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University of Massachusetts Memorial Medical Center, Inc. v. Christodoulou

July 13, 2004


On certification to the Superior Court, Appellate Division, whose opinion is reported at 360 N.J. Super. 313 (2003).


(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).

On June 28, 1996, twenty-eight-year-old Mario S. Christodoulou was involved in a catastrophic accident in Sturbridge Massachusetts while driving a car owned by his employer, Auto Auction Land of Jersey City, (Auto Auction). Mario was treated at the University of Massachusetts Memorial Medical Center (hospital) for almost two months until his death, resulting from traumatic injuries suffered in the accident. The hospital and the University of Massachusetts Group Practice (collectively, the medical providers) provided Mario with medical services at a cost of $712,683.85.

On or about September 28, 1996, Mario's father, Steve Christodoulou (Steve C.), filed with the New Jersey Division of Workers' Compensation (the Division) an employee claim petition on behalf of Mario's estate and a dependency claim petition on behalf of himself and his wife, alleging that the accident occurred in the course of their son's employment with Auto Auction. The hospital was listed as a medical provider on the employee claim petition. The respondent on both claims was Auto Auction. Granite State Insurance Company (Granite State) is Auto Auction's compensation carrier and AIG Claim Services, Inc. (AIG) is the claims administrator. Auto Auction disputed that the accident occurred in the course of employment and that Mario was providing support to his parents. Exchanges of correspondence between the medical providers' attorney, Peter Kent, and the Christodoulous' attorneys, Goldberger, Seligsohn, and Shinrod (Goldberger), led Kent to believe that the medical providers' bills would be presented for payment in the workers' compensation action.

On May 10, 1999, at a Section 20 hearing before a judge of compensation, Steve C. settled both the employee and dependency claims in exchange for a $50,000 lump-sum payment from Auto Auction. The settlement was placed on the record, with Steve C. acknowledging that he was settling his claims because it would be difficult to prove his claims. He also noted his understanding that he would have no further recourse against Auto Auction, except for the ability to seek indemnification against Auto Auction for payment of Mario's medical bills. On the record, and in front of Auto Auction's counsel, Goldberger assured Steve C. that, as part of the settlement, Auto Auction's insurance carrier would "protect" him in the event of a lawsuit by a doctor or hospital seeking payment of Mario's medical bills relating to the accident. The workers' compensation judge signed the "Order Approving Settlement With Dismissal," which memorialized the agreement between the parties and provided that Auto Auction will hold Steve C. harmless for any medical or hospital bill arising out of the accident. The medical providers did not receive notice of the settlement discussions or the Section 20 hearing, and they did not participate in or approve of the settlement.

On August 9, 1999, by letter, Goldberger informed Kent of the Section 20 settlement, the dismissal of Steve C.'s compensation claims, and the preservation of the medical providers' rights in the Dismissal order. Goldberger suggested that the medical providers contact AIG to collect on their outstanding bills. On March 29, 2000, AIG refused the medical providers' demand for payment, claiming that AIG had agreed to hold Steve C. harmless, not his son's estate, for payment of the medical bills. Because Steve C. was not responsible for his son's bills, AIG refused to reimburse the medical providers. Thereafter, the medical providers filed motions in the workers' compensation court, seeking 1) permission to present their unpaid bills for payment; and 2) a Rule 4:50-1 vacation of the order approving the Section 20 settlement. The court denied both motions because the providers did not file a timely petition for relief.

On March 16, 2001, the medical providers filed a complaint in the Law Division against the Christodoulous, Auto Auction, Granite State, and AIG to recover the cost of medical services provided to Mario, and against the law firms representing the Christodoulous and Auto Auction. The Christodoulous cross-claimed against Auto Auction and the compensation carriers for enforcement of the hold-harmless provision in the Section 20 settlement, and for counsel fees and costs. Auto Auction and its law firm cross-claimed against the Christodoulous and their law firm for contribution, indemnification, counsel fees, and costs.

