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Endo Surgi Center, P.C. v. Liberty Mutual Insurance Co.

April 9, 2007


On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-228-06.

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



Argued February 27, 2007

Before Judges Skillman, Lisa and Holston, Jr.

The issue presented by this appeal is whether an insured under an automobile liability policy who is denied personal injury protection (PIP) benefits may maintain a common law action for breach of good faith against the insurer. We conclude that PIP benefits are statutory in origin, and therefore, an insured who is wrongfully denied such benefits is entitled to only the statutory remedy of interest on the benefits and attorney's fees.

Plaintiff Endo Surgi Center (Surgi Center) is a professional corporation, owned by a group of physicians, which operates a medical treatment facility. Surgi Center provided medical services to fifteen patients for injuries suffered in automobile accidents for which defendant Liberty Mutual is responsible for payment of PIP medical benefits. Liberty Mutual refused payment for the portion of the patients' medical bills attributable to "facility fees" for use of a surgical site in Surgi Center's facility. The patients assigned their PIP claims for these fees to Surgi Center.

Surgi Center filed an action in the Law Division for recovery of the assigned PIP medical benefit claims. Surgi Center's complaint also asserted various other causes of action, including claims for a "bad faith course of conduct" and "fraud," and sought both compensatory and punitive damages.

Before filing an answer, Liberty Mutual moved to dismiss the parts of Surgi Center's complaint that asserted claims for bad faith and fraud as well as its punitive damages claim. The trial court denied Liberty Mutual's motion to dismiss Surgi Center's bad faith claim. The court granted Liberty Mutual's motion to dismiss Surgi Center's claims for fraud and punitive damages without prejudice.

We granted Liberty Mutual's motion for leave to appeal from the order denying its motion to dismiss Surgi Center's bad faith claim. We now reverse that order.

The requirement that an automobile insurance policy include PIP benefits is a fundamental part of the No-Fault Act, N.J.S.A. 39:6A-1 to -35, first enacted in 1972, L. 1972, c. 70, and comprehensively amended in 1998 by enactment of the Automobile Insurance Cost Reduction Act (AICRA), L. 1998, c. 21 and c. 22. Two major objectives of this legislation are facilitating "prompt and efficient provision of benefits for all accident injury victims" and "minimiz[ing] resort to the judicial process[.]" Gambino v. Royal Globe Ins. Cos., 86 N.J. 100, 105-107 (1981).

To achieve these objectives, the No-Fault Act mandates that every automobile liability insurance policy include coverage for PIP benefits. N.J.S.A. 39:6A-3.1; N.J.S.A. 39:6A-4. In addition, the statute provides that any claim for PIP medical benefits "shall be overdue if not paid within 60 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of same[,]" N.J.S.A. 39:6A-5(g), and that "[a]ll overdue payments shall bear interest at the percentage of interest prescribed in the [Rules of Court] for judgments, awards and orders for the payment of money[,]" N.J.S.A. 39:6A-5(h). The No-Fault Act also provides that either the insured or insurer may submit any dispute regarding payment of PIP medical benefits to alternative dispute resolution, which may consist of either arbitration or review by a medical review organization. N.J.S.A. 39:6A-5.1; N.J.S.A. 39:6A-5.2; see Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 469-70 (App. Div. 2005); Cynthia M. Craig & Daniel J. Pomeroy, New Jersey Auto Insurance Law § 10:2-1 (2007). An insured who prevails in such a proceeding may be awarded attorney's fees. See Maros v. Transamerica Ins. Co., 76 N.J. 572, 579 (1978); Sabato, supra, 380 N.J. Super. at 473-74.

We have previously recognized that because PIP benefits are statutory in nature, see Pickett v. Lloyd's, 131 N.J. 457, 476 (1993); Manetti v. Prudential Prop. & Cas. Ins. Co., 196 N.J. Super. 317, 320-21 (App. Div. 1984), the procedures and remedies provided by the No-Fault Act for enforcement of an insured's right to PIP benefits are exclusive. See Milcarek v. Nationwide Ins. Co., 190 N.J. Super. 358, 365-70 (App. Div. 1983); Kubiak v. Allstate Ins. Co., 198 N.J. Super. 115, 118-20 (App. Div. 1984), certif. denied, 101 N.J. 290 (1985); Pierzga v. Ohio Cas. Group of Ins. Cos., 208 N.J. Super. 40, 44-45 (App. Div.), certif. denied, 104 N.J. 399 (1986). In Milcarek, we agreed with the defendant insurance company that the statutory requirement of payment of interest on overdue PIP benefits and the availability of attorney's fees to a successful claimant were the exclusive remedies available to an insured for a wrongful denial of PIP benefits. 190 N.J. Super. at 365-70. Similarly, in Kubiak, we stated:

Our Legislature has provided the means for expediting PIP disputes and protecting "the rights of all parties" to such disputes by establishing a right to petition the courts for an order which may be entered "on motion for good cause shown." N.J.S.A. 39:6A-13. This, together with the right to interest on overdue payments . . . and the ability under R. 4:42-9(a)(6) to recover counsel fees if successful in the action should sufficiently guard against a situation[] where an injured ...

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