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Everett v. State Farm Indemnity Co.

December 31, 2002


On appeal from Superior Court of New Jersey, Law Division, Camden County, L-3177-98.

Before Judges Cuff, Winkelstein and C.S. Fisher.

The opinion of the court was delivered by: Per Curiam


Argued November 8, 2001

Plaintiff was injured in an automobile accident on January 27, 1996. On April 27, 1998, he filed a complaint against State Farm, his insurance carrier, for Personal Injury Protection Benefits (PIP), seeking payment for hospital and medical expenses, lost wages and other expenses he incurred as a result of the accident. On March 31, 2000, the Law Division granted defendant's motion for summary judgment based on plaintiff's failure to timely file his complaint. We disagree with the Law Division's conclusion and reverse.


On January 27, 1996, plaintiff was in a car parked on Center Street in Merchantville, Camden County. The car was struck on the driver's side by a motor vehicle driven by Kathleen A. Murphy, allegedly causing plaintiff injuries. After the accident, plaintiff sought treatment from Philip Getson, D.O. On January 31, 1996, Getson wrote a prescription for a thermophore electric pad, commonly referred to as a heating pad, to relieve plaintiff's "acute post-traumatic cervical, thoracic & lumbar str. & spr." Accompanying the prescription was a bill from Garden State Medical Equipment Co., the medical provider, for $56.03 and a claim form seeking payment for the heating pad. No doctors' notes, records or medical reports were submitted to State Farm at that time.

Between January 31, 1996, and April 12, 1999, plaintiff allegedly incurred medical expenses totaling $32,316.84. The largest bill, $16,135, was from Getson for services rendered from January 31, 1996, through April 15, 1998. The record does not indicate when the bills were submitted to State Farm. The earliest date on any claim form is June 19, 1998.

On August 1, 1996, Mary Willhouse, a State Farm claim representative, wrote a letter to plaintiff, with a copy to his counsel, advising that State Farm would consider no additional expenses after August 10, 1996; that if there were any unpaid bills for treatment prior to that date, they should be forwarded to State Farm for consideration. The letter was apparently written after the physician hired by State Farm to perform an independent medical examination (IME) concluded that plaintiff required no additional treatment for injuries sustained in the accident. The IME report is not part of the record. In the record, however, is a letter from Getson, dated April 20, 1998, contesting State Farm's decision to "cut off" plaintiff's benefits in August 1996.

On September 13, 1996, Willhouse sent plaintiff's counsel a letter stating that State Farm never received an itemized bill or office notes from plaintiff's treating physician. The letter also advised plaintiff that bills State Farm received from other health care providers were denied since "without the treating physician's notes, there is no documentation of the medical necessity of the treatment provided." Willhouse further explained that the $56.03 bill from Garden State, which was reduced to $46.64 by Garden State after application of the fee schedule, was applied to plaintiff's $250 deductible; a subsequent bill from Garden State of $667.17 was not paid because the IME physician did not consider it medically justified, and a bill for wrist splints was denied because plaintiff's carpal tunnel syndrome was not considered related to the accident.

Although State Farm denied responsibility for paying the medical bills, it pursued its subrogation rights against the tortfeasor. In January 1998 State Farm applied for arbitration seeking reimbursement for various expenses incurred by plaintiff. In its contentions, State Farm sought "100 percent reimbursement of all medical and expense payments pursuant to N.J.S.A. 39:6A-9.1," on the grounds that State Farm paid out "PIP benefits." The total expenses sought and awarded were $1,272.69. Under the column labeled "medicals," however, no dollar amount was listed. Although plaintiff alleges State Farm included the $56.03 claim for the heating pad in its subrogation application, a breakdown of the expenditures for which reimbursement was sought does not include that particular expense. According to Willhouse, the $1,272.69 award is apportioned as follows: 1) fee for prior injury investigation - $784.15; 2) fee for independent medical examination - $450; 3) addendum fee for independent medical examination - $35; and 4) copying expenses - $3.54. Thus even though State Farm claimed reimbursement for medical expense payments, the only medical expense for which State Farm sought and received reimbursement was for the IME.


On appeal plaintiff argues that in reducing the $56.03 bill for the heating pad to $46.64, as authorized by the fee schedule, and applying the balance to plaintiff's $250 deductible, State Farm's action constituted "the last payment of benefits," tolling, for two years from that date, the time period within which to file a complaint for PIP benefits. N.J.S.A. 39:6A-13.1a. Plaintiff directs our attention to State Farm's own records to support his position. A document kept by State Farm, known as a "PAYMENT RECORD," shows the following:


Date of Payment $$of bill $$approved Date incurred Deductible Payment or co-pay Provider Total Paid of service Patient payment amount to date

7/1/96 56.03 46.64 l/31/96 46.64 G.S.Med.Equip. 46.64 -- --

Plaintiff alleges the bookkeeping entry on July 1, 1996, giving him credit for the $46.64, which State Farm considered the "Date of Payment," is the controlling date for purposes of tolling the statute of limitations. Accordingly, plaintiff argues that the complaint, which was filed on April 27, 1998, within two years of July 1, 1996, was timely filed. State Farm responds that the phrase "last payment of benefits" requires that a benefit actually be paid either to the claimant or the health care provider, and thus, merely making the adjustment to the fee schedule and applying the balance to the deductible or co-pay, is not sufficient.

In rendering his decision in defendant's favor on March 31, 2000, the Law Division judge found that the bookkeeping entry was not a payment of benefits. The judge concluded that the statute required the expenditure of funds by the insurance company. He said:

[T]he question is whether or not a notation of the bill falls within the deductible, a payment is required by the statute. I don't think it is. I'm going to rule that it's not. It is not a payment. It is not the expenditure of funds by the insurance company. It's simply a notation. It's a bookkeeping entry so that they know at what point they become obligated to make payments, and that point is when the bills reach the - ...

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