PALISADES INSURANCE COMPANY , v. HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY

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APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2830-19

PALISADES INSURANCE
COMPANY,

Plaintiff-Appellant, APPROVED FOR PUBLICATION
July 27, 2021
v. APPELLATE DIVISION

HORIZON BLUE CROSS
BLUE SHIELD OF NEW
JERSEY,

Defendant-Respondent.
_________________________

Argued May 26, 2021 – Decided July 27, 2021

Before Judges Alvarez, Geiger, and Mitterhoff.

On appeal from the Superior Court of New Jersey,
Law Division, Middlesex County, Docket No.
L-6136-19.

Glenn D. Curving argued the cause for appellant
(Riker Danzig Scherer Hyland & Perretti, LLP,
attorneys; Glenn D. Curving, of counsel; Anne M.
Mohan and Alfonse R. Muglia, on the briefs).

Adam J. Petitt argued the cause for respondent
(Stradley Ronon Stevens & Young, LLP, attorneys;
Adam J. Petitt, of counsel; Robert J. Norcia, on the
brief).
The opinion of the court was delivered by

MITTERHOFF, J.A.D.

In this personal injury protection (PIP) reimbursement case, plaintiff

Palisades Insurance Company appeals from a February 28, 2020 order granting

defendant Horizon Blue Cross Blue Shield of New Jersey's motion for

summary judgment and dismissing its complaint with prejudice. Having

reviewed the record and considering the applicable law, we affirm.

Plaintiff is an insurance carrier that sells automobile insurance policies

including mandatory PIP benefits, which provide payment to its insureds, or

medical providers as assignees of its insureds, for treatments of injuries

sustained in motor vehicle accidents. Defendant is a not-for-profit corporation

providing health insurance benefits to its insureds. Pursuant to N.J.S.A.

39:6A-4.3(d), plaintiff allows its customers to designate their health insurer as

primary for payment of medical expenses incurred as a result of an automobile

accident.

Plaintiff's insureds M.B, M.T., T.L., and P.M opted to designate

defendant to provide medical coverage on a primary basis. Each insured was

involved in an automobile accident and received treatment. Despite the

designation, each insured and/or their provider sought payment of their

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medical expenses from plaintiff. With regard to M.B, M.T., and T.L, plaintiff

sent letters notifying defendant that its subscribers had submitted expenses

related to injuries sustained during motor vehicle accidents, and that under the

terms of their policies, defendant was the primary provider of medical benefits.

Plaintiff requested confirmation that it would process the claims. After

defendant failed to respond to the letters, plaintiff voluntarily paid the claims

of M.T., T.L., and M.B.

In P.M.'s case, plaintiff commenced payment upon receipt of the claim.

It subsequently realized that the insured had selected the health care as primary

designation on their auto policy. P.M. requested confirmation from defendant

that it would provide primary coverage for their automobile accident -related

injuries. Defendant responded with a letter indicating that the insured's

contract permitted only secondary coverage for PIP-eligible expenses. That

prompted P.M.'s medical provider to send plaintiff a letter requesting that the

insured's coverage designation be changed to PIP as primary. Plaintiff then

provided primary coverage for the remaining expenses.

Plaintiff filed a complaint on August 28, 2019, and an amended

complaint on September 5, 2019, requesting reimbursement under a theory of

subrogation for the medical expenses it paid on behalf of its insureds.

Defendant filed an answer on October 9, 2019, but did not respond to a number

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of ensuing discovery requests. On December 4, 2019, defendant moved for

summary judgment and requested that sanctions be imposed against plaintiff's

counsel, alleging the amended complaint was frivolous.

In support of its motion, defendant argued that before plaintiff filed this

complaint, it had unsuccessfully sought reimbursement in at least ten other

cases that presented identical legal questions. In each lawsuit, as here,

plaintiff argued that: (1) the insureds elected to have their health insurer act as

the primary provider of medical expenses related to automobile accidents, (2)

the insureds were enrolled in a health benefits plan provided by defenda nt; and

(3) plaintiff paid PIP benefits to health care providers, despite knowing their

policies provided only secondary coverage. In each case, plaintiff argued it

had a right to reimbursement under a theory of subrogation, and lost.

