California stands at the forefront of regulating transportation network companies (TNCs), but Senate Bill 623 moves beyond operational oversight into the courtroom. Effective for automobile accidents involving TNCs occurring on or after January 1, 2027, the legislation fundamentally changes how past medical expenses will be litigated in civil actions against transportation network companies, their subsidiaries, and app-based drivers.
The legislation applies only to civil actions against TNCs, as defined in Business and Professions Code §7463. For purposes of the statute, a transportation network company is "an organization operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle." Pub. Util. Code, §5431, subd.(c).
The new law does not attempt broad tort reform. It targets a specific category of litigation by establishing new limits in recoverable medical expenses from lien-based providers, expanding discovery into medical financing and referral arrangements, and imposing new restrictions on attorney-provider financial relationships. Together, these provisions reshape both the valuation and litigation of damages in TNC cases and are likely to influence discovery strategy, motion practice, settlement negotiations, and trial presentation.
A New Framework for Recovering Medical Expenses
The centerpiece of SB 623 is new Civil Code section 3333.9, which limits recovery for past medical expenses incurred through lien-based providers. Subject to a narrow exception, a plaintiff's recovery may not exceed the 70th percentile of FAIR Health billed charges, or comparable commercially recognized databases, for the same or similar service in the applicable geographic area at the time treatment was rendered.
The significance of this change extends well beyond establishing a numerical benchmark. Historically, disputes over lien-based medical treatment often centered on whether billed charges reflected the reasonable value of services provided. SB 623 replaces much of that uncertainty with a statutory framework that ties recoverable damages to an objective market reference.
The statute preserves a limited avenue for recovery above the benchmark where a plaintiff demonstrates, by clear and convincing evidence supported by expert testimony, that exceptionally rare or highly specialized treatment was necessary because no reasonably comparable provider or service was available. That determination must be made by the court before trial, and a plaintiff who fails to obtain approval risks an award of attorney's fees and costs incurred in opposing the motion.
The legislation also prohibits parties from introducing evidence of medical bills, lien amounts, invoices, or other claimed charges that exceed the recoverable amount. Just as importantly, neither side may reference the statutory limitation itself before the jury. The practical effect is to narrow the evidence presented at trial while reducing disputes over inflated billed charges that bear little relationship to the amount ultimately recoverable.
Increase Transparency in Medical Lien Arrangements
SB 623 reaches well beyond the amount of recoverable damages. It also created one of California's most expansive statutory discovery frameworks governing medical liens and the financial relationships surrounding them. Where a medical lien, receivable, or right to payment has been sold, assigned, financed, factored, or otherwise transferred, recoverable damages generally may not exceed the consideration paid to acquire the lien. The bill further requires disclosure of agreements relating to those transactions, including contingent or deferred compensation, and bars undisclosed lien transfers from being asserted against defendants, insurers, settlements, or judgments.
The law also broadens discovery into financial relationships involving lien-based medical treatment. Agreements involving assignments, financing arrangements, ownership interests, referral relationships, lending, and compensation between medical providers, attorneys, law firms, and affiliated entities are expressly discoverable. Upon request, providers must also disclose whether a plaintiff was referred by counsel and identify the approximate number of patients referred by that attorney or law firm during the preceding 24 months.
These provisions reflect a legislative emphasis on transparency. Financial arrangements that previously required extensive motion practice to uncover now fall squarely within the scope of discoverable information. As a result, discovery concerning medical liens is likely to become both broader and more detailed than in many current personal injury cases involving transportation network companies.
New Restrictions on Attorney and Provider Relationships
SB 623 also regulates the financial relationships that may exist between plaintiffs' counsel and lien-based medical providers. The new law prohibits attorneys representing plaintiffs under contingency fee agreements from referring clients to health care providers in which the attorney or an immediate family member has a direct ownership interest. It further prohibits fee splitting, referral compensation, kickbacks, rebates, bonuses, and the financial incentives connected to lien-based medical treatment.
The statute also prohibits attorneys from charging additional contingency or administrative fees based upon negotiating reductions of medical liens, while prohibiting providers from entering agreements to reduce medical liens before treatment is rendered. Violations may subject attorneys to discipline by the State Bar, while providers may face professional discipline for prohibited conduct.
Collectively, these provisions reflect a legislative determination that financial relationships capable of influencing treatment decisions should be subject to greater regulation and scrutiny. Whether these provisions will ultimately reduce disputes surrounding lien-based treatment remains to be seen, but they unquestionably increase both transparency and potential regulatory consequences.
Practical Implications for Litigants
For transportation network companies, insurers, and defense counsel, SB 623 creates new opportunities to evaluate damages early in litigation.
- Expect discovery requests to focus not only on medical records and billing statements, but also on lien assignments, financing agreements, referral relationships, and ownership interests.
- Third-party subpoenas directed to medical providers and lien purchasers are also likely to increase as defendants seek to determine whether claimed medical expenses comply with the statute's recoverable limits.
- Motion practice is likewise expected to evolve. Courts will likely confront disputes regarding the appropriate FAIR Health benchmark, whether comparable databases satisfy the statutory requirements, and whether a plaintiff qualifies for the statute's limited exception permitting recovery above the established cap.
- Questions concerning coding requirements, billing compliance, and the discoverability of financial arrangements will likewise become recurring issues.
Although SB 623 is limited to litigation involving transportation network companies and app-based drivers, its approach may receive close attention in future legislative debates concerning medical damages in other categories of personal injury litigation.
Additional Changes Affect Transportation Network Companies
The legislation also includes two operational changes affecting transportation network companies.
- First, SB 623 strengthens existing safety requirements by requiring criminal background checks before a driver's account is activated and annually thereafter. The legislation also expands the list of disqualifying criminal offenses that prohibit a transportation network company from contracting with or retaining a driver.
- Second, the bill authorizes transportation network companies and charter-party carriers to allow women passengers and women drivers to request same-gender matches through their platforms. The provision expressly authorizes companies to facilitate these preferences notwithstanding California's general public accommodation laws.
Looking Ahead
SB 623 represents far more than a regulatory measure affecting rideshare companies. By redefining recoverable medical expenses, expanding discovery into medical lien arrangements, and regulating attorney-provider financial relationships, the Legislature has substantially altered the litigation framework governing transportation network company cases.
Beginning January 1, 2027, litigants will be operating under a markedly different set of rules. Transportation network companies, insurers, medical providers, and counsel on both sides of the aisle should begin preparing now for a litigation landscape in which transparency, documentation, and early evaluation of medical damages will play an even more significant role than they do today.
The bill in its entirety may be found here: https://legiscan.com/CA/text/SB623/id/3450862
