Barme v. Wood

Citation37 Cal.3d 174,689 P.2d 446,207 Cal.Rptr. 816
Parties, 689 P.2d 446, 53 USLW 2274 Warren H. BARME, Jr., et al., Plaintiffs, v. Gayanne WOOD et al., Defendants and Respondents; City of Huntington Park, Intervener and Appellant. L.A. 31484.
Decision Date08 November 1984
CourtUnited States State Supreme Court (California)

Kegel, Tobin & Hamrick, Kegel & Tobin, Clinton M. Hodges and David E. Lister, Los Angeles, for intervener and appellant.

Burke, Williams & Sorensen and Brian A. Pierik, Los Angeles, as amici curiae on behalf of intervener and appellant.

Shield & Smith, Los Angeles, Home & Clifford, North Hollywood, Ball, Hunt, Hart, Brown & Baerwitz, Beverly Hills, Horvitz & Greines, Horvitz & Levy, Ellis J. Horvitz, Encino, Irving H. Greines, Beverly Hills, S. Thomas Todd, Kent L. Richland and John L. Klein, Encino, for defendants and respondents.

Latham & Watkins, Bryant C. Danner, Donald P. Newell, Joseph A. Wheelock, Jr., Los Angeles, and Milton A. Miller, Newport Beach, as amici curiae on behalf of defendants and respondents.

KAUS, Justice.

In our recent decision in American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359, 204 Cal.Rptr. 671, 683 P.2d 670, we reviewed a wide-ranging constitutional challenge to one provision of the Medical Injury Compensation Reform Act of 1975 (MICRA), a section which authorized the periodic payment of damages in medical malpractice actions. (Code Civ.Proc., § 667.7.) We concluded that the provision was constitutional. In this case, we face a somewhat similar challenge to another provision of MICRA, Civil Code section 3333.1, subdivision (b), 1 which precludes a so-called "collateral source" which has provided medical expenses or other benefits to the plaintiff in a medical malpractice case from obtaining reimbursement of those expenses from a medical malpractice defendant. As in American Bank, we conclude that the Legislature acted within its constitutional authority in enacting the provision in question.

I

In November 1977, plaintiff Warren H. Barme, Jr., a police officer employed by the City of Huntington Beach, suffered a heart attack while on duty. Shortly thereafter, he underwent open heart surgery at St. Francis Hospital of Lynwood; during the surgery, he sustained brain damage. In April 1978, Barme and his wife brought this action against the hospital as well as a number of doctors and a nurse involved in his treatment, alleging that the brain damage was caused by their negligence.

In September 1978, the City of Huntington Beach, a self-insured workers' compensation carrier, filed a complaint in intervention, seeking to recover from defendants the expenses it had incurred, and was continuing to incur, in providing workers' compensation benefits to Barme. (Lab.Code, § 3852.) 2 The complaint alleged that as of September 1978, the city had paid approximately $79,000 in such benefits; the total amount of benefits was expected to exceed $150,000. The city asserted that these expenditures were proximately caused by defendants' negligence.

In August 1979, defendants moved for summary judgment with respect to the city's complaint in intervention, maintaining that recovery by the city was barred under section 3333.1, subdivision (b). 3 The city opposed the motion primarily on the ground that section 3333.1, subdivision (b) was unconstitutional under equal protection and due process principles. 4 The trial court disagreed and granted summary judgment in favor of defendants. The city appeals.

II

In American Bank, we summarized the medical malpractice insurance "crisis" which gave rise to the MICRA legislation. "The problem which was the immediate impetus to the enactment of MICRA arose when the insurance companies which issued virtually all of the medical malpractice insurance policies in California determined that the costs of affording such coverage were so high that they would no longer continue to provide such coverage as they had in the past. Some of the insurers withdrew from the medical malpractice field entirely, while others raised the premiums which they charged to doctors and hospitals to what were frequently referred to as 'skyrocketing' rates. As a consequence, many doctors decided either to stop providing medical care with respect to certain high risk procedures or treatment, to terminate their practice in this state altogether, or to 'go bare,' i.e., to practice without malpractice insurance. The result was that in parts of the state medical care was not fully available, and patients who were treated by uninsured doctors faced the prospect of obtaining only unenforceable judgments if they should suffer serious injury as a result of malpractice." (36 Cal.3d at p. 371, 204 Cal.Rptr. 671, 683 P.2d 670.)

