March 3, 2008
KEYSTONE INSURANCE COMPANY, NOW KNOWN AS AAA MID ATLANTIC INSURANCE COMPANY OF NEW JERSEY, PLAINTIFF-RESPONDENT,
AMERICAN SPINAL CARE, INC.; ETTORE CARCHIA, D.C.; MICHAEL GALLAGHER; AND CHARLES F. WARRINGTON, II, DEFENDANTS, AND ALL PRO REHABILITATION, INC., AND FRANCES FERRARI, DEFENDANTS-APPELLANTS, AND GARDEN STATE ORTHOPEDICS; COMMUNITY NEUROLOGY ASSOCIATES; BROWNING ROAD APOTHECARY; PENNSAUKEN MRI, PC; DR. ARELYN PACHO; ACCUFIT BRACING; BUCKS MEDICAL SUPPLY, INC., DEFENDANTS.
LIBERTY MUTUAL INSURANCE COMPANY, PLAINTIFF-RESPONDENT, LIBERTY MUTUAL FIRE INSURANCE COMPANY AND LIBERTY INSURANCE CORP., PLAINTIFFS,
AMERICAN SPINAL CARE, INC.; PRO MEDICAL EQUIPMENT, INC.; MR MEDICAL TRANSPORT; G.S.C. TRANSPORT; CHARLES F. WARRINGTON, II; ETTORE CARCHIA, DC, MICHAEL GALLAGHER, DC, MD; AND MARTIN CINER, PT, DEFENDANTS,
ALL PRO REHABILITATION, INC., AND FRANCES FERRARI, DEFENDANTS-APPELLANTS, AND JEROME SILBERMAN; GUTAUM SEHGAL, MD; RICHARD HELLANDER, MD; ARELYNE PACHO, DO; YOUSSEF WASSEF, MD; ERLINDA DEL ROSARIO, MD; BUCKS MEDICAL SUPPLY; ABLE HEALTH EQUIPMENT COMPANY; STATEWIDE DIAGNOSTICS, INC.; RITTENHOUSE IMAGING, REIBEL MEDICAL ASSOCIATES; COMMUNITY NEUROLOGY ASSOCIATES; PHILIP GETSON, DO; WINDSOR REHABILITATION DIAGNOSTICS, PA; DIAGNOSTIC SPINAL ULTRASOUND, PA; DR. EBY BANAS, MD; ATLANTIC IMAGING GROUP; AND GUARDIAN BEHAVIORAL HEALTH; AND AMERICAN ARBITRATION ASSOCIATION, DEFENDANTS.
STATE FARM INDEMNITY COMPANY, PLAINTIFF-RESPONDENT,
AMERICAN SPINAL CARE, INC.; ETTORE CARCHIA, D.C.; MICHAEL GALLAGHER; AND CHARLES F. WARRINGTON, II, DEFENDANTS, AND ALL PRO REHABILITATION, INC. AND FRANCES FERRARI, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-152-01, L-656-01, and L-3140-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 13, 2008
Before Judges Coburn and Grall.
Plaintiffs, Keystone Insurance Company (now known as AAA Mid Atlantic Insurance Company of New Jersey), Liberty Mutual Insurance Company, and State Farm Indemnity Company filed separate actions against, among others, defendants All Pro Rehabilitation, Inc. ("All Pro"), and Frances Ferrari. The complaints, which were consolidated by the trial court, alleged, insofar as is pertinent here, that (1) plaintiffs were automobile insurance companies that received personal injury protection benefit ("PIP") bills from All Pro for medical and therapeutic services provided pursuant to the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -34; (2) All Pro was not entitled to payment of those bills because the services for which it billed plaintiffs were provided by a person, Michael Gallagher, who was neither licensed as a chiropractor nor as a physical therapist; (3) Ferrari was the sole shareholder and officer of All Pro; (4) plaintiffs were entitled to repayment; and (5) plaintiffs were entitled to treble damages and attorney's fees under the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -14 (the "Act").
Plaintiffs moved for summary judgment based on certifications asserting that Gallagher was unlicensed and that their actual damages were $5,361.30 for Keystone; $10,630.68*fn1 for Liberty Mutual; and $61,204.29 for State Farm. They also sought treble damages and attorney's fees under the Act. Although Ferrari did not deny that Gallagher was unlicensed, she certified that she "believed that all of the Doctors and Chiropractors I dealt with were licensed." She added that "[t]hey had represented to me that they were licensed and I believed them."
The trial court ruled that Ferrari's good faith belief was irrelevant and entered judgment trebling each plaintiff's damages. Subsequently, the trial court entered an order under the Act granting Liberty Mutual counsel fees of $18,556.66 as against All Pro and Ferrari jointly and severally. On appeal, All Pro and Ferrari take issue with the trial court's determination that they were liable under the Act even if they did not knowingly violate it. Their position is sound. There is no liability under the Act unless the defendant acts knowingly. The Act repeatedly says precisely that, see N.J.S.A. 17:33A-4, and it has been consistently so construed and applied by the courts of the state. See, e.g., Liberty Mut. Ins. Co. v. Land, 186 N.J. 163, 172 (2006); Merin v. Maglaki, 126 N.J. 430, 432, 437 (1992); Material Damage Adjustment Corp. v. Open MRI of Fairview, 352 N.J. Super. 216, 230 (App. Div. 2002); Allstate Ins. Co. v. Greenberg, 376 N.J. Super. 623, 637-40 (Law Div. 2004). Therefore, plaintiffs were not entitled to recover under the Act without proof that Ferrari acted knowingly. Consequently, the summary judgment orders must be reversed. The trial court did not resolve the factual issues of whether Ferrari acted knowingly or whether defendants engaged in a pattern of violating the act, the latter finding being necessary for the award of treble damages. N.J.S.A. 17:33A-7(b). In addition, the trial court was not asked to address, and did not resolve the issue of, whether plaintiffs were entitled to repayment outside the provisions of the Act. We therefore remand for further proceedings to resolve those issues and such other matters as may be necessary for final disposition of the case.
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