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Varano, Damian & Finkel, L.L.C. v. Allstate Insurance Co.

January 06, 2004


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, L-8853-00.

Before Judges Ciancia, Alley and Coleman.

The opinion of the court was delivered by: Ciancia, J.A.D.


Submitted December 9, 2003

Defendant Allstate Insurance Company (Allstate) appeals a summary judgment enforcing a prior settlement that Allstate entered into with defendant Ramsey Medical, P.A. (Ramsey Medical) for the payment of medical bills incurred by Allstate's insured, Jerome Maak. The final order directed Allstate to pay $10,000"for outstanding medical bills pursuant to PIP" and also to pay $1,425 in legal fees to plaintiffs Varano, Damian & Finkel, L.L.C. (Varano). We now reverse the summary judgment and remand for further proceedings.

Allstate's insured, Maak, sustained personal injuries in a 1996 auto accident and sought treatment from Ramsey Medical. In turn, Ramsey Medical sought payment from Allstate under Maak's Personal Injury Protection (PIP) coverage. Allstate paid some claims but not others. Ramsey Medical sought arbitration through its counsel, the Varano firm, but a settlement was reached before arbitration was concluded. The settlement provided for payment of $10,000 to Ramsey Medical and $1,425 to Varano in fees and costs.

In October 2000 plaintiffs filed a complaint to enforce the settlement. Allstate answered and attempted, without success, to depose Dr. George Najemian, a chiropractor who purportedly owned Ramsey Medical. An order was signed compelling the deposition, but it never took place. Plaintiffs filed what was essentially a motion for summary judgment shortly before the scheduled trial date. Allstate opposed the motion and cross-moved for judgment based on the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30 or, alternatively, for the right to reserve claims under that Act against Ramsey Medical, Najemian, and other corporations under Najemian's control, specifically with respect to treatment of twenty-four Allstate insureds other than Maak. We note, as to this latter request, the trial court signed a second order granting Allstate the right to pursue the reserved claims under the Insurance Fraud Prevention Act.

Allstate's reasons for not complying with the settlement agreement center around its alleged lack of knowledge that Ramsey Medical and Najemian were in violation of laws and regulations that precluded payment to them of medical claims. Allstate's position is essentially that it was defrauded by Ramsey Medical.

Allstate alleges that Ramsey Medical was incorporated in 1996 with Najemian listed as its registered agent and a Dr. Robban Sica, M.D. as the sole director. A 1999 annual report showed Najemian as both the registered agent and the sole officer/director. Sica was not mentioned. The same day that Ramsey Medical was incorporated, Tangn Management Corporation (Tangn) was also incorporated with the same address as Ramsey Medical and with Najemian as the registered agent and sole director. In this regard, we note plaintiffs' certification of counsel which accompanied their motion for summary judgment and stated, in part:

Dr. George P. Najemian, II is a chiropractor licensed in the State of New Jersey. At the time the services were performed, Dr. Najemian was the sole owner and director of Tangn Management Corp.... [which] provided management services to Ramsey Medical, P.A., owned and under the directorship of Robban A. Sica, M.D....

In 1996 an osteopath, Dr. Morris Mintz, was hired by Ramsey Medical. His certification states that he was hired and supervised by Najemian. He never met or spoke to Sica. Mintz was employed at Ramsey Medical for about two-and-a-half years before he was fired.

Shortly after Mintz was fired, Dr. Rekha Daftary, M.D. was hired at Ramsey Medical. Her certification states that she, too, was hired and supervised by Najemian and considered him her employer. She never met or spoke to Sica. Daftary treated Maak until her resignation in February 1999. Ramsey Medical assertedly made six claims for payment alleging treatment of Maak by Daftary on twelve occasions after February 1999. Daftary certified that she did not treat Maak on those twelve occasions.

Allstate alleges that Ramsey Medical's corporate structure was intended to mislead Allstate into believing it was owned, operated, and controlled by a plenary licensed physician --i.e., Sica. The New Jersey Board of Medical Examiners has promulgated regulations regarding the structure of a professional practice. N.J.A.C. 13:35-6.16. Of particular relevance here is N.J.A.C. 13:35-6.16(f)3i, which in essence prohibits a physician with a plenary license, such as an M.D. or a D.O., from being employed by a practitioner with a limited license, such as a chiropractor (D.C.) or podiatrist (D.P.M.). The regulation states:

Thus, a practitioner with a plenary license shall not be employed by a practitioner with a limited scope of license, nor shall a practitioner with a limited license be employed by a practitioner with a more limited form of limited license. By way of example, a physician with a plenary license may be employed by another plenary licensed physician, ...

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