We explained that MICRA "attacked the problem on several fronts. In broad outline, the act (1) attempted to reduce the incidence and severity of medical malpractice injuries by strengthening governmental oversight of the education, licensing and discipline of physicians and health care providers, (2) sought to curtail unwarranted insurance premium increases by authorizing alternative insurance coverage programs and by establishing new procedures to review substantial rate increases, and (3) attempted to reduce the cost and increase the efficiency of medical malpractice litigation by revising a number of legal rules applicable to such litigation." (Id. at pp. 363-364, 204 Cal.Rptr. 671, 683 P.2d 670.)

The collateral source provision before us--like the periodic payment of damages provision at issue in American Bank --is one of the provisions of MICRA which was intended to reduce the cost of medical malpractice insurance. Section 3333.1, subdivision (a) --which is not at issue here--authorizes a defendant in a medical malpractice action to introduce evidence of a variety of "collateral source" benefits--including health insurance, disability insurance or worker's compensation benefits. Apparently, the Legislature's assumption was that the trier of fact would take the plaintiff's receipt of such benefits into account by reducing damages. 5 Section 3333.1, subdivision (b) --the provision challenged here--provides, in turn, that "[n ]o source of collateral benefits introduced pursuant to subdivision (a) shall recover any amount against the plaintiff nor shall it be subrogated to the rights of a plaintiff against a defendant." The city apparently concedes that this provision was intended to eliminate the right it would otherwise have under Labor Code section 3852 to seek reimbursement from a medical malpractice defendant. It argues, however, that section 3333.1, subdivision (b) is unconstitutional, violating its rights to both due process and equal protection. Neither contention has merit.

A

The city acknowledges that an employer's right to seek reimbursement from a third party for workers' compensation benefits that the employer is legally obligated to provide is of statutory origin and is properly subject to legislative regulation or abolition. 6 The city contends, however, that the due process clause prohibits the Legislature from arbitrarily eliminating this right, and maintains that section 3333.1, subdivision (b) is arbitrary because it bears no rational relation to a legitimate public purpose.

We cannot agree. As we explained in American Bank, the Legislature could properly determine, in light of the facts before it, that the public interest of the state would be served by the adoption of measures which reduced the cost of medical malpractice insurance. "By reducing such costs, the Legislature hoped (1) to restore insurance premiums to a level doctors and hospitals could afford, thereby inducing them to resume providing medical care to all segments of the community, and (2) to insure that insurance would in fact be available as a protection for patients injured through medical malpractice." (36 Cal.3d at p. 372, 204 Cal.Rptr. 671, 683 P.2d 670.) The retention of adequate medical care and the preservation of adequate insurance coverage are clearly legitimate public interests.

It is just as clear that section 3333.1, subdivision (b) is rationally related to the objective of reducing the cost of medical malpractice insurance. By prohibiting "collateral sources" from obtaining reimbursement from medical malpractice defendants or their insurers, the section obviously reduces the potential liability of such defendants. (See California Physicians' Service v. Superior Court (1980) 102 Cal.App.3d 91, 97, 162 Cal.Rptr. 266.) The Legislature could rationally conclude that this would lead to lower malpractice insurance premiums.

Although the city points out that any savings in malpractice premiums is likely to be offset by higher premiums for workers' compensation, health and disability insurance and the like, that circumstance does not undermine the rationality of the legislation. Assuming that section 3333.1, subdivision (b) would not reduce the total costs caused by malpractice, the Legislature could have determined that by redistributing the financial impact of malpractice among the different types of insurers involved in the health field, the costs would be spread over a wider base, alleviating the immediate problems posed by a growing cadre of uninsured doctors and a potential shortage of medical care.

The city also contends that the legislation is arbitrary because it shifts some of the cost of medical malpractice from negligent health care providers to innocent --i.e., nonnegligent--employers or insurers. In the first place, to put the matter in perspective, it must be remembered that by and large the insurers who are burdened by the provision have been paid a fee or premium to provide the health or other benefits covered by their policies; employers, like the city in this case, who have chosen to be self-insured presumably have decided that it is in their self-interest to do so in order to save the insurance premium they would otherwise incur. Because the injury in this...

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