Larry Magrinat v. Myra Maddox: When a third party purchases a debt owed to a medical provider, the proper measure of damages is the full amount owed by the plaintiff.

On August 26, 2016, the Alabama Court of Civil Appeals issued its opinion in Larry Magrinat v. Myra Maddox [Ms. 2150357], — So.3d — (Ala.Civ.App. 2016), a case arising out of a motor vehicle accident, for which Magrinat was awarded $42,000.00 in compensatory damages for his claim of negligence against Maddox. Magrinat appealed, challenging the damages award and alleging that the trial court used the wrong measure of damages in determining the award.

On May 15, 2012, in Lee County, Alabama, Maddox was operating a vehicle that rear-ended the vehicle occupied by Magrinat. As a result of the accident, Magrinat incurred injuries to his left ankle and left arm, for which he received treatment, including a surgery performed by Dr. Shane Buggay at St. Vincent’s Hospital. At his deposition, Dr. Buggay testified that the surgery was necessary to repair Magrinat’s arm. Magrinat incurred approximately $27,000.00 in medical expenses related to the surgery. Of Dr. Buggay’s charges of $9,281.00, he wrote off all but $3,200.00, which was sold to OrthoUSA (who expected to collect on the debt it had purchased).

Magrinat argued to the trial court that the proper measure of damages should include the amount of the charges for which he is responsible and not the amount that Dr. Buggay agreed to accept from OrthoUSA ($3,200.00). Maddox argued that the applicable measure of damages is the amount paid or to be paid to a medical provider. Following a bench trial on December 4, 2015, the trial court entered the judgment of $42,000.00. Upon a motion requesting an itemization of the damages it had awarded, the trial court indicated that the award included $3,200.00 for Dr. Buggay’s services.

Determining the Proper Measure of Damages

The question before the Alabama Court of Civil Appeals, in a matter of first impression, was whether the trial court applied the proper measure of damages to determine the amount to be awarded to Magrinat; specifically, whether Magrinat is entitled to recover the amount of Dr. Buggay’s bill for which Magrinat was liable or the amount for which Dr. Buggay agreed to sell the debt to OrthoUSA. The appellate court determined that the proper measure of damages to be applied in a given case is a question of law, not a question of fact.

Maddox argued that Alabama’s collateral source rule provides that the proper measure of damages to be applied is the amount actually paid to the medical provider; therefore the trial court did not err in awarding to Magrinat $3,200.00 for the treatment provided by Dr. Buggay. The court disagreed with Maddox’s analysis, distinguishing the circumstance in this instance from that of a medical provider accepting a lower payment for his services from an insurance company or Medicare.

Rather Dr. Buggay had sold the debt to OrthoUSA in the hope of receiving some payment for treatment provided to an uninsured patient while allowing OrthoUSA to bear the risk of collecting the debt. The amount owed by Magrinat is not less; it is merely owed now to OrthoUSA, rather than Dr. Buggay. The Alabama Court of Civil Appeals found no cases on point in Alabama to answer the question of the proper measure of damages in such instances, so it looked to California for guidance.

Damages for Medical Expenses

In Alabama, the “general rule regarding the recovery of medical expenses, including hospital expenses resulting from personal injuries, is that a plaintiff may recover those medical expenses that are reasonable and necessary.” Ex parte Hicks, 537 So.2d 486, 489-90 (Ala. 1988); see also Hooks v. Pettaway, 142 So.3d 1151, 1158 (Ala.Civ.App. 2013). Therefore, the only way for Magrinat to be fully compensated for the loss he suffered as a result of the accident was for him to recover the amount for which he is liable and not limit the recovery to the amount for which the medical provider agreed to sell the debt. It is of no consequence whether the debt holder actually intends to collect the debt.

Damages When a 3rd Party Purchases a Medical Debt

The Alabama Court of Appeals adopted the following holding in answering the question at bar: “[W]hen a third party purchases a medical provider’s debt but the injured party who was treated remains responsible and liable for that debt in full, the injured party is entitled to recover as damages the amount the injured party owes, to the extent it is reasonable and necessary; the injured party is not limited to recovering the amount the medical provider agreed to accept from the third-party purchaser of that debt.”

In the instant case, Magrinat should have been award damages for Dr. Buggay’s treatment in the amount of $9,281.00, rather than $3,200.00. The judgment for compensatory damages was reversed and remanded to apply the proper measure of damages

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