The Impact of In Re K&L Auto Crushers, LLC

The Impact of In Re K&L Auto Crushers, LLC

In 2021, the Texas Supreme Court rendered a decision concerning a personal injury case where the defense challenged the reasonableness of the full-bill medical charges plaintiff sought to recover. The case involved a motor-vehicle collision with a tractor-trailer, and the plaintiff incurred $1.2 million dollars in medical expenses that included multiple surgeries. In this particular personal injury case, the plaintiff did not pay for the medical bills incurred, but rather had their attorney send a “letter of protection” to the medical providers essentially stating that payment of the reasonable medical bills is contingent on a third-party recovery. In essence, the medical providers would provide services and not ask for payment until the plaintiff received proceeds from any third-party settlement. Discovery disputes began to arise with the defendants’ subpoenas served on plaintiff’s medical providers. Defendants sought documents and information on the negotiated rates and costs the plaintiff’s medical providers charged insurance companies, public programs, and in-network health providers for the same services billed to the plaintiff. In connection with these discovery requests, defendants contended that their experts needed information regarding medical billing practices and rates in order to sufficiently contest the reasonableness of the full-bill rates the medical providers charged the plaintiff. Plaintiff objected to relevance, breadth, burden, and confidential/protected nature of trade secrets. The trial court sustained the plaintiff’s objections, and thus, the defendants’ discovery requests were quashed.

The Texas Supreme Court granted mandamus relief and ruled that defendants’ subpoenas were relevant, sufficiently tailored, and not overbroad or unduly burdensome. Additionally, the Court concluded that the attorney “letters of protection” gave the medical providers a vested interest in the outcome of the case, and thus, they were not afforded discovery protections that a non-party to the case would otherwise have. With respect to confidentiality and trade secrets, the Court held that protective orders could be used to minimize any harm of disclosures.

In keeping with prior Texas Supreme Court rulings, the Court, regarding K&L Auto Crushers, held that discovery is allowed regarding information and documents relating to medical provider’s negotiated billing rates and costs for the same services provided to a plaintiff. It is the Court’s position that reasonableness of a plaintiff’s claimed medical expenses is key to a defendant’s defense. However, there are limitations to the discovery requests, as not all documents and communications relating to negotiated rates are discoverable. The Court advised that subpoenas and requests must be specifically narrowed and proportional to the same medical services billed in the case at hand.

The ruling in K&L Auto Crushers has a negative effect on personal injury cases as it relates to plaintiffs establishing a fair third-party evaluation of their medical expenses and damages. Oftentimes, defendant tortfeasors devalue a plaintiff’s damages, as it is in their best interest to minimize the potential damage award they will ultimately have to pay the plaintiff. Defendants rarely account for a plaintiff’s full-bill medical expenses when evaluating a case, regardless of any discovery or defense expert contradiction. Defendants use the full-bill medical expenses as a “ceiling” in their evaluation of plaintiff‘s medical damages submitted and then systematically and subjectively lower the damages in their evaluation in order to mitigate the value of the plaintiff’s case. These third-party evaluation and negotiation tactics inhibit personal injury plaintiffs from reaching an equitable resolution on their case. The ruling in K&L Auto Crushers will now allow defendants to use negotiated rates as the new lower ceiling in their evaluations and further devalue and minimize personal injury plaintiff’s damages and potential settlements.

In re K & L Auto Crushers, LLC, 627 S.W.3d 239 (Tex. 2021).

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