US District Court for District of Arizona Holds That Amount Accepted as Payment in Full is Reasonable Expenses Incurred for Necessary Medical Services

US District Court for District of Arizona Holds That Amount Accepted as Payment in Full is Reasonable Expenses Incurred for Necessary Medical Services

Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113
(D. Ariz. Apr. 28, 2020)

In April 2020, the US District Court for District of Arizona held that “reasonable expenses incurred for necessary medical services” are those expenses which the health care provider accepts as payment in full rather than the amount that the health care provider billed.

This case involves a plaintiff that suffered injuries in an automobile accident. At the time of the accident, plaintiff had an automobile insurance policy with Progressive Preferred Insurance Company (“Progressive”), but had no health insurance. The policy included medical payments coverage of $5,000 per person. After treatment, which plaintiff claimed cost him $6,719, plaintiff sought to recover from Progressive $5,000 (i.e., the policy limit). Progressive sent plaintiff a check for $3,455.09 after determining that plaintiff’s medical providers were part of a voluntary provider network and had contractually agreed to accept reduced rates as payment in full. As a result, plaintiff brought a lawsuit against Progressive alleging, among other things, a breach of contract. Both parties filed motions for summary judgment.

After finding that plaintiff had not satisfied the contractual conditions required to file the lawsuit, the court nevertheless addressed the merits of plaintiff’s claims. In addressing plaintiff’s breach of contract claim for alleged breach of the policy requiring Progressive to pay “reasonable expenses incurred for necessary medical services received,” the court explained that “[a]t the core of the dispute is a math problem for [plaintiff].” The court continued:

[h]e submitted to Progressive medical bills totaling $6,719; his policy limit was $5,000; and Progressive sent $3,455.09 to his counsel, the sum which the healthcare providers had, pursuant to the terms of their own contracts with Progressive, agreed to accept as payment in full. But Plaintiff argues he “incurred” $6,719 in expenses, for which he was liable though he had not paid a penny of this amount until [after this case was filed and discovery had closed]. Under plaintiff’s theory, Progressive owes [plaintiff] $5,000, which [plaintiff] may use however he wishes..., while [plaintiff] independently owes his doctors $6,719 (or an additional $1,719 beyond the policy limits). But Progressive claims because the healthcare providers expressly agreed to accept $3,455.09 as payment in full, [plaintiff] “incurred” only $3,455.09 in expenses.

The court discussed the “unique payment practices of the health care industry,” wherein “health care providers routinely accept an amount less than the amount billed as payment in full” and then distinguished the phrases “actual charges” and “actually incurred by the insured,” but ultimately found that those phrases were not dispositive in this case. Instead, the court found that the dispositive question was whether “reasonable” expenses were those billed or those accepted as payment in full. The court reasoned that even if plaintiff had “incurred” the full amount of the original charges, Progressive only agreed to “pay the reasonable expenses incurred for necessary medical services.” The court noted that plaintiff had not pointed to any Arizona case law requiring an insurance company to accept the originally billed amount as “reasonable,” regardless of the amount. Indeed, the court stated “[t]he illogic of [plaintiff’s] argument is that if [plaintiff’s] providers had billed him $1 billion for his medical services, presumably [plaintiff] would not claim that $1 billion should be deemed a reasonable expense simply because he received a $1 billion bill.”

After discussing other cases that held that the amount accepted as payment in full was “reasonable,” the court held that “reasonable expenses incurred for necessary medical services” are those expenses which the health care provider accepts as payment in full. As such, the court found that Progressive did not breach the parties’ contract by paying the amount the health care providers agreed to accept as payment in full.

Plaintiff has since appealed the court’s ruling, and the issue will now be considered by the Ninth Circuit Court of Appeals. For more information about how this holding could affect your business, please contact your Quarles & Brady attorney or:

• John O'Neal: 602-229-5436 / john.oneal@quarles.com
• Lauren Stine: 602-229-5474 / lauren.stine@quarles.com
• Susan Brichler Trujillo: 602-229-5318 / susan.trujillo@quarles.com
• Luis J. Lanz: 602-229-5331 / luis.lanz@quarles.com