Pebley Decision and Future Litigation



Jonah Manzier 
Senior Counsel 
TD&PConsulting, Inc.

On May 8, 2018, the California Court of Appeal, Second District, Division 6 rendered a decision in Pebley v. Santa Clara Organics, LLC (Pebley), [i] which marked a significant departure from accepted case law.[ii] The facts in this case are as follows:  

Plaintiff Dave Pebley was injured in a motor vehicle accident caused by defendant Jose Pulido Estrada, an employee of defendant Santa Clara Organics, LLC (Santa Clara). Although Pebley had health insurance, he elected to obtain medical services outside his insurance plan. A jury found defendants liable forPebley’s injuries and awarded him $3,644,000 in damages, including $269,000 for past medical expenses and $375,000 for future medical expenses.[iii]

The defendant, Santa Clara, argued that the plaintiff failed his duty to mitigate damages when he elected to obtain care under a lien rather than his insurance.[iv] The Pebley Court rejected the defendant’s argument maintaining that a plaintiff’s decision to pay out of pocket for his medical care is irrelevant (regardless of the reason) if his duty to mitigate is fulfilled.[v] 

A tortfeasor cannot force a plaintiff to use case are her insurance to obtain medical treatment for injuries caused by the tortfeasor. That choice belongs to the plaintiff. If the plaintiff elects to betreated through an insurance carrier, the plaintiff’s recovery typically willbe limited to the amounts paid by the carrier for the services provided….Butwhere, as here, the plaintiff chooses to be treated outside the availableinsurance plan, the plaintiff is in the same position as an uninsured plaintiffand should be classified as such under the law.[vi] 

On that account, the Court explains, any plaintiff who receives treatment outside of his or her insurance must “be considered uninsured, as opposed to insured, for the purpose of determining economic damages.”[vii]  As an appropriate measure of medical damages, the plaintiff may introduce evidence of the full amount billed, (despite the fact that it has not been paid,) and evidence of the full billed amount’s reasonableness. [viii] 

California law regarding the appropriate measure of medical damages in a personal injury action is unclear. Howell v. Hamilton Meats & Provisions Inc., D053620 (Cal. Ct.App. Dec. 22, 2011) offered some guidance. But subsequent opinions have made the ruling less clear.

[The Howell Court found] that an injured party who receives medical treatment through his or her health insurance is limited to the lesser of the amount actually paid for the medical services or the reasonable value of those services, rather than the amount billed by the provider. (52 Cal.4th at p. 556.) Howell adopted the Restatement’s market value approach to measure medical damages. (Id. at p. 556 [citing Rest.2d Torts, §911].)

Since Howell, the lower courts have been called upon to decide whether the full amount billed, as opposed to paid, is relevant to future medical damages (see Corenbaum v. Lampkin (2013) 215 Cal.App.4th1308, 1330-31 [holding that because “the full amount billed is not an accurate measure of the value of medical services,” it is also “not relevant to a determination of the reasonable value of future medical services”]); and whether those same unpaid bills are admissible if an injured party is uninsured. (See Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311, 1330 [holdingthe amount billed was relevant in cases where the plaintiff was uninsured].)[ix]

The lack of clarity turns on (1) whether an individual is identified as insured or uninsured, and (2) whether the full amount billed or paid is an accurate measure of value. Pebley adds to the confusion by identifying an insured person as an uninsured for purpose of increasing the amount of damages awarded.

The Pebley Court all but ignores the growing body of evidence indicating that providers do not expect insurers to pay the full amount billed. In 2016, the federal court in United States v. Berkeley Heartlab, Inc., relying on expert testimony, maintained that “physicians set their charges higher than the actual payment they expect to receive . . .” In fact, physicians set the irritates 200% to 500% higher than the Medicare Physician Fee Schedule (MPFS) rates[x] (with the knowledge that Medicare is not allowed to pay above the MPFS).[xi]  Insurance companies, whether public or private, pay discounted rates as a matter of practice. And providers, as market actors, do not expect to receive the total amount billed. 

The Pebley Court specifically precluded the defense from introducing evidence of “Pebley’s medical treatment costs [by excluding] … evidence that Pebley was insured [] [and did] not seek medical treatment through his insurance. …. [] exclude[ing] evidence of the amounts an insurance company may pay, or what a medical provider may accept, for medical services, both past and future.”[xii]  It disregards the2017 Court of Appeal decision in Cuevas,[xiii]where the Court found that there was enough evidence to support the future viability of medical payments under the Affordable Care Act (ACA) and Medi-Cal. Thus, the Cuevas Court concluded that insurance coverage should be considered available when determining medical damages.[xiv] 

Additional consideration by California’s Supreme Court is needed in the Pebleymatter. Should the Pebley Court be able to maintain that the availability of insurance does not have a direct impact on Mr. Pebley’s future medical expenses, or that the reasonable value of medical expenses is not impacted by insurance coverage? The Pebley Court may not speak to this question. But the impact of its decision belies that fact and cuts against the reality of the healthcare market.


[i] Pebley v. Santa Clara Organics, LLC, 232 Cal. Rptr. 3d 404, 406 (Cal. Ct. App. 2018)

[ii] Case law prior to Pebley holds that evidence of billed medical expenses is not relevant in instances where a plaintiff is covered by insurance.  See Howell v. Hamilton Meats (2011) 52 Cal.4th 541; Correnbaum v. Lampkin (2013) 215Cal.App.4th 1308; Ochoa v. Dorado (2014) 228 Cal.App.4th 120; c.f.Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311.)

[iii] Pebley v. Santa Clara Organics, LLC, 232 Cal.Rptr. 3d 404, 406 (Cal. Ct. App. 2018)

[iv] Id.

[v] Id.

[vi] Id. The court cites earlier reasonable value cases to reach this conclusion.

[vii] Id.

[viii] Id.

[ix] Pebley v. Santa Clara Organics, LLC No S249399,Jul 13, 2018, (Amicus Brief) by Glenda Weaver,http://www.dri.org/advocacy/center-for-law-and-public-policy/amicus/amicus-briefs/docs/default-source/amicus-briefs/2018/amicus-petition—final

[x] U.S. Dist. LEXIS 107481 (D.S.C. July 11, 2017).

[xi] Id.

[xii] Pebley at 4.

[xiii] Cuevas v. Contra Costa County, 11 Cal.App.5th 163 (2017).

[xiv] Id. at 180-181.