NORTH JERSEY NEUROSURGICAL ASSOCIATES, P.A. v. IFA INSURANCE COMPANY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1179-09T21179-09T2

NORTH JERSEY NEUROSURGICAL

ASSOCIATES, P.A., as subrogee

of Carlos Mojica,

Plaintiff-Respondent,

v.

IFA INSURANCE COMPANY,

Defendant-Appellant.

___________________________________

 

Argued May 4, 2010 - Decided

Before Judges Lihotz and Ashrafi.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6180-09.

Glenn T. Dyer argued the cause for appellant (Connell Foley, LLP, attorneys; Mr. Dyer, of counsel and on the brief; Gregory E. Peterson, on the brief).

Walter L. Faust argued the cause for respondent (Walter L. Faust, L.L.C., attorneys; Mr. Faust, on the brief).

PER CURIAM

Defendant IFA Insurance Company appeals from a Law Division judgment entered on behalf of plaintiff North Jersey Neurosurgical Assoc., P.A., which confirmed a June 9, 2009 personal injury protection (PIP) arbitration award. Plaintiff extended medical care to defendant's insured, Carlos Mojica, who sustained significant injuries in an automobile accident. As his subrogee, plaintiff sought payment under the PIP provisions of Mojica's policy. The amount awarded, $60,706.91, was subject to the policy's $250,000 PIP benefit limitation.

Prior to issuing payment of the award, defendant listed the total claims made against the benefit limit, advising plaintiff only $3,307.65 remained available. The total claims paid included "PPO fees" of $4,596.36. These fees were paid to Horizon Casualty Services (Horizon), hired by defendant to secure Preferred Provider Organization (PPO) contract rates that were applied to participating medical providers treating Mojica.

In a written opinion, the trial court determined defendant was not permitted to deduct the PPO fees paid to Horizon, and awarded plaintiff $4,596.36 plus attorneys fees and costs, in addition to the $3,307.65 payment previously made by defendant. On appeal, defendant seeks reversal of the judgment, contending the court erred in disallowing its deduction of the PPO service fees from the PIP limits before determining the sums available to pay plaintiff. We decline to disturb confirmation of the award and affirm.

Mojica sustained injuries following an October 15, 2005 automobile accident. His vehicle was insured by defendant under a policy containing the statutory maximum of $250,000 PIP coverage. N.J.S.A. 39:6A-4(a).

Plaintiff treated Mojica and, as his subrogee, demanded arbitration for payment of medical services rendered. Prior to arbitration, defendant submitted a PIP pay-out ledger identifying all expenses paid or processed to be paid, which totaled $240,895.99. Throughout the ledger, various entries appear labeled as PPO service fees. By letter dated the day before the arbitration hearing, defendant revised the PIP ledger, reducing the available benefits to $3,307.65. The letter stated the total "PPO fees" deducted were $4,596.36.

The question submitted to arbitration was what additional services provided by plaintiff were compensable. Defendant had paid certain invoices but disputed others, arguing proper pre-certification was not obtained, certain procedures were improperly coded and duplication of some items precluded payment. Following review, the arbitrator awarded plaintiff $60,706.91, plus attorneys' fees and costs.

Although defendant provided disclosure of its calculations of the remaining PIP benefit prior to the arbitration, it did not reveal the nature of the PPO fees charged against the PIP cap. Plaintiff later learned the sum represented Horizon's fee for negotiating the acceptance of PPO fee-for-service limits with participating providers. Horizon assured the contract expense rates for certain medical service providers conformed to PPO rates, which were generally well below what would otherwise be submitted. Horizon's service fees were computed as twenty-nine percent of the "savings" resulting from securing a medical provider's compliance.

The record also makes clear that the arbitrator was not asked and did not address the propriety of taxing the fees paid to Horizon against the available PIP cap. The award neither mentions the total benefits paid nor states the sums remaining for satisfaction of plaintiff's allowed claims. Following the award, defendant issued payment to plaintiff of $3,307.65.

