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New Jersey Manufacturers Insurance Co. v. University Physician Associates

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


January 30, 2008

NEW JERSEY MANUFACTURERS INSURANCE COMPANY, PLAINTIFF-RESPONDENT,
v.
UNIVERSITY PHYSICIAN ASSOCIATES, A/S/O CHRISTINA MONTAGANO, DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Essex County, L-5004-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: November 5, 2007

Before Judges Rodríguez and C.L. Miniman.

Defendant University Physicians Associates (UPA) appeals from a judgment vacating an arbitration award made under the Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -30, in its favor requiring plaintiff New Jersey Manufacturers Insurance Company (NJM) to pay UPA Personal Injury Protection (PIP) benefits to which NJM's insured, Christina Montagano, was entitled. Because we have no jurisdiction under APDRA to review the merits of a Law Division judgment affirming, modifying or vacating an APDRA award, we dismiss this appeal.

Montagano was injured in an automobile accident on January 14, 2004. She was admitted to the University of Medicine and Dentistry of New Jersey (UMDNJ) Hospital for emergency medical care by physicians employed by UPA. Montagano executed an assignment of benefits in favor of UMDNJ but not UPA. However, UPA submitted its medical bills for Montagano's emergency medical treatment to NJM, which paid UPA the amount that it considered "usual, customary and reasonable." This amount was less than the total that UPA had billed. UPA then issued a demand for arbitration to NJM purporting to act on Montagano's behalf in order to recover the difference.

During arbitration proceedings, NJM learned that UPA had no executed assignment designating it as Montagano's assignee and argued that UPA had no authority to present a claim on her behalf. UPA countered that its arbitration demand included insurance claim forms, signed by Montagano, authorizing the doctors to receive payment. Further, UPA argued, NJM was equitably estopped from raising this defense because it had already made partial payments. The Dispute Resolution Professional (DRP) suggested that UPA simply get Montagano to sign an Assignment of Benefits form but she refused. NJM then claimed that her refusal demonstrated that she disapproved UPA's actions. The DRP was not persuaded by this defense, believing instead that it was in the best interests of the parties to have the matter resolved in arbitration. He awarded UPA $1722.15 in unpaid medical bills, $2475.00 in fees and $231.00 in costs.

NJM then brought the matter before the Superior Court, Law Division, with a summary complaint seeking to vacate the arbitration award pursuant to N.J.S.A. 2A:23A-13.*fn1 UPA answered and both parties filed summary judgment motions. The Law Division judge heard argument on the motions on September 22, 2006, and on October 30, 2006, she concluded that the lack of an assignment was fatal to UPA's claim and vacated the award. She held that emergency physicians are merely incidental beneficiaries of agreements between insurer and insured and, thus, have no standing to assert claims on the insured's behalf without explicit authorization. UPA cannot claim to have detrimentally relied on NJM's partial payments, she explained, because emergency physicians have a duty to provide services to all injured patients. She concluded that the DRP committed legal error in making an award in favor of UPA because there was no privity of contract between the parties and there were no equitable grounds for relief. Accordingly, she entered judgment for NJM.

UPA argues on appeal that the judge committed legal error in ruling that UPA lacked standing to make a claim for PIP benefits because it had no assignment from the insured. It contends that the Commissioner of Banking and Insurance exceeded his authority in promulgating N.J.A.C. 11.3-5.6(a) limiting PIP arbitration to "a provider who is an assignee of PIP benefits" because the regulation is inconsistent with the statute, N.J.S.A. 39:6A-5.1(a), which provides that "[a]ny dispute regarding the recovery of medical expense benefits . . . may be submitted to dispute resolution on the initiative of any party to the dispute." UPA also urges that the judge erred in refusing to consider one of our unpublished opinions, Allstate Insurance Company v. CentraState Medical Center, No. A-6967-95T2 (App. Div. Mar. 24, 1997) (slip op.), in which we concluded that the lack of an assignment was not a bar to a provider's demand for arbitration respecting emergency medical treatment. UPA argues that the DRP was correct in concluding that an executed assignment was not required.