On the return date of the motion for summary judgment, defendant

argued that the statutory and regulatory schemes which govern the payment of

automobile accident-related expenses amongst PIP and health insurers, do not

provide any right of recovery to PIP insurers that voluntarily pay claims they

are not liable for. Plaintiff contended that the payments were not voluntary

because they were made only after its requests for confirmation that the

insureds held policies with defendant went unanswered. Because the coverage

status of the insureds and whether defendant properly processed their claims

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remained in dispute, plaintiff argued summary judgment was improper. At the

conclusion of the hearing, the judge granted defendant's motion and dismissed

plaintiff's amended complaint with prejudice. Sanctions were not imposed.

This appeal ensued.

II.

"We review a grant of summary judgment de novo, applying the same

standard as the trial court." Woytas v. Greenwood Tree Experts, Inc., 237 N.J.
501, 511 (2019) (citing Bhagat v. Bhagat, 217 N.J. 22, 38 (2014)). Rule 4:46-

2(c) provides that a court should grant summary judgment when "the

pleadings, depositions, answers to interrogatories and admissions on file,

together with the affidavits, if any, show that there is no genuine issue a s to

any material fact challenged and that the moving party is entitled to a

judgment or order as a matter of law."

Self-serving assertions that are unsupported by evidence do not give rise

to a genuine issue of material fact. Miller v. Bank of Am. Home Loan

Servicing, L.P., 439 N.J. Super. 540, 551 (App. Div. 2015) (quoting Heyert v.

Taddese, 431 N.J. Super. 388, 414 (App. Div. 2013)). "Competent opposition

requires 'competent evidential material' beyond mere 'speculation' and 'fanciful

arguments.'" Hoffman v. Asseenontv.Com, Inc., 404 N.J. Super. 415, 426

(App. Div. 2009) (quoting Merchs. Express Money Order Co. v. Sun Nat'l

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Bank, 374 N.J. Super. 556, 563 (App. Div. 2005)). We review the record

"based on our consideration of the evidence in the light most favorable to the

parties opposing summary judgment." Brill v. Guardian Life Ins. Co., 142 N.J.
520, 523 (1995).

Plaintiff argues the motion judge erred in concluding that subrogation

does not exist as to PIP-to-health insurer reimbursement claims. It

acknowledges that the New Jersey Automobile Reparations Reform Act (No-

Fault Act), N.J.S.A. 39:6A-1 to -35, does not expressly permit inter-company

reimbursements amongst PIP and health insurers, but contends the insurance

industry has developed a practice, which defendant refuses to honor, of

voluntarily providing reimbursements when overpayments are made. Further,

plaintiff alleges that the No-Fault Act simply does not contemplate a situation

where a health insurer refuses to acknowledge or address a dispute. This puts

PIP insurers between a rock and a hard place in that PIP providers are subject

to penalties if prompt payments are not made. Accordingly, plaintiff suggests

the No-Fault Act does not preclude health insurance-to-PIP reimbursement,

and it should be permitted to proceed with its claim.

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B.

Prior to 1972, "insurers were free to file suit against other insurers to

recover payments for medical expenses based on the common-law right of

subrogation." State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exch.,

146 N.J. 1, 6 (1996). That created, however, "an inefficient means of

compensation since it required expensive and time-consuming litigation, and

. . . would not compensate drivers whose own fault caused their injuries."

Ibid. (quoting Garden State Fire & Cas. Co. v. Com. Union Ins. Co., 176 N.J.

Super 301, 305 (App. Div. 1980)).

In response, the Legislature enacted what has become colloquially

known as No-Fault. Under No-Fault, automobile insurers are required to

provide PIP coverage to their insureds, without consideration of fault, and are

prohibited from asserting subrogation claims seeking reimbursement of

medical expenses against the at-fault insured's PIP provider. Liberty Mut. Ins.

Co. v. Penske Truck Leasing Co., 459 N.J. Super. 223, 229-30 (App. Div.

2019).

