Over the summer, Byron Henry and I wrote an article discussing the emerging majority rule in Texas for applying section 41.0105, the paid vs. incurred rule for medical care expenses. Our goals were two-fold: (1) to update the appellate bar on the current state of the law on this issue and (2) to provide suggestions for how to deal in practice with various pitfalls we see with the emerging majority rule. Byron and I have practiced on both sides of the docket, so we did not intend those suggestions to be defense-oriented. Rather, as appellate practitioners, we have seen how the current majority rule is inherently flawed in practice and creates dangers for plaintiffs and defendants alike.
Byron and I felt the topic was especially timely because the Texas Supreme Court had recently granted the petition in one of the cases emerging in the majority -- Escabedo v. Haygood, 283 S.W.3d 3 (Tex. App.---Tyler 2009, pet. granted). The Court heard argument on September 16, 2010.
We received a good deal of positive feedback after the article was published in the Appellate Advocate. But we also heard concerns from some that our article could influence the Texas Supreme Court's decision in Haygood to the detriment of Petitioner. I was humbled to think an article I was involved with could have such an impact, but I was also excited to be part of a timely and important debate that will impact how we all practice.
Following the Haygood argument, John Gsanger and Paul Gold prepared a response to our article, which was published in the current edition of the Appellate Advocate. Byron and I would like to briefly reply to that article here.
The Gsanger/Gold article argues that the Tyler Court of Appeals' opinion in Haygood is fatally flawed and presents an inferior, minority rule. However, Gsanger and Gold do not address the pitfalls Byron and I see when applying the majority view in practice, nor do they acknowledge the inequitable and illogical results that will come from following cases like Gore v Faye and Irving Holdings v Brown. Instead, Gsanger and Gold assert that (1) Haygood renders meaningless section 18.001 of the Civil Practice and Remedies Code by converting article 41.0105 into a standard of proof rather than a limit on recovery, and (2) the legislative history of article 41.0105 supports the majority view of applying 41.0105 post-verdict.
We disagree with both premises.
First, the majority rule misapplies section 18.001 and article 41.0105. Gsanger and Gold recognize that "[t]here is a natural interaction between" the standard of proof for damages in section 18.001 and the limit on recovery found in article 41.0105. See Gsanger/Gold at 70. Section 18.001 is not a standard of proof but a procedural vehicle allowing an affidavit to serve as competent evidence at trial. Section 41.0105 makes the initial charges irrelevant by limiting recovery to the amounts actually paid or incurred. The majority rule ignores this necessary interaction and, instead, requires parties to apply each statute in isolation using different numbers. This leads to absurd results like those found in Gore v. Faye and Irving Holdings v. Brown. See Henry/Casada at 409-412.
Second, the legislative history does not require the jury to use one set of numbers to determine the amounts reasonably and necessarily incurred and the judge to use another set of numbers to determine the ultimate recovery. The legislative history cited by Gsanger and Gold simply reiterates the obvious -- that a claimant may not recover more than what he actually paid or incurred. The discussion of the collateral source rule is a red herring because amounts paid by an insurance company or Medicare are not at the center of this debate. Rather, the problem lies with allowing a jury to award damages that were written off or otherwise forgiven and were, thus, not incurred or paid by anyone. If the Legislature intended claimants to recover such write-offs, then why did the Legislature bother to enact 41.0105 at all?
Finally, the courts that apply 41.0105 only post-verdict fail to address how to resolve the conflicts caused by the jury using fictional damages numbers to determine reasonableness and necessity and the court using the real, billed amounts to determine an ultimate recovery. The only court that has adequately addressed this issue is the Tyler court in Haygood. And, in so doing, that court necessarily determined that the majority rule does not work in practice.
The majority rule of allowing a jury to see only the fictional amounts would work, in theory, in simple cases in which the reasonableness and necessity of bills is not at issue, the court and the parties agree that the amount actually paid or incurred equals a sum certain, and the court caps any recovery at that sum certain. But that is the easy case.
Such an approach does not work when there are questions regarding reasonableness and necessity of certain services or charges. In those cases, there are only two options. If the court insists on providing the jury with the fictional, gross amounts billed, then the charge must include separate blanks for each charge or, at a minimum, separate blanks for each disputed charge. That could be an onerous task. And what happens when the jury awards only a portion of the billed amount and in doing so rejects some charges as unnecessary or unreasonable? Should the trial court reduce the amount paid in proportion to the jury's reduction? Once again, only a granulated jury charge containing a blank for each disputed treatment or charge would allow the trial court to know which payments to exclude or reduce post-trial.
The other option is for everyone, including the jury, to work only with the real numbers (i.e. bills showing the net amounts billed after write-offs or proof of amounts actually paid) as in Haygood. I personally believe the second option is the simplest and cleanest for everyone. I also believe that this approach harmonizes section 18.001 with article 41.0105 while also furthering the purpose of article 41.0105 -- to limit a plaintiff's recovery of medical expenses.
We welcome your take on the issue and on the two articles.