Procedurally, NJM argues that we cannot review the judgment on appeal because N.J.S.A. 2A:23A-18(b) bars any appeal of an order from the Superior Court affirming, modifying or vacating an arbitration award determining PIP benefits. NJM argues that in Coalition for Quality Health Care v. N.J. Department of Banking & Insurance, 348 N.J. Super. 272, 312-13 (App. Div.), certif. denied, 174 N.J. 194 (2002), we approved PIP arbitration rules promulgated by the Commissioner of Banking and Insurance. Specifically, the Commissioner determined that arbitrations are governed by the APDRA, which prevents any appeal beyond the Law Division, except for rare instances that invoke our general supervisory power. N.J.S.A. 2A:23A-18(b); Weinstock v. Weinstock, 377 N.J. Super. 182, 189 (App. Div. 2005). By seeking arbitration, NJM claims, the parties have waived the right both to a jury trial and an appeal. UPA argues that we have the power to review a Law Division judgment predicated on an error of law as that type of review comes within our exclusive, non-delegable supervisory powers as described in Allstate Insurance Company v. Sabato, 380 N.J. Super. 463, 472 (App. Div. 2005). This threshold issue is determinative.

The Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1.1 to -35, permitted a claimant, and only a claimant, to compel an insurer to resolve a PIP dispute through alternate dispute resolution (ADR). N.J.S.A. 39:6A-5.1. It did not change the standard of review imposed by the Arbitration Act. The 2003 Arbitration Act, N.J.S.A. 2A:23B-1 to -32, which applies to arbitration agreements, does not eliminate appellate review but it establishes a very limited scope of review. N.J.S.A. 2A:23B-23. An award may be modified or corrected if "there was an evident mathematical miscalculation or an evident mistake in the description of a person, thing, or property referred to in the award." N.J.S.A. 2A:23B-24(a)(1). It may also be modified or corrected if "the arbitrator made an award on a claim not submitted to the arbitrator and the award may be corrected without affecting the merits of the decision upon the claims submitted." N.J.S.A. 2A:23B-24(a)(2). Finally an award may be modified or corrected if "the award is imperfect in a matter of form not affecting the merits of the decision on the claims submitted." N.J.S.A. 2A:23B-24(a)(3). Under the Arbitration Act, an award may be vacated only in very limited circumstances, as where it "was procured by corruption, fraud or other undue means," there was evident partiality, corruption or misconduct by the arbitrator, a refusal to postpone a hearing, an award exceeding the arbitrator's powers, there was no agreement to arbitrate or "the arbitration was conducted without proper notice of the initiation of an arbitration." N.J.S.A. 2A:23B-23(a); see also Habick v. Liberty Mut. Fire Ins., 320 N.J. Super. 244, 249 (App. Div.), certif. denied, 161 N.J. 149 (1999).

APDRA, which applies to resolution of civil disputes, on the other hand, provides for a broader scope of review:

In considering an application for vacation, modification or correction, a decision of the umpire on the facts shall be final if there is substantial evidence to support that decision; provided, however, that when the application to the court is to vacate the award pursuant to paragraph (1), (2), (3), or (4) of subsection c., the court shall make an independent determination of any facts relevant thereto de novo, upon such record as may exist or as it may determine in a summary expedited proceeding as provided for by rules adopted by the Supreme Court for the purpose of acting on such applications. [N.J.S.A. 2A:23A-13(b).]

The grounds on which a party may seek to vacate an award are also broader than the grounds to vacate an award under the Arbitration Act:

(1) Corruption, fraud or misconduct in procuring the award;

(2) Partiality of an umpire appointed as a neutral;

(3) In making the award, the umpire's exceeding their power or so imperfectly executing that power that a final and definite award was not made;

(4) Failure to follow the procedures set forth in this act, unless the party applying to vacate the award continued with the proceeding with notice of the defect and without objection; or

(5) The umpire's committing prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution.

[N.J.S.A. 2A:23A-13(c).]

Once the court has reviewed the arbitration, its decision is final and there is no right to further review by the Appellate Division. N.J.S.A. 2A:23A-18(b); Weinstock, supra, 337 N.J. Super. at 190; see 40 Edward A. Zunz and Edwin F. Chociey, Jr., New Jersey Practice: Appellate Practice and Procedure § 26.12 (2005). The rationale is that the parties voluntarily waive their right to appeal by choosing to arbitrate under APDRA. Weinstock, supra, 337 N.J. Super. at 188.

AICRA was amended in 1998 and N.J.S.A. 39:6A-5.1(a) was amended to read:

Any dispute regarding the recovery of medical expense benefits or other benefits provided under personal injury protection coverage . . . arising out of the operation, ownership, maintenance or use of an automobile may be submitted to dispute resolution on the initiative of any party to the dispute, as hereinafter provided.

Thus, insurers could also demand ADR.

