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Legal Issues

Iowa Legislature Addresses "Phantom Damages" in New Bill - June 19, 2020

With contributions from Will Lounsbury

Governor Reynolds signed a bill this week altering and clarifying the amount of damages a claimant may recover for medical expenses in a personal injury lawsuit.

This new law remedies confusion that had arisen over time between attorneys representing both plaintiffs and defendants regarding the calculation of recoverable damages under the Iowa Supreme Court case, Pexa v. Auto Owners Insurance Co.

Evidence of Medical Expenses

Under the new law, evidence offered to prove past medical expenses is limited to the following:

  • amounts actually paid to satisfy medical bills, regardless of payment source; and
  • amounts actually necessary to pay bills incurred that have not yet been paid. This cannot exceed the amount that could be satisfied by utilizing the claimant’s health insurance, regardless of whether such insurance is, or will be, used to satisfy the bills.

There is no affirmative duty on any party to seek a reduction in billed charges if the party is not contractually allowed to do so.

Recoverable Damages for Medical Expenses

In personal injury actions, a claimant’s recoverable damages may not exceed the sum of the amounts actually paid by or on behalf of the claimant to health care providers, as well as any amount actually necessary to satisfy medical care charges incurred but not yet paid. Notably, this new law does not apply to medical malpractice actions.

Unlike the recoverable damages addressed in Pexa, this legislation does not require qualified expert witness testimony to validate any unpaid bills for care as “reasonable and necessary” for the costs to be recoverable. Instead, medical care charges that have been incurred but remain unpaid are recoverable up to the amount actually necessary to satisfy the bill.

Big Picture

This law comes into play when litigation is in progress and damages need to be analyzed. 

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