Utah Supreme Court Limits Past Medical Specials to Amounts Actually Incurred; Negotiated Rate Differential Is Not a Collateral Source

Introduction

In Gardner v. Norman, 2025 UT 47, the Utah Supreme Court resolves a recurring and consequential question in personal injury litigation: when an insured plaintiff seeks special damages for past medical expenses, may the fact finder consider the payer-specific negotiated amounts that satisfy the medical bills, or does the collateral source rule compel reliance on the hospital’s higher gross “chargemaster” prices? The Court holds that the collateral source rule does not bar admission of the negotiated rates and that past medical specials must reflect the amounts actually incurred—i.e., the payer-specific contracted charges—not the gross charges that neither the plaintiff nor the insurer was ever obliged to pay.

The case arises from a rear-end collision on a freeway off-ramp. Plaintiff Troy Gardner received emergency treatment, and the hospital initially billed $7,175.77 for the ER visit (and $92 for an eye exam). Because Gardner had health insurance, an existing insurer–provider contract governed payment: the insurer satisfied the ER bill in full at $4,395.75, roughly 40% below the gross charge. Before trial, the district court excluded evidence of the negotiated charges as “collateral source” and permitted Gardner to prove his specials with the gross bill only. After a bench trial, the court awarded past medical specials based on the gross charges. Defendant Tyler Norman appealed.

The Utah Supreme Court retained the appeal to address the issue as a matter of first impression and now clarifies the interaction between Utah’s common-law collateral source rule and modern healthcare pricing, including contractually negotiated rates required to be disclosed under federal price-transparency regulations.

Summary of the Opinion

• The collateral source rule does not require exclusion of the insurer–provider negotiated amount that satisfied the plaintiff’s medical bill.
• Past medical special damages are limited to the reasonable value of services actually incurred. Where a preexisting contract fixes the payer-specific rate, the plaintiff never incurs the provider’s gross chargemaster price; recovery is limited to the negotiated rate actually incurred.
• The “negotiated rate differential”—the spread between the gross charge and the contracted rate—is not a collateral source “benefit” because no one pays it. The rule still bars evidence of insurance payments and forbids setoffs based on collateral payments (except as statutorily modified in medical malpractice), but it does not expand recoverable specials beyond actual loss.
• Because the district court calculated specials using gross charges and excluded the negotiated amounts based on the collateral source rule, the award is vacated and the case is remanded for a new trial limited to past medical specials.
• Gross charges are not categorically inadmissible; they may be relevant to reasonableness in some circumstances, subject to Rule 401/403 and careful enforcement of the collateral source rule. The Court expresses no opinion on the use of gross or negotiated charges for noneconomic damages or future medical expenses.

Detailed Analysis

Precedents and Authorities Cited

• Wilson v. IHC Hosps., Inc., 2012 UT 43
  • Confirms the evidentiary aspect of the collateral source rule: courts exclude references and allusions to collateral payments to avoid juror confusion and prejudice (especially regarding subrogation and perceived windfalls).
  • Supports the Court’s careful distinction between admitting a number (the negotiated amount) and revealing a source (insurance), the latter remaining inadmissible.
• Mahana v. Onyx Acceptance Corp., 2004 UT 59; Gibbs M. Smith, Inc. v. U.S. Fid. & Guar. Co., 949 P.2d 337 (Utah 1997)
  • Articulate the damages aspect of the collateral source rule: a tortfeasor’s liability is not credited by collateral payments; any windfall accrues to the plaintiff, not the tortfeasor.
  • Gardner harmonizes this principle with the limit that specials compensate actual, incurred economic loss; the rule does not create recoverable losses that never existed.
• Hansen v. Mountain Fuel Supply Co., 858 P.2d 970 (Utah 1993); Gorostieta v. Parkinson, 2000 UT 99; Simmons v. Wilkin, 15 P.2d 321 (Utah 1932)
  • Utah’s longstanding requirement: medical expenses must be both reasonable and necessary—and actually incurred—to be recoverable as special damages.
• RESTATEMENT (SECOND) OF TORTS § 911 cmt. h (1979)
  • Anchors the “reasonable value” rule; critically, if the injured person pays less than the “exchange rate,” recovery is capped at what was paid or incurred. Utah adopts this limiting function in the context of preexisting negotiated rates.
• RESTATEMENT (SECOND) OF TORTS § 920A(2) (1979)
  • Confirms that collateral source payments do not offset tortfeasor liability—reaffirmed here while observing that the negotiated rate differential is not a payment or benefit at all.
• Tschaggeny v. Milbank Ins., 2007 UT 37
  • Notes the industry practice of insurer–provider contracts that set payer-specific rates. Gardner builds on this reality: when such contracts predate the injury, they cap the plaintiff’s prospective liability and define what is “incurred.”
• Harris v. ShopKo Stores, Inc., 2013 UT 34
  • Eggshell-plaintiff type principle: defendants take plaintiffs as they find them. The Court acknowledges that identical conduct may yield different medical specials across insured and uninsured plaintiffs, but that variability is a commonplace feature of tort law and not a reason to inflate specials beyond what was actually incurred.
• Comparative authority—Howell v. Hamilton Meats & Provisions, Inc., 257 P.3d 1130 (Cal. 2011); Robinson v. Bates, 857 N.E.2d 1195 (Ohio 2006); Martinez v. Milburn Enters., Inc., 233 P.3d 205 (Kan. 2010)
  • Howell is the leading analogue: specials are capped at amounts actually incurred under preexisting contracts; the negotiated rate differential is not a collateral benefit. Gardner expressly finds Howell’s reasoning persuasive.
  • Robinson and Martinez reinforce that the unpaid differential is not a collateral payment; admitting the negotiated amount does not contravene the collateral source rule.
• Federal price-transparency regulations: 45 C.F.R. §§ 180.10, 180.20, 180.50(b)
  • Define “standard charges,” including gross chargemaster prices, discounted cash prices, payer-specific negotiated rates, and de-identified minima/maxima. The taxonomy underscores the multiplicity of hospital “prices” and supports the Court’s insistence on the amount actually incurred as the relevant economic loss.
• Utah statutory carve-out for medical malpractice, Utah Code § 78B-3-405
  • Demonstrates the Legislature knows how to alter the collateral source rule and has done so only in med-mal. Gardner leaves that statutory regime undisturbed and otherwise applies the common-law rule.

