The Phantom Damages Elimination Act

Prior to task force meetings, ALEC posts these legislative member-submitted draft model policies to our website. The draft model policies are then discussed, debated, and voted on by ALEC task force members. Policies that receive final approval by legislators on the ALEC Board of Directors become official ALEC model policy. Draft model policies that fail to become official ALEC model policy are removed from the website.

Policy Status

  • Type: Model Policy
  • Status: Draft
  • Date Finalized: October 1, 2011
  • Date Amended: September 12, 2016

Issues

  • Lawsuit Reform

    • Task Forces

  • Judiciary

    • Related Articles

    Tags

  • 2025 Annual Meeting
  • Civil Justice Task Force
  • Collateral Source
  • Lawsuit Reform 2024
  • Phantom Damages
  • STFS 2016

    • Summary

    The Phantom Damages Elimination Act seeks to resolve dishonest discovery practices which influence compensatory damages calculations. When substantiating their demanded damages in a litigation, plaintiffs, during discovery, may submit bills for various medical expenses incurred after their injury. Many of these initial bills do not reflect the amounts actually paid by a plaintiff, but instead a much larger number of unpaid money, creating an inflated damages calculation and potential judgement. These are known as “Phantom Damages.” The Phantom Damages Elimination Act ensures that only the costs actually paid by a plaintiff are admissible during discovery practices, ensuring damages are calculated fairly.   
    Draft

    The Phantom Damages Elimination Act

    Section 1. {Title}.  This Act may be known as the Phantom Damages Elimination Act.

    Section 2. {Purpose}.  The purpose of this section is to prevent compensatory damage awards for medical expenses from including amounts that the claimant has not and will not pay for such medical care or treatment.

    Section 3. {Recovery of Medical or Health Care Expenses}.  In an action to recover damages resulting from death or injury, the damages that may be recovered by a claimant for reasonable and necessary health care services or treatment received shall include only:

    (A) amounts actually paid by or on behalf of the claimant; and

    (B) amounts actually necessary to satisfy unpaid charges still due and payable to the health care service provider for which the claimant or a third party on behalf of the claimant has a legal obligation to pay.

    [OPTIONAL: Section 4. {Excessive Unpaid Charges}.  Unpaid charges under Section 3(b) shall not exceed amounts customarily accepted by health care service providers for the health care services or treatment at issue in satisfaction of their bills.]

    Section 5. {Inadmissibility of Gross Amount Billed}.  The gross amounts of a claimant’s medical bills are inadmissible as evidence of damages where such gross amounts are not reflective of the actual amounts paid or that remain actually owed to satisfy those bills.

    Section 6. {Rule of Construction}.  This Act is in addition to, and does not otherwise affect, any other limitation on damages.

    Section 7. {Effective Date}.  This Act is effective upon enactment and shall apply to any action filed on or after the effective date of this Act.

    Given the nuances in state law discussed above, legislators should contact the ALEC Civil Justice Task Force to evaluate the law of their states when developing legislation.

    Approved by ALEC Board of Directors October 2011.