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Everett v. State Farm Indemnity Company

March 06, 2003


On appeal from the Superior Court, Appellate Division.


(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

(NOTE: This Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in the majority opinion below.)

The issue before the Court is whether an insured timely filed his complaint for personal injury protection (PIP) benefits against his insurer.

On January 27, 1996, George Everett was injured when his parked car was struck by another vehicle. Everett sought treatment with Philip Getson, D.O on January 31, 1996. Getson wrote a prescription for a heating pad to relieve Everett's "acute post-traumatic cervical, thoracic & lumbar" strain and sprain. Accompanying the prescription was a bill from Garden State Medical Equipment Co. (Garden State), 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 Everett's insurance carrier, State Farm Indemnity Company (State Farm), at that time.

Between January 31, 1996 and April 12, 1999, Everett incurred medical expenses totaling $32,316.84. The largest bill, $16,135, was for services rendered by Getson from January 31, 1996 through April 15, 1998. The record does not show when the bills were submitted to State Farm. On August 1, 1996, Mary Willhouse, a State Farm claims representative, wrote a letter to Everett, with a copy to his attorney, advising that State Farm would not consider any additional expenses after August 10, 1996 and that if there were any unpaid bills for treatment prior to that date, they should be forwarded to State Farm. This letter was prompted by a physician's conclusion in an independent medical examination (IME) report that Everett required no additional treatment for his injuries.

On September 13, 1996, Willhouse sent Everett's attorney a letter stating that State Farm never received an itemized bill or office notes from Everett's treating doctor. The letter also advised Everett that bills State Farm received from other health-care providers were denied because there was no documentation from the treating doctor in respect of the medical necessity of the treatment provided. Willhouse further explained, among other things, that the $56.03 bill from Garden State, which was reduced to $46.64 by Garden State after application of a fee schedule, was applied to Everett's $250 deductible.

On April 27, 1998, Everett filed a complaint against State Farm for PIP benefits, seeking payment for hospital and medical expenses, lost wages, and other expenses he incurred as a result of the car accident. On March 31, 2000, the Law Division granted State Farm's motion for summary judgment dismissing the matter on the ground that Everett failed to timely file his complaint.

Everett appealed to the Appellate Division, which reversed the decision of the trial court. One member of the panel dissented. Everett argued before the appellate court that in reducing the $56.03 bill for the heating pad to $46.84 and applying the balance to the deductible, State Farm's actions constituted the "last payment of benefits," thereby tolling, for two years from that date, the time period within which to file a complaint for PIP benefits. Everett claims that under State Farm's payment record, the bookkeeping entry on July 1, 1996 giving him credit for the $46.64 is the controlling date for tolling the statute of limitations. Accordingly, his complaint, filed on April 27, 1998 was within two years from July 1, 1996 and, as such, was timely filed. On the other hand, State Farm argued that the "last payment of benefits" language requires that a benefit actually be paid to either the insured or the health-care provider, and that merely making an adjustment to the fee schedule and applying the balance to the deductible or co- pay is not sufficient to toll the statute of limitations.

In reaching its conclusion, the majority of the Appellate Division noted that: 1) the purpose of the No-Fault Insurance Act (Act) is remedial in nature and, thus, is to be liberally construed; 2) the underlying purpose of the Act is to assure that an injured party is promptly compensated for medical treatment resulting from injuries sustained in a car accident; and 3) the statute of limitations provision, N.J.S.A. 39:6A-13.1a, has two purposes: a) to prevent stale claims; and b) to penalize dilatoriness and serve as a measure of repose. In construing the limitations provision, specifically the term "last payment of benefits," in the context of the Act and according due consideration of the Act's underlying purposes, the majority found that the application of the heating pad bill to the deductible constitutes a "payment of benefits" under the statute. Thus, the complaint was filed within two years of the date of the last payment of benefits: July 1, 1996. The court reasoned that a liberal construction of N.J.S.A. 39:6A-13.1a is harmonious with the underlying purposes of statutes of limitations provisions. Once State Farm related the expense to the accident, regardless of whether payment was made to a health-care provider, State Farm was on notice to expect that it may be faced with claims for additional medical expenses. Further, in adjusting the heating pad bill and applying it to the deductible, State Farm was in the same position it would have been had it been necessary to make a payment to a health-care provider or to the insured. In addition, the court noted that if State Farm's position were accepted, different tolling dates would apply dependent on either the amount of the medical bill or the insured's deductible. According to the majority, it is unlikely that the Legislature would intend such an inconsistent result.

The dissent argued that the adjustment of the heating pad bill to the deductible is nothing more than a bookkeeping event and does not constitute a "payment" of benefits under the Act. The dissent reasoned that an acknowledgment of an expense falling within an insured's deductible does not constitute a "payment" by an insurer, nor a "benefit" to an insured. The dissent opined that this construction is strongly suggested by the ordinary meaning of the word "payment," and is further justified by prior judicial construction of the word "payment." In addition, the limitations provision should not be broadened because of possible arbitrary results that might otherwise occur. Further, the dissent believed his view is compelled by the well-settled goals of the Act to eliminate minor tort lawsuits and reduce escalating insurance premiums, and is further mandated by the insignificant role deductibles should play in the application of the Act.

State Farm appealed to the Supreme Court as a matter of right based on the dissent in the Appellate Division.

HELD: Judgment of the Appellate Division is affirmed substantially for the reasons expressed in the panel's majority opinion. The process of adjusting the heating pad bill to the fee schedule and applying the balance to the insured's deductible constituted a "last payment of benefits" under the No-Fault Insurance Act, ...

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