The 1998 amendment to N.J.S.A. 39:6A-5.1(b) empowered the Commissioner to "designate an organization . . . for the purpose of administering dispute resolution proceedings regarding medical expense benefits" and to "promulgate rules and regulations with respect to the conduct of the dispute resolution proceedings." N.J.S.A. 39:6A-5.1(b). The Commissioner promulgated N.J.A.C. 11:3-5.6 governing PIP dispute resolution proceedings and in Coal. for Quality Health Care, supra, 348 N.J. Super. at 312-13, we validated its present form as being legislatively authorized and properly approved by the Commissioner.

In 1998, both the Arbitration Act and APDRA were in effect. In promulgating N.J.A.C. 11:3-5.6 on November 30, 1998, the Commissioner specified that "[t]he final determination of the dispute resolution professional shall be binding upon the parties, but subject to vacation, modification or correction by the Superior Court in an action filed pursuant to N.J.S.A. 2A:23A-13 for review of the award." N.J.A.C. 11:3-5.6(f). Thus, ADR of PIP disputes is required to be conducted pursuant to APDRA. Coal. for Quality Health Care, supra, 348 N.J. Super. at 286. We specifically approved the portion of the regulation that requires resolution of PIP disputes under APDRA. Id. at 312-13. The result is that there is no right to be heard by an appellate court.

Faced with an appeal from a voluntary APDRA dispute resolution, we dismissed the appeal on the ground that the parties waived appeal by selecting dispute resolution under APDRA. Mt. Hope Dev. Assocs. EAJ, Inc. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 143 (1998). The Supreme Court held that like the constitutional right to appeal, the right to appeal under R. 2:2-3(a)(1) could be waived by voluntarily selecting APDRA dispute resolution. Id. at 151. Importantly, the Court observed:

Appellants have not alleged any of those "rare circumstances" grounded in public policy that might compel this Court to grant limited appellate review. Tretina Printing[, Inc. v. Fitzpatrick & Assocs., Inc.,] 135 N.J. [349,] 364-65 [(1994)]. For example, in Faherty [v. Faherty], 97 N.J. [99,] 109 [(1984)], we addressed the enforceability of an award affecting child support. We held that an award that adversely affects the substantial best interest of the child must be subject to review beyond the statutory grounds for vacation or modification provided in N.J.S.A. 2A:24-8. In reaching that conclusion, we "recognize[d] that courts have a non-delegable, special supervisory function in the area of child support that may be exercised upon review of an arbitrator's award." 97 N.J. at 109. As with arbitration, when parties proceed under the APDRA, there may be other limited circumstances where public policy would require appellate court review. For instance, because of this Court's supervisory function over the courts, we may determine that an award that is confirmed, modified, or vacated by a biased court should be subject to review beyond that which is provided for in N.J.S.A. 2A:23A-18. Such issues, however, are not present in this case. [Id. at 152.]

In Sabato we concluded that a Law Division judgment limiting an award of attorney's fees pursuant to R. 4:42-9(a)(6) and the Rules of Professional Conduct is appealable to us "because the reasonableness of counsel fees comes within our exclusive supervisory powers." Sabato, supra, 380 N.J. Super. at 474.

In this case, all evidence in the record appears to indicate that UPA voluntarily chose to enter arbitration according to the guidelines in N.J.A.C. 11:3-5.6. UPA's arbitration demand sought "dispute resolution . . . in accordance with the Rules for No Fault Arbitration in the State of New Jersey." Consistent with the Commissioner's policy, this is governed by APDRA. Thus, UPA has waived its constitutional right to appeal the decision below.

Appellant cites to Sabato to support its contention that under APDRA the Appellate Division retains its authority to correct lower courts' legal errors. That is incorrect. In Sabato we concluded that APDRA prevented us from evaluating whether or not the lower court committed an "erroneous and prejudicial application of the law to the facts." Id. at 472. Thus, we cannot review the judge's determination on the merits of this action.

We do, of course, have jurisdiction over UPA's contention that the Commissioner exceeded his authority in promulgating N.J.A.C. 11.3-5.6(a) by limiting PIP ADR to "a provider who is an assignee of PIP benefits" because the regulation is inconsistent with N.J.S.A. 39:6A-5.1(a). However, that issue was settled in Coal. for Quality Health Care, supra, 348 N.J. Super. at 312-13, where we validated the present form of the regulation as being legislatively authorized and properly approved by the Commissioner.

Dismissed.


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