at 11:03 am and is filed under California, Subrogation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.