Oral Argument was heard in the Texas Supreme Court on September 16, 2010 in the case of Aaron Glenn Haywood v. Margarita Garza de Escabedo from Angelina County and the 12th District Court of Appeals. The significance of this case to personal injury practice in Texas is huge. This is the first case to finally make its way to the Texas Supreme Court regarding the application of Section 41.0105 of the Texas Civil Practice and Remedies Code. This is commonly known as the “paid or incurred” rule that limits the recovery of medical expenses to the amounts actually paid or incurred by the Plaintiff. Since being passed in 2003 as a part of a larger tort reform bill, this provision has caused quite a controversy in the bench and bar. Although the statute is relatively clear in its limitation on medical expenses, the application of the rule has been a source of significant debate amount trial lawyers and judges. This debate continues to rage to this day over what evidence is to be admitted at trial on this issue.
The debate concerns whether the full amount of the medical expenses charged is submitted to the jury or whether only the reduced amount that was paid by health insurance, Medicare or Medicaid should be submitted. The position of the Plaintiff’s bar is that the full amount of the medical expenses charged should be submitted with the amount awarded by the jury being reduced by the trial court at the time a judgment is entered to the amount paid or incurred. Plaintiff’s counsel argues that to do otherwise, would abrogate the collateral source rule. The position of the Defense bar is that only the amounts actually paid should be submitted to the jury. How a trial court rules on this issue is important not so much for the medical expense issue, but for how the amount of medical expenses affects the other damages awarded by a jury. It is widely believed by both sides of the bar that the amount of medical expenses considered by the jury has a significant impact on the more intangible damages awarded by a jury for elements such as mental anguish, pain and suffering or physical impairment.
Often the swing between the amounts charged and the amounts paid can be considerable. We are currently preparing for a trial in which the amount charged was almost $500,000.00 while the amount actually paid by Medicare and the group health carrier was slightly over $200,000.00. In Haywood, the difference was $95,000.00. There has been no consistency in the application of this provision by trial courts. In Harris County, Texas, for example, one judge might limit the admission of evidence to the amount actually paid, while the judge in the court next door might allow the admission of the entire amount charged. The intermediate appellate decisions have been similarly inconsistent.
The Texas Supreme Court is now finally looking at this issue and will likely provide some guidance on how these damages are to be submitted. In Haywood, the trial court submitted the entire amount of the medical expenses charged. On appeal, the 12th Court of Appeals in Tyler held that the failure of the Plaintiff to offer evidence of the amount actually paid meant there was no evidence of past medical expenses and as a result, Plaintiff could not recover medical expenses at all.
The oral argument conducted by the Supreme Court on this issue is available on line at www.supreme.courts.state.tx.us. The case number is 09-0377. Watching the interaction by the Court with appellate counsel is insightful in predicting how the Court will rule on this issue. Based on the arguments of counsel and the questions by the Court, I would predict the Court will be issuing an opinion that will make the Plaintiff’s bar very unhappy. Look for an opinion that limits the admission of evidence on medical expenses to the amounts actually paid. Regardless of the opinion actually issued, as a trial lawyer, it will be nice to finally have some consistency in this area. For questions regarding this article or the paid or incurred rule and its application contact H. Dwayne Newton at (713) 493-7621.