On October 9, 2002, the Law Division dismissed without prejudice the claims against the law firms and denied all other motions for summary judgment and dismissal, finding that the medical providers were not bound by the settlement. The Appellate Division granted the Christodoulous and Auto Auction leave to appeal from the denial of the motions to dismiss the medical providers' common-law collection action and reversed. The court held, among other things, that the collection action was barred because the medical providers neither intervened timely in the compensation action nor filed a timely petition before the Division.

The Supreme Court granted certification.

HELD: The Section 20 settlement in the Division of Workers' Compensation only resolves issues between those who were parties to the agreement. Because the medical providers are not bound by the Section 20 settlement, they are not precluded from enforcing their contractual rights to payment for the medical care rendered to Mario Christodoulou.

1. Under the New Jersey Workers' Compensation Act (the Act), when a compensation court finds an injury compensable, in that it arises out of and in the course of employment, and that the medical services are reasonable and necessary, the employer is responsible for the expenses incurred by the employee for treatment of the injury. (Pp. 10-11)

2. The Act permits a health-care provider to file a petition in order to assert its claim for payment for medical services rendered to an injured employee or to intervene in a pending workers' compensation action. The Act does not establish an exclusive remedy for a hospital or doctor that has provided medical services to a patient who may or may not have suffered a work-related injury. The contractual right of the provider to seek payment directly from the employee is not nullified. Nothing in the Act suggests that the provider must file a petition before the Division or intervene in a pending action to preserve its right to a contractual remedy against the patient. There is no purpose in imposing such a burden on medical providers who reasonably believe that their bills will be processed at the compensation hearing. The burden must rest with the injured employee to take all steps necessary to collect medical bills from the employer. (Pp. 11-14)

3. Section 20 of the Act allows an employer and employee in a contested workers' compensation action to enter into a lump-sum settlement with the approval of the compensation court to resolve all issues. A Section 20 settlement has the force and effect of a dismissal of the claim petition and is a final and conclusive resolution. There is no language in Section 20 or its legislative history that suggests that medical providers who do not participate in settlement negotiations or agree to a settlement surrender their contractual rights to payment for services rendered to an employee. The employer and employee cannot extinguish the rights of those who do not participate, or do not have the opportunity to participate, in a settlement. (Pp. 14-16)

4. The medical providers relied on Goldberger's repeated representations that the medical bills would be presented to the compensation court. Thus, the providers did not act unreasonably by failing to file their own petition or to intervene in the compensation action. The Christodoulous did not advise the medical providers of the settlement discussions or the date of the hearing and assigned no portion of the settlement toward the medical bills. Having lulled the providers into believing that their bills would be presented for payment, the Christodoulous cannot now argue that the only venue to resolve this dispute was in the Division. Moreover, the hold-harmless language in the settlement order demonstrates that the parties did not view the Section 20 settlement as extinguishing the contractual rights of the medical providers. (Pp. 16-19)

5. The Court disapproves of language in lower court decisions stating that a common law collection action by a medical provider can be filed only after a judgment of non-compensability has been rendered in the compensation court. Principles of fairness dictate that medical providers not be precluded from filing a common law collection action against a patient despite the absence of a judgment of non-compensability. The holding will encourage the parties to address the payment of medical and hospital bills when negotiating a settlement. The rule adopted by the Appellate Division that a medical provider may maintain an action in the Law Division against an employee who has a pending compensation claim is consistent with the goal of handling claims efficiently and avoiding duplication of effort. A necessary corollary to that rule is the requirement that while an employee's claim for a work-related injury is pending in the Division, a medical provider's action for unpaid services must be transferred from the Law Division to the Division of Workers' Compensation. (Pp. 19-23)

Judgment of the Appellate Division is REVERSED, the complaint is REINSTATED, and the matter is REMANDED to the Law Division for further proceedings consistent with this opinion.


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