Citizens Against Lawsuit Abuse of Central Texas

By Mary Alice Robbins - Texas Lawyer
May 28, 2007

A bill that allows plaintiffs in personal-injury suits to recover the difference between the medical expenses they incurred and the amount their insurers paid faced little opposition in the Texas Legislature, but at least two groups are urging Gov. Rick Perry to veto it.

Passed on a 139-0 vote in the House and a 28-2 vote in the Senate, H.B. 3281 addresses a controversy that has been brewing since the Legislature passed major tort reforms in 2003. The controversy centers on whether the sweeping reforms included elimination of the long-standing collateral source rule.

H.B. 4, the 2003 tort reform measure, provided a new §41.0105 in the Texas Civil Practice & Remedies Code, which reads: "In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant."

Jay Harvey, president of the Texas Trial Lawyers Association and a partner in Austin's Winckler & Harvey, says courts across the state have had difficulty understanding what this limitation means and how to apply it.

Harvey says H.B. 3281 clarifies that the Legislature did not intend for H.B. 4 to impose limitations on economic damages in suits other than those for medical malpractice or health care liability. H.B. 3281 specifically provides that the limitation in §41.0105 applies only to a health care liability claim and does not apply to a claim for future medical or health care expenses.

Bill Hammond, president of the Texas Association of Business, says TAB has asked Perry to veto the bill. "It's going to drive up the cost of insurance for every Texan who has insurance," Hammond says.

"If the amount of awards in personal-injury cases goes up, the cost of general liability insurance goes up," says Fred Bosse, regional vice president and an attorney for the American Insurance Association, which registered its opposition to H.B. 3281 at the Senate State Affairs Committee's May 10 public hearing on the bill.

Kirsten Voinis, spokeswoman for Citizens Against Lawsuit Abuse of Central Texas, another group asking the governor to veto the bill, says, "Texans with legitimate claims or injuries deserve to be compensated, but H.B. 3281 allows personal-injury lawyers to sue for reimbursement of expenses that never were incurred. That is a shame and a sham."

Hammond says a patient's hospital charges can be two, three or four times higher than the amount the patient's insurer contracted with the hospital to pay.

Bosse says "it's somewhat like unjust enrichment" if a plaintiff recovers the full charges even though the plaintiff's insurance company contracted for a lower payment.

But Harvey says a tortfeasor should not have to pay lower damages because the plaintiff has health insurance.

"People are being penalized basically for doing the right thing and having insurance," says state Rep. John Smithee, R-Amarillo, one of the House sponsors of H.B. 3281.

"It would be ludicrous to suggest in a wrongful-death action that the wrongdoer's responsibility should be mitigated by the fact that the victim had life insurance," says Smithee, a partner in Templeton, Smithee, Hayes, Heinrich & Russell in Amarillo.

Smithee says the "paid or incurred" limitation acts as a deterrent for obtaining insurance. "That's not good social policy," he says.

Perry spokeswoman Krista Moody says the governor will thoughtfully review H.B. 3281 before making a decision about it. "The governor takes into consideration argument on all sides," Moody says. "He considers all variables."

Perry has until June 17 to decide whether to veto or sign the bill.

"Incurred" Twice

A state intermediate appellate court recently interpreted §41.0105.

In a 2-1 decision on May 16, San Antonio's 4th Court of Appeals held in a personal-injury suit, Mills v. Fletcher, that the statute limits a plaintiff from recovering medical or health care expenses that have been adjusted or "written off." The decision reverses a 2006 judgment by Bexar County Court-at-Law No. 2, which awarded $1,551 to plaintiff Kevin Fletcher against Alisa Mills for his past medical expenses. According to the 4th Court's majority opinion, Mills had argued that §41.0105 required a reduction in Fletcher's award, because his medical providers had accepted less than their billed charges from Fletcher's insurer.

Justice Karen Angelini, author of the majority opinion, noted that the word "incurred" is used twice in §41.0105. "In referring to "incurred' the second time, the Legislature chose to modify "incurred' with the word "actually,' " Angelini wrote.

Angelini further wrote that by modifying "incurred" on second reference with the word "actually," the Legislature intended to limit expenses "incurred." Justice Steven Hilbig concurred in the judgment only.

Justice Catherine Stone wrote in her dissenting opinion that the language of §41.0105 "is not a model of clarity, perhaps because it underwent numerous revisions before it was finalized." According to Stone's dissent, the majority's interpretation of the statute fails to give meaning to the term "incurred."

Citing the Texas Supreme Court's 1972 decision in Black v. American Bankers Insurance Co., Stone wrote, "One incurs when one suffers or brings on a liability or expense."

David Plaut, Miller's attorney and a partner in Austin's Hanna & Plaut, calls Angelini's opinion wellwritten.

"This is an important decision on §41.0105," he says.

John Tyler, Fletcher's attorney and a partner in Tyler & Peery in San Antonio, says he was somewhat surprised by the 4th Court's decision, because the state Supreme Court in Black and the 4th Court in 1961's American Indemnity Co. v. Olesijuk held that a plaintiff incurs an expense at the time of treatment. Tyler says he probably will file a motion for rehearing of Mills by the entire 4th Court.

Plaintiffs attorney Jim Perdue Jr., who is not involved in Fletcher but who wrote an article on §41.0105 for the Winter 2006 Texas Tech Law Review, says the 4th Court's majority opinion offers no guidance as to what the section means.

Perdue, who is board certified in personal-injury law by the Texas Board of Legal Specialization, says a host of rewrites of H.B. 4 created a §41.0105 that, in his opinion, does not say anything.

Perdue, a partner in the Perdue Law Firm in Houston, notes, "The Mills v. Fletcher opinion continues to leave wide open what the section means as far as what a trial judge is supposed to do."