Legal Reasoning

1. Special damages compensate concrete, measurable economic loss actually incurred.
   • Utah law limits reimbursement to medical expenses that are both necessary and reasonable, and actually incurred. “Reasonable value” is a limiting concept; it does not inflate recovery beyond real economic loss.
2. When a preexisting insurer–provider contract sets the rate, the plaintiff never incurs the gross charge.
   • Because the contract existed before Gardner’s injury, his prospective liability to the provider was capped at the negotiated amount. He could not have been balanced-billed for the gross rate under that agreement, so he never “incurred” the gross charge.
3. The collateral source rule still applies, but it is not a vehicle to enlarge specials beyond actual loss.
   • Evidentiary aspect: courts must exclude references to insurance and collateral payments to avoid prejudice. Gardner reaffirms this.
   • Damages aspect: a tortfeasor cannot offset liability by pointing to collateral payments. But the unpaid negotiated differential is not a “payment” or “benefit,” so there is nothing to offset; it simply never existed as a liability.
4. Fairness and policy considerations.
   • Limiting specials to actual incurred amounts avoids overcompensation that would place a plaintiff in a better financial position than before the tort—contrary to the compensatory nature of special damages.
   • Variability across plaintiffs (insured vs. uninsured) is an accepted feature of tort damages; defendants take plaintiffs “as they are.” And even uninsured patients typically face discounted “self-pay” prices, underscoring that gross charges often do not reflect anyone’s real liability.

How Other Courts Approach the Issue

Nationwide, courts have taken several approaches. Some states rely on statutes modifying the collateral source rule and expressly restrict recoverable specials to amounts paid or incurred. Others admit both gross and negotiated rates as evidence of “reasonable value.” A third line—exemplified by California’s Howell—precludes recovery of gross charges where the plaintiff never incurred them, treating the negotiated rate differential as outside the collateral source rule. Gardner adopts the Howell approach in Utah’s common-law framework, while preserving Utah’s collateral source doctrine and recognizing the Legislature’s distinct medical malpractice carve-out.

Application to the Case

The district court excluded the negotiated amounts and awarded specials using gross charges because it believed the collateral source rule mandated that result. The Supreme Court corrects that legal premise. It holds that:

• The amount of the payer-specific negotiated rate is admissible as evidence of the plaintiff’s actual incurred medical expenses, so long as its admission does not reveal the collateral source itself.
• Using the gross chargemaster price to calculate specials was error because neither Gardner nor his insurer was ever obliged to pay that amount under the preexisting contract.

The Court vacates the special damages award and remands for a new trial limited to past medical specials, directing the district court to reassess admissibility and proofs consistent with this opinion. Although the trial record also included dispute about coding levels (ER level 4 vs. level 5), the Court’s ruling centers on the governing legal standard; on remand, questions about what was actually incurred and what is reasonable may be litigated without violating the collateral source rule.

Impact and Practical Implications

Framework Going Forward in Utah

• Measure of past medical specials: the amount actually incurred, typically the payer-specific negotiated rate in place under a preexisting contract, not the gross chargemaster amount.
• Collateral source rule intact:
  • Courts must still exclude evidence that an insurer paid or reimbursed bills, and defendants cannot seek offsets for collateral payments (except in med-mal per statute).
  • Parties may present the figure representing the amount incurred without disclosing its source (e.g., using redacted records, stipulations, or neutral descriptors like “amount accepted as full satisfaction”).
• Gross charges:
  • Not categorically inadmissible; may be relevant where the reasonableness of the negotiated rate is disputed or for other proper purposes.
  • Subject to Rule 403 balancing and vigilant enforcement of the collateral source rule to avoid revealing insurance.
  • No opinion expressed on their use for noneconomic damages or future medical expenses.