In 1990, No-Fault was amended to allow insureds to choose to have their

health insurer primarily responsible for paying medical expenses arising out of

automobile accidents. N.J.S.A. 39:6A-4.3(d). Choosing the health care

insurance-as-primary option reduces the insured's car insurance premiums.

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7 N.J.S.A. 39:6A-4.3(f). Health insurers, in turn, are prohibited from including

any provision in their plans which "restricts, limits, or excludes coverage" of

expenses arising out of automobile accidents. N.J.A.C. 11:3-37.3 (d). There

are, however, exceptions to the general rule against PIP restrictions, such as

self-funded health plans under the Employee Retirement Income Security Act

of 1974, 29 U.S.C. §§ 1001 to -1461. See 29 U.S.C. § 1144(b)(2)(B); FMC

Corp. v. Holliday, 498 U.S. 52, 61 (1990); White Consol. Indus., Inc. v. Lin,

372 N.J. Super. 480, 483-84 (App. Div. 2004).

To facilitate the orderly resolution of insurance claims arising from

automobile accidents, the New Jersey Department of Banking and Insurance

implemented the Coordination of Benefits (COB) scheme under N.J.A.C. 11:3-

37.1 to -37.14. Those regulations establish a system by which PIP and health

insurers determine which expenses are covered by the respective plans, and

how much each is obligated to pay. When a dispute arises regarding the

obligations of a PIP insurer and a health insurer, N.J.A.C. 11:3-37.11 provides:

(a) If, subsequent to the selection of the PIP-as-
secondary coverage option by the named insured,
injuries are sustained by an insured eligible for health
benefits plan coverage, but a dispute exists between
the health benefits provider and the automobile
insurer, then the health benefits provider shall provide
benefit as if it were the primary coverage provider and
no PIP benefits were available to the insured. In no
event shall the provision of benefits be unreasonably

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delayed by either a health benefits provider or an
automobile insurer.

(b) If the health benefits provider asserts that it is not
subject to N.J.A.C. 11:3–37.3, and thus, will not act as
the primary coverage provider then the automobile
insurer shall assume the role of primary coverage
provider, and provide its benefits in accordance with
N.J.A.C. 11:3–37.8. The automobile insurer shall be
entitled to recover premium reductions [from the
insured] in accordance with N.J.A.C. 11:3–37.8(c).

No-Fault requires PIP insurers to make prompt payment of claims.

Under N.J.S.A. 39:6A-5(g), PIP payments "shall be overdue if not paid within

[sixty] days after the insurer is furnished with written notice of the fact of a

covered loss and of the amount of the same." If a PIP insurer provides

secondary coverage, however, the duty to provide primary coverage arises only

after it has received notice that the health insurer has determined it will not act

as the primary. N.J.A.C. 11:3-37.11(b).

When a PIP-as-secondary insurer receives a claim eligible for primary

coverage, it must deny coverage and send the insured a notice advising them to

submit the claim to their health insurer. See N.J. DEP'T OF BANKING AND INS.,

BULL. N O. 05-25, (Dec. 5, 2007) [hereinafter Bull. No. 05-25] ("The claimant's

private passenger automobile insurer should notify the insured, and any of the

insured's health care providers known to the automobile insurer, that the

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insured or provider should first submit the claim to the appropriate health plan

for coverage. . . ."). 1

Health insurers are also required to make prompt payment of claims, but

are governed by N.J.A.C. 11:22-1.1 to -1.16. Specifically, N.J.A.C. 11:22-1.5

requires health insurers to pay claims within thirty calendar days of receipt if

submitted electronically or forty calendar days if submitted by other means. A

health insurer's duty to pay does not arise until it has received a claim directly

from the insured or a healthcare provider. See N.J.A.C. 11:22-1.5(a); Bull.

No. 05-25 ("The time periods for the prompt payment of claims by health

plans set forth at [N.J.A.C.] 11:22 should not begin until the health plan has

received the claim directly from the insured or the provider."). A PIP or health

insurer's failure to comply with the COB subchapter "may result in the

assessment of any and all penalties in accordance with the laws of this State."

N.J.A.C. 11:3-37.13.

