Why this Case is Important

In California, personal injury plaintiffs may recover the lesser of the (1) amount incurred for medical services, or (2) reasonable market value of those services. Plaintiffs with medical insurance may not offer into evidence the full billed amount since it represents a misleadingly inflated number given the realities of modern medical practices in which the amount initially billed is typically more than the amount ultimately paid, especially when insurance is involved. While truly uninsured plaintiffs may offer the amount billed as one indication of what the reasonable market value might be, insured plaintiffs could not do so even if they did not benefit from any discounted rate negotiated by their insurers. (Ochoa v. Dorado (2014) 228 Cal.App.4th 120, 135-36.)

Then, on May 8, 2018, the Second District Court of Appeals decided Pebley v. Santa Clara Organics, LLC. The court ruled that plaintiffs who have insurance, but elect to not seek covered treatment, are deemed "uninsured" and, therefore, permitted to offer the full billed amount of medical expenses into evidence. This case is important because it upends the prior state of California law (creating an appellate split with Ochoa), encourages higher medical billing practices, and hinders the ability of defendants to demonstrate the inflated nature of non-insured treatment.


Plaintiff Pebley was injured in a motor vehicle accident. He initially received treatment through his insurance provider, Kaiser, but switched to uncovered treatment after filing the lawsuit. The defendants noted that one of Pebley’s attorneys previously authored an article encouraging this more costly practice, with the admitted purpose of driving up the "settlement value" of the case. In addition, despite apparently becoming Medicare-eligible in March 2013, Pebley continued to seek only uncovered treatment, charged at much higher rates, including for a cervical fusion surgery in March 2014.

At trial, the court granted the plaintiff’s requests to exclude all evidence of (1) Pebley’s available insurance coverage, and (2) what insurance companies would have paid for the treatment at issue. In light of this order forbidding reference to insurance, the court also barred a defense expert from opining on the reasonable value of professional fees because his methodology involved an analysis of Medicare rates.

The trial court further ruled that the full amount of Pebley’s bills – nearly $270,000 – was admissible. Pebley was required to support with expert testimony that this billed amount was reasonable, and he offered the treating physicians who performed his spinal fusion procedure for that purpose. One of these physicians also opined that Pebley would need 2-3 additional surgeries, ranging from around $125,000 to $175,000 each. The defense offered expert testimony that the reasonable value of all past and future treatment totaled about $154,000. Ultimately, the jury awarded the full amount of the bills, and another $375,000 for future treatment, for a total of $644,000.


The appellate court upheld the verdict in full (except for a small reduction of about $1,000 on other grounds). It is the first case in California in this context to hold that a party with insurance "shall be considered uninsured." The court further held that the fact a plaintiff does not turn to available insurance is "irrelevant" to whether damages were properly mitigated. It held also that the fact a plaintiff had insurance at all is properly excluded under Evidence Code, section 352. Finally, the court found that the trial court did not err by excluding even general references to insurance, or the discounted rates carriers might negotiate for similar treatment.


The Pebley decision marks a sharp turn in personal injury actions, in which the case law had consistently provided that evidence of full billed amounts for medical treatment was inadmissible unless the plaintiff was truly uninsured. Putting the full amount billed in front of the jury ignores the reality of often discounted services, for insured and uninsured patients alike, but especially when insurance is available. This leads to a misleading and prejudicial impression of what the actual value of the services are. Jurors are likely to trust that the billed amount is a reasonable measure of damages, despite the fact that amount is often inflated or otherwise not reflective of the reality of how treatment is valued in our modern, largely insurance-based medical system.

Also, by upholding the trial court's evidentiary rulings, the Pebley case severely limits the ability of defendants to introduce evidence on the failure to mitigate damages and the reasonable value of medical services. Thus, not only does the case give insured plaintiffs the ability to use inflated bills as an indication of the reasonable value of services, it also prevents defendants from arguing that the plaintiff's decision to sidestep insurance was unreasonable, resulted in higher rates than those available, and/or resulted in unreasonably expensive treatment due to the realities of the medical insurance market in general.

Practice Pointers

First and foremost, defendants should urge trial courts to follow Ochoa and similar cases, rather than the conflicting Pebley decision, pursuant to Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456. As outlined above, there are strong arguments for declining to follow Pebley given its departure from prior precedent, uneven treatment of parties concerning evidence of reasonable market value, and inequitable ruling concerning mitigation of damages.

On the issue of mitigation, specifically, there may be grounds for getting outside the Pebley holding by demonstrating the availability of covered treatment at the same quality as the non-insured treatment. The Pebley court's reasoning on the mitigation issue focused largely on the plaintiff’s "right to seek the best care available," which it seemed to imply would be outside of his insurance plan with Kaiser. Therefore, if defendants can establish that, in fact, the same quality of care was available under the insured plaintiff's plan, the trial court should reconsider whether to give a failure to mitigate instruction even if it otherwise decides to follow Pebley instead of Ochoa.

In addition, it may be appropriate to object to potentially outdated jury instructions, most notably, CACI 3903A, which refer to the reasonable "cost" of services, rather than their reasonable "value." The former is rooted in what providers actually charge; the latter is rooted in what they should charge, and is a better measure of damages since it is less influenced by industry conditions, improperly inflated billing practices, or other circumstances that increase costs beyond their actual value. The Pebley court seemed to acknowledge that this instruction does not parallel case law that refers to "reasonable value," rather than "reasonable cost." However, since no party objected to the instruction, the court did not further address this issue.  Accordingly, defendants should object to instructions referring to the "reasonable cost" of services, requesting instead modified or special instructions referring to their "reasonable value."

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