On July 14, 2009, plaintiff filed a Law Division action seeking confirmation of the arbitrator's award and reimbursement of its attorneys' fees and costs. Plaintiff's complaint asserted defendant had not properly satisfied the award as the PIP benefits had not been exhausted, and argued the PPO service fees were administrative, making defendant solely responsible for their payment.

Defendant maintained Horizon's services benefited Mojica because they reduced the overall PIP benefits paid to a single provider, thus satisfying more claims within the PIP limitation. Noting it did not include Horizon's "processing fees," which defendant agreed were its administrative costs, defendant maintained the PPO service fees aided the insured and should be considered medical fees, properly reducing the PIP coverage limit.

In a written opinion, the court concluded the PPO savings fees were not medical expense benefits subject to the PIP policy limitation. The judgment confirmed the arbitration award and awarded plaintiff an additional $4,596.36 plus attorneys' fees and costs. Defendant's appeal ensued.

We briefly recite the background governing the proceeding. Under the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1.1 to -35, automobile insurance policies are required to include no-fault PIP coverage. N.J.S.A. 39:6A-4. PIP coverage provides payment of medical expenses "in an amount not to exceed $250,000 per person per accident." N.J.S.A. 39:6A-4(a).

Disputes regarding PIP benefits "may be submitted to dispute resolution on the initiative of any party to the dispute[.]" N.J.S.A. 39:6A-5.1(a). Alternate dispute resolution (ADR) of PIP disputes is governed by applicable provisions of the New Jersey Alternate Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -30. APDRA is New Jersey's equivalent of the Federal Arbitration Act, 9 U.S.C.A. 1 to -14, and is designed to assist in providing "prompt and efficient provision of benefits for all accident injury victims" and "minimiz[ing] resort to the judicial process." Gambino v. Royal Globe Ins. Cos., 86 N.J. 100, 105-07 (1981). Accordingly, "[t]he final determination of the dispute resolution professional shall be binding upon the parties, but subject to vacation, modification or correction by the Superior Court in an action filed pursuant to N.J.S.A. 2A:23A-13 for review of the award." N.J.A.C. 11:3-5.6(f).

Confirmation of an arbitration award is governed by N.J.S.A. 2A:23A-12(f) and N.J.S.A. 2A:23A-26. Additionally, N.J.S.A. 2A:23A-13(e) grants parties who participate in PIP arbitration forty-five days to secure vacation or modification of a PIP award when:

(1) There was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award;

(2) The umpire has made an award based on a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted;

(3) The award is imperfect in a matter of form, not affecting the merits of the controversy; or

(4) The rights of the party applying for the modification were prejudiced by the umpire erroneously applying law to the issues and facts presented for alternative resolution.

Further, subsection (f) provides:

Whenever it appears to the court to which application is made, pursuant to this section, either to vacate or modify the award because the umpire committed prejudicial error in applying applicable law to the issues and facts presented for alternative resolution, the court shall, after vacating or modifying the erroneous determination of the umpire, appropriately set forth the applicable law and arrive at an appropriate determination under the applicable facts determined by the umpire. The court shall then confirm the award as modified.

[N.J.S.A. 2A:23A-13(f).]

As a preliminary matter, plaintiff challenges our jurisdiction to review the trial court's judgment confirming the award. Citing N.J.S.A. 2A:23A-18(b), plaintiff maintains the award is binding upon the parties and not reviewable. With increasing frequency, we have been asked to examine the extent of appellate intervention in such matters.

N.J.S.A. 2A:23A-18(b) states: "Upon the granting of an order confirming, modifying or correcting an award, a judgment or decree shall be entered by the court in conformity therewith and be enforced as any other judgment or decree." "[T]he statutory denial of a right to appeal to this court is based on the assumption that the trial judge will decide the case by applying the principles dictated by the Legislature." Morel v. State Farm Ins. Co., 396 N.J. Super. 472, 476 (App. Div. 2007). Thus, "when parties proceed under the APDRA, there may be other limited circumstances where public policy would require appellate court review." Mt. Hope Dev. Assocs. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 152 (1998).