Reimbursements of payments incorrectly made by auto carriers are

permitted by inter-company agreement or arbitration amongst PIP insurers,

N.J.S.A. 39:6A-11, but this court has determined that health insurers are not

subject to PIP arbitration. See N.J. Mfrs. Ins. Co. v. Horizon Blue Cross Blue

Shield of N.J., 403 N.J. Super. 518, 528 (2008) (finding "neither the statute nor

1
Available at: https://www.state.nj.us/dobi/bulletins/blt05_25.pdf

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the implementing regulations contemplate that arbitration under N.J.S.A.

39:6A-5.1 will include health insurers").

Consequently, the No-Fault statutes do not provide an enforcement

mechanism that PIP carriers may use against health insurers. Rather, the COB

regulations are enforced by the Commissioner of Banking and Insurance

through the assessment of penalties. N.J.A.C. 11:3-37.13. Moreover, the COB

scheme depends upon PIP insurers to deny claims falling under primary

coverage, in order to notify the healthcare providers that the expenses must be

submitted to the health insurer for payment. See Bull. No. 05-25. When a PIP

carrier voluntarily pays a claim it is only secondarily liable for, the COB

scheme breaks down, in that the provider remains unaware that the claim was

improperly submitted, removing any incentive for the provider to pursue the

health insurer.

Prior to the enactment of the No-Fault law, subrogation claims amongst

automobile insurers were permitted. "Subrogation is a device of equity to

compel the ultimate discharge of an obligation by the one who in good

conscience ought to pay it [and] . . . to serve the interests of essential justice

between the parties." Standard Accident Ins. Co. v. Pellecchia, 15 N.J. 162,

171 (1954) (citations omitted).

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In the insurance context, subrogation is a doctrine
allowing the insurer to seek recovery from the party at
fault, exercised after the insurer has indemnified its
insured under the terms of an insurance policy. The
doctrine is based on the principle that a benefit has
been conferred upon the insured at the expense of the
insurer and vests in the latter any rights the former
may have had against a third party who is liable for
the damages.

[City of Asbury Park v. Star Ins. Co., 242 N.J. 596,
604 (2020) (quoting George J. Kenny et al., New
Jersey Insurance Law § 8-2, at 231-32 (2019)
(citations omitted)).]

"[T]he insurer 'steps into the shoes of the insured,' Pellecchia, 15 N.J. at
172, and files suit against the tortfeasor subject to any 'defenses which would

defeat recovery by the [insured].'" Id. at 605. (second alteration in original)

(quoting Hartford Fire Ins. Co. v. Riefolo Constr. Co., Inc., 81 N.J. 514, 524

(1980)). The right to subrogate, however, does not "arise spontaneously" and

is not "free-floating or open-ended." Culver v. Ins. Co. of N. Am., 115 N.J.
451, 456 (1989). It requires:

"(1) an agreement between the insurer and the insured,
(2) a right created by statute, or (3) a judicial 'device
of equity to compel the ultimate discharge of an
obligation by the one who in good conscience ought to
pay it.'" While the doctrine has an equitable
foundation, the attitude of courts toward subrogation
has been described as "one of allowing complete
freedom of contract and trying to determine and
enforce the expressed intention of contracting parties."

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[Ibid. (citations omitted) (first quoting Aetna Ins. Co.
v. Gilchrist Brothers, Inc., 85 N.J. 550, 560 (1981));
and then quoting Robert E. Keeton et al., Insurance
Law, § 3.10 at 153 (1988).]

III.

Plaintiff argues defendant's failure to respond to letters, advising it had

received claims subject to primary coverage by the health insurance company,

should require it to pay the claim. A health insurer's duty to process a claim,

however, does not arise until it has received a request for payment directly

from the insured or a healthcare provider. N.J.A.C. 11:22-1.5(a); Bull. No. 05-

25. If, after proper submission, a health insurer disputes coverage of a

requested medical expense, the insured must pursue the internal appeals

process under the plan. N.J.A.C. 11:22-1.10(a)(2) ("A provider shall initiate

an appeal by submitting to the health carrier or its agent a complete Claim

Payment Appeal Form, which shall include all substantiating documentation

required by the health carrier or its agent."). Where both the PIP and health

insurer dispute coverage, the health insurer becomes obligated to act as the

primary. N.J.A.C. 11:3-37.11(a).

