Personal Injury Insurance Actions in Missouri and a New Definition of ‘Reasonable Value’

A change in a Missouri state statute has created a new, interpretable definition of reasonable value of medical care in personal injury litigation. Although the change was likely intended to provide more clarity, competing Missouri decisions interpreting the new statute have created some confusion when it comes to pre-amendment cases.

How Missouri courts resolve the question of whether the amendment applies retroactively will have significant implications as to the potential exposure insurers face in actions to recover contractual insurance benefits following an accident.

In Missouri personal injury actions, an injured plaintiff may recover damages as compensation for medical treatment received following an accident. However, the admissibility of evidence regarding the “reasonable value” of treatment is governed by state statute (Section 490.715.5, RSMo), which was amended a year ago.

Previously, there was a rebuttable presumption under Missouri law that the dollar amount necessary to satisfy the financial obligation to the healthcare provider represented the value of the medical treatment received.

The bar for rebutting this presumption was low, leading plaintiffs to offer testimony that the amounts charged or billed represented the reasonable value of those services. Plaintiffs could potentially be awarded the full amounts of the medical charges, even when such charges had been written off or contractually adjusted.

Under current Missouri law, parties may only introduce evidence of the “actual cost” of the medical treatment rendered to the plaintiff. The statute now defines the actual cost as the sum of money actually paid to the healthcare provider plus any remaining dollar amount necessary to satisfy the financial obligation to the provider for such treatment. There is no longer an avenue under the amended statute for plaintiffs to introduce evidence of the full amount billed in an attempt to recover amounts not actually paid or actually due and owing.

In actions against automobile insurance carriers following an accident, many plaintiffs attempted to circumvent this change by filing actions before the amendment’s effective date in hopes of benefitting under the prior version. Missouri courts have since confronted the question of whether the new statute applies equally to such pre-amendment cases, and courts have come to competing conclusions.

Some Missouri courts have found that the amendment to the statute effected merely a procedural or remedial change to the evidentiary code. Because the amendment does not fundamentally change a party’s substantive rights, those courts have concluded that the new statute may be applied to existing causes of action.

Other courts have found that because the plaintiff’s claim against the insurance carrier is based in contract, the law that applied at the time of the injury controls. They reasoned that at the time of such a pre-amendment accident, plaintiffs arguably had a contractual right to potentially recover the full amount billed, concluding that the amendment effected a substantive change in the law and may not be applied retroactively in such cases.

As a result, an inurance company’s potential exposure could be significantly affected, depending upon the date of the accident. Additionally, as a practical matter, the value an insurer places on a claim could have implications as to that insurer’s exposure for statutory penalties arising from a “vexatious refusal” to pay benefits under a policy. Consequently, the inconsistent rulings on this issue may impact the way in which insurance adjusters evaluate an insured’s claim for benefits.

For example, if the insurer calculates the value of a particular claim based upon the lower “actual cost” of the medical treatment for a pre-amendment accident, the injured plaintiff may point to any resulting settlement offer as evidence of the insurer’s vexatious conduct in light of the significantly higher amount billed for the medical services received. On the other hand, if the insurer values the claim based upon the billed amounts despite the statutory amendment only allowing evidence of the “actual cost” of those services, the insurer may overvalue its exposure for a claim, thereby paying more benefits than the insured would be legally entitled to recover otherwise.