Archive for July 14th, 2011

What’s “reasonable”? Ask a claims adjuster.

Thursday, July 14th, 2011

The word “reasonable” gets thrown around a lot in Texas law.  A lawsuit for negligence claims that someone acted other than as a “reasonable” person would under the same circumstances.  When you go to the doctor, you’re entitled to the same level of treatment that a “reasonable” doctor would provide.  And if you ever do get hurt and wind up incurring medical expenses as a result, what sort of medical expenses can you be paid?  Why, “reasonable” ones, of course.

All this leaves us asking, though, what does “reasonable” mean?  Is it the definition found in Webster’s or some other dictionary?  Well, thanks to the Texas Supreme Court’s recent decision in Haygood v. Escabedo, you needn’t go any further than your insurance company to find out just what “reasonable” means in Texas.

Given the predilections of many of our legislators—a substantial number of whom appear to lie awake in a cold sweat at night, fretting over the nightmare scenario where a lawsuit plaintiff receives a penny more than his out-of-pocket damages—it was only a matter of time until someone simply decided to let insurance companies decide what the law is.  Well, that day has arrived.  In  Haygood, the Texas Supreme Court interpreted Section 41.0105 of the Texas Civil Practice and Remedies Code, a law that had been on the books for a number of years but that had been applied in a number of different ways.  The statute basically provides that a plaintiff in a lawsuit can recover as medical or health care expenses only what is owed or what has actually been paid on his or her behalf.  (The longstanding rule was that a plaintiff could recover the “reasonable value”—there’s that word again—of the services rendered.)  Given our insurance-driven health care system, the switch to “actually paid” is a big one.  Insurance companies generally negotiate down the cost of medical services to a fraction of the original figure quoted by a doctor or hospital.

Different trial judges applied sec. 41.0105 in different ways.  Some limited the damages information submitted to juries to the amounts actually paid.  Still others simply let the jurors review all of a plaintiff’s medical bills and come up with a reasonable figure and then applied sec. 41.0105, themselves, capping the amount awarded by the jury at the “actually paid” figure.  Haygood holds that the actual value of services normally charged by a medical provider is not only not the measure of damages, it’s not even relevant to the determination of anything in the lawsuit and therefore inadmissible.  The impact on jury awards for health care expenses is likely to be less than the impact on awards for all other kinds of damages.  Texas has long allowed recovery for the pain, suffering, and mental anguish that accompany any sort of physical injury, but it is a tried and true axiom that medical costs are what drives all aspects of recovery.  So if a plaintiff has an injury that requires $100,000 of medical care but the hospital accepts $5,000 in payment—and the latter is the only figure the jury ever hears—the jury will likely ask “how bad can it really have been?”  Because the original value of medical services is not only not recoverable, but not even relevant under Haygood, a plaintiff does not even get the opportunity to explain that, while his medical costs are for a $5,000 injury, his pain is for a $100,000 one.

The practical upshot is that an insurance company—not a court, a jury, or even a health care provider—gets to set the upper limit on what is a “reasonable” medical recovery.  Whatever a jury may award, it is limited by the amount that a health insurer is willing to pay.  Since doctors and hospitals often accept whatever insurers will pay rather than attempt to pursue patients for compensation, it places all new and enormous power in the hands of insurers.