In considering the scope of N.J.S.A. 2A:23A-18(b), the Supreme Court has recognized certain discrete exceptions. For example, the general elimination of appellate jurisdiction does not apply to child support orders or awards of counsel fees. Ibid.; Sabato, supra, 380 N.J. Super. at 472-76. Another recognized circumstance occurs "where public policy would require appellate court review." Mt. Hope, supra, 154 N.J. at 152. In this regard, we have engaged in review "necessary" to carry out our "supervisory function over the [trial] courts." Morel, supra, 396 N.J. Super. at 476 (quoting Mt. Hope, supra, 154 N.J. at 152). This "supervisory function" permits our exercise of appellate jurisdiction

when a trial judge has failed to limit his or her review to the grounds set forth in N.J.S.A. 2A:23A-13. On the other hand, when the trial judge adheres to the statutory grounds in reversing, modifying or correcting an arbitration award, we have no jurisdiction to tamper with the judge's decision or do anything other than recognize that the judge has acted within his jurisdiction.

[New Jersey Citizens Underwriting Reciprocal Exch. v. Kieran Collins, D.C., LLC, 399 N.J. Super. 40, 48 (App. Div.), certif. denied, 196 N.J. 344 (2008).]

Defendant's appeal urges such a derogation of the limits of the trial court's statutory jurisdiction, as defined by N.J.S.A. 2A:23A-13, has occurred. We consider defendant's arguments in that light to decide whether our jurisdiction is properly invoked.

Neither party contests that the arbitration award limited plaintiff's claims to $60,706.91, subject to the policy's PIP benefits cap. Therefore, neither party takes exception to the arbitrator's action. Essentially, it is the implementation of the award that is disputed. Defendant asserts its ability to deduct the PPO service fees as benefits paid, while plaintiff suggests defendant's actions exceed the scope of the arbitrator's award.

We are disadvantaged by the fact that any argument held in chambers was not recorded. The trial judge framed its determination as invoking the authority of N.J.S.A. 2A:23A-13 "to vacate or modify the award" yet failed to recite the specific statutory subsection utilized.

The court's determination does not precisely fit within the confines of N.J.S.A. 2A:23A-13(e) or (f), and its review of the propriety of taxing the PPO service fees paid to Horizon against the PIP cap appears to exceed the scope of its jurisdiction; nevertheless, we are not persuaded the judgment must be vacated. A broad review of the judge's order reveals it simply confirmed the award granting plaintiff the sum remaining within the PIP benefit cap of $4,596.35.

As we view this issue, the deduction of service fees paid to an entity not submitting a request for reimbursement of the cost of direct medical services rendered to Mojica was a determination that could and should have been raised in the arbitration. The propriety of the payment, as well as the amount, was both a legal and factual question capable of resolution in PIP arbitration. Riverside Chirop. Group, supra, 404 N.J. Super. at 235; Coalition for Quality Health Care v. N.J. Dep't of Banking & Ins., 348 N.J. Super. 272, 312 (App. Div.), certif. denied, 174 N.J. 194 (2002).

While plaintiff has the burden of establishing the insurer's obligation to make payment on the reasonable medical expenses it incurred following the accident, Miltner v. Safeco Ins. Co. of Am., 175 N.J. Super. 156, 157-58 (Law Div. 1980), it should not also be saddled with uncovering payments defendant made to other entities, which may not have been for "eligible medical treatments, diagnostic tests and services[.]" N.J.S.A. 39:6A-4(a).