Litigation Practice Pointers

• For plaintiffs:
  • Be prepared to prove “incurred” amounts with admissible records showing the amount accepted as full satisfaction, sanitized of collateral source identifiers. Consider business-records foundations that refer to “amount accepted” or “account balance zeroed” without naming payers.
  • Develop expert testimony, if needed, on reasonableness of the negotiated amount in the relevant market. Gross charge evidence may be risky; justify its probative value and propose limiting instructions to avoid collateral source disclosure.
  • Anticipate lien and subrogation issues; while collateral source remains protected, recoveries are still subject to contractual or statutory reimbursement rights outside the jury’s view.
• For defendants:
  • Move in limine to exclude gross charges as not reflective of “incurred” expenses and to admit the negotiated rate (without source identification) as the proper measure of specials.
  • Where coding disputes or billing errors exist (e.g., denial of ER level 5), develop admissible evidence showing adjustments unrelated to collateral payments, such as provider-initiated corrections or contractual adjustments, again avoiding mention of insurance.
  • Consider Rule 403 arguments if gross charge evidence risks confusing or prejudicing the fact finder.
• For trial courts:
  • Structure evidentiary rulings to admit the negotiated amount as the “incurred” expense while guarding against any revelation of a collateral source.
  • Use limiting instructions and redactions to prevent prejudice.
  • Confine the specials determination to past medical expenses actually incurred; reserve disputes over noneconomic damages or future medical expenses for separate analysis.

Discovery and Proof

• Contracts and rate sheets: While insurer–provider contracts may be proprietary, the amount actually accepted as payment in full for the plaintiff’s services is central and should be discoverable via billing records, remittance advices, or provider testimony—again, sanitized of payer identity.
• Federal price transparency: Hospitals’ public disclosures of gross, discounted cash, and payer-specific negotiated charges (45 C.F.R. Part 180) can provide context and foundation; care must be taken to avoid linking a specific payer to the plaintiff’s rate at trial.

Settlement Valuation

• Past medical specials are likely to be lower where payer-specific rates are substantially discounted from gross charges. This recalibrates settlement anchors and can reduce reliance on gross bills as proxies for injury severity.
• Noneconomic damages are unaffected by this decision, but parties should anticipate more robust argument that specials are not a direct proxy for pain and suffering.

Uninsured, Government Programs, and Open Questions

• Uninsured plaintiffs: Hospitals often publish discounted self-pay rates. Gardner notes this to illustrate that gross charges frequently overstate actual liability. The decision implies the same “incurred amount” principle applies to self-pay discounts where those define the amount accepted in full satisfaction.
• Medicare/Medicaid: The opinion does not specifically address government payers. The logic suggests the incurred amount is the amount accepted as payment in full under those programs, subject to distinct statutory and regulatory frameworks (and careful collateral-source sanitization).
• Out-of-network care and balance billing: Not directly addressed. Where no preexisting contract caps liability and balance billing is lawful, the “incurred” amount analysis may differ. Future cases may clarify how to measure “incurred” expenses in those scenarios.
• Provider write-offs vs. negotiated discounts: Gardner addresses negotiated differentials under preexisting contracts. It does not resolve how purely gratuitous or post hoc write-offs (if any) should be treated; those issues may prompt further development.

Complex Concepts Simplified

• Special damages: The portion of compensatory damages that pays for measurable, economic losses such as past medical bills. They must be necessary, reasonable, and actually incurred.
• Collateral source rule: A defendant cannot reduce liability because a third party paid some or all of the plaintiff’s loss. Evidence that insurance paid is generally inadmissible; offsets for collateral payments are prohibited except where the Legislature has said otherwise (e.g., Utah medical malpractice statute).
• Gross charge (chargemaster): The hospital’s list price before any discounts. Rarely reflects what anyone actually pays.
• Payer-specific negotiated charge: The contracted price an insurer has prearranged with a provider—a common market reality that typically sets the amount accepted as full payment for insured patients.
• Negotiated rate differential: The gap between the gross charge and the payer-specific rate. No one pays this amount; it is therefore not a collateral “payment” or “benefit.”
• “Incurred” expense: The liability the patient actually faces for treatment. Under preexisting contracts, this is the negotiated amount the provider agrees to accept as full satisfaction.
• Subrogation: The insurer’s right to recoup payments from the plaintiff’s recovery. Jurors are not told about subrogation; it is one reason references to insurance are excluded at trial.

Conclusion

Gardner v. Norman establishes a clear Utah rule for past medical specials in insured cases: recovery is limited to the amount actually incurred, typically the payer-specific negotiated charge, not the provider’s gross chargemaster price. The collateral source rule remains fully operative to bar evidence of and offsets for collateral payments, but it does not transform unpaid differentials into compensable losses. By aligning Utah law with the practical realities of healthcare pricing and the compensatory purpose of special damages, the Court reduces the risk of overcompensation while preserving the collateral source rule’s core protections against defendant windfalls. Trial courts must now tailor evidentiary rulings to admit the incurred amounts without revealing collateral sources, and parties should recalibrate proof and valuation of medical specials accordingly. The decision leaves open targeted questions (e.g., out-of-network liability, gratuitous write-offs, and the role of gross charges for noneconomic or future damages) for future case-by-case development.