With regard to M.B, M.T., and T.L., plaintiff's letters did not require

defendant to act. While acknowledging defendant's disregard of plaintiff's

notice attempts, nothing under the No-Fault or COB laws required defendant to

respond, or process the alleged claims, until they were properly submitted.

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As to P.M., the communications between the insured, their healthcare

provider, and the parties served as notice that defendant was asserting it was

not subject to N.J.A.C. 11:3-37.3, and would not act as the primary insurer.

N.J.A.C. 11:3-37.11(b). At that point, plaintiff became obligated to provide

primary coverage despite the insured's designation. Ibid. Its recourse is not

reimbursement from defendant, rather, it is to recover the premium reductions

the insured saved by electing health as primary on their auto policy. Ibid. If

plaintiff believed that defendant unreasonably denied coverage, it could have

requested that P.M. pursue defendant's internal appeals process, or obtained an

assignment of rights from the insured and pursued the appeal itself. Instead, it

simply paid the claim. Consequently, plaintiff has failed to establish any right

of subrogation. Culver, 115 N.J. at 456. It has not provided an assignment of

rights executed by any of its insureds, no statutory right to subrogation exists

under No-Fault, and plaintiff has failed to demonstrate that defendant engaged

in any culpable conduct. Plaintiff may seek reimbursement from the

healthcare providers it paid out of turn, or it must obtain an assignment of its

insureds' rights. It may not recover the funds it paid toward expenses eligible

for primary coverage directly from defendant.

Plaintiff next argues that the motion judge erred, both legally and

factually, in finding the payments it made were voluntary. Legally, it suggests

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that because the voluntary payment doctrine has never been applied to inter-

insurer reimbursement, the doctrine should not be applied here. Factually,

plaintiff contends the payments were not voluntary, because they were made

under threat of sanctions for failure to provide prompt payment. We disagree.

Initially, we note that plaintiff has not presented any legal authority that

persuades us the voluntary payment doctrine is inapplicable in a health -

insurer-to-PIP reimbursement case. Rather, "[i]t long has been the general

common-law rule that where a party, without mistake of fact, fraud, duress, or

extortion, voluntarily pays money on a demand that is not enforc[ea]ble

against him [or her], he [or she] may not recover it." Cont'l Trailways, Inc. v.

Dir, Div. of Motor Vehicles, 102 N.J. 526, 548 (1986).

Here, there was no mistake of fact because the insureds' designation of

health-as-primary on their policies provided plaintiff with notice that it was

not obligated to pay the subject claims. Plaintiff does not allege fraud or

duress. Instead, it contends it paid the claims under threat of penalty for

failure to provide prompt payment. A PIP-as-secondary insurer's duty to pay

automobile-accident-related medical expenses, however, does not arise until it

receives notice that the primary insurer has determined the claim is not

covered. N.J.A.C. 11:3-37.11(b). Any payment made in fear of penalties was

made under a mistake of law, because plaintiff had not received the duty-

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triggering notice, and was under no obligation to pay. Reimbursements are not

appropriate when voluntary payments are made based on a mistake of law.

Cont'l Trailways, Inc., 102 N.J. at 548. The judge's finding that the payments

were voluntary was sound, both legally and factually.

Plaintiff also contends that summary judgment was prematurely granted

in this case because factual disputes existed as to whether the named insureds

were defendant's policy holders, how defendant processes its claims,

defendant's alleged past practice of seeking reimbursements from PIP insurers,

and the reasons defendant failed to respond to its letters. The sought -after

discovery, however, is incapable of curing the fundamental legal obstacle for

plaintiff: that no cause of action for subrogation exists to allow a PIP carrier

to pursue reimbursement for claims mistakenly paid out of turn.

To the extent not addressed, plaintiff's remaining arguments lack

sufficient merit to warrant discussion in our written opinion. R. 2:11-

3(e)(1)(E).

Affirmed.

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