Defendant's position, in effect, seeks to limit the scope of the arbitration award consistent with its view of the actual medical expenses paid. It is not attempting to litigate a distinct and separable submission made by plaintiff. In this regard, defendant controlled the information surrounding the nature of monies paid to Horizon, not plaintiff. Not until questioned by plaintiff after arbitration did defendant reveal the basis for the fees charged against the PPO cap. Accordingly, we reject defendant's suggestion that plaintiff carried the burden of presenting this issue to the dispute resolution professional. Defendant should have secured such a determination that its reduction of benefits was appropriately claimed. Its failure to do so precludes review of the issue.

We offer no review of the substantive issue and are not persuaded by defendant's urging that appellate review is necessary to effectuate the objectives of AICRA, which include "reducing unnecessary costs[.]" See N.J.S.A. 39:6A-1.1(b); see also Seaview Orthopaedics ex rel. Fleming v. Nat'l Healthcare Res., Inc., 366 N.J. Super. 501, 516 n. 7 (App. Div. 2004) (holding PPO vender agreements entirely compatible with the no-fault scheme because such contracts do not increase, but rather, tend to lessen the monetary obligations of insurers and insureds). Defendant suggests that if insurers are not permitted to classify PPO savings fees as medical expense benefits, they will be discouraged from entering PPO vendor agreements, which would lead to less coverage for insureds. In our view, this case is atypical. In most cases, the insurer's incentive to enter PPO vendor agreements exists because the amount of benefits paid will not reach the statutory limit. Consequently, the insurer will reap the benefit from enforcing PPO agreements, as doing so will lessen its overall obligations.

 
Notwithstanding the court's erroneous comments regarding the review of the PPO service fee, we conclude the trial judge properly exercised his authority to confirm the arbitration award. We will not further review the judgment. Fort Lee Surgery Ctr., Inc. v. Proformance Ins. Co., 412 N.J. Super. 99, 104 (App. Div. 2010).

Affirmed.

Defendant's submission reveals it had paid $156,713.09 and committed to pay an additional $84,182.90.

Although the parties do not challenge this initial payment made to plaintiff, after review of the record our calculations differ from those of the parties by $1,200, a result we cannot explain. The total claims paid or to be paid were $240,885.99 and the total PPO service fees deducted were $4,596.36. The sum of these less the $250,000 PIP limit results in a difference of $4,507.65 not $3,307.65, the amount paid by defendant following arbitration.

The parties met with the trial judge in chambers on September 8, 2009. There is no transcript of this proceeding.

AICRA provides that either party to a PIP dispute may select ADR in lieu of filing an action in Superior Court, and vests in the Commissioner of Banking and Insurance (the Commissioner) the authority to "promulgate rules and regulations with respect to the conduct of the dispute resolution proceedings" and designate an organization to administer the dispute resolution program. N.J.S.A. 39:6A-5.1; Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 470 (App. Div. 2005). In exercising this authority, the Commissioner chose to adopt the APDRA's procedures for resolution of PIP claims. N.J.A.C. 11:3-5.1 to -5.12. Thus, compliance with APDRA rules is a mandatory requirement of PIP ADR. Riverside Chirop. Group. v. Mercury Ins. Co., 404 N.J. Super. 228, 235 (App. Div. 2008).

N.J.S.A. 39:6A-2(e) defines medical expenses as:

reasonable and necessary expenses for treatment or services as provided by the policy, including medical, surgical, rehabilitative and diagnostic services and hospital expenses, provided by a health care provider licensed or certified by the State or by another state or nation, and reasonable and necessary expenses for ambulance services or other transportation, medication and other services as may be provided for, and subject to such limitations as provided for, in the policy, as approved by the commissioner.

In opposition to defendant's claim, we identify plaintiff's reliance on N.J.A.C. 11:3-28.6(a), which states: "All expenses relating to the investigation of claims, including expenses for medical examinations, file maintenance and cost containment measures, are the responsibility of the automobile liability insurer."

(continued)

(continued)

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A-1179-09T2

August 4, 2010