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New Jersey Manufacturers Insurance Co. v. Horizon Blue Cross Blue Shield of New Jersey

November 3, 2008


On appeal from the Superior Court of New Jersey, Law Division, Ocean County, L-1495-07.

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



Argued October 6, 2008

Before Judges Lisa, Reisner and Alvarez.

The Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1 to-35, gives automobile owners the option of designating their health insurance, rather than the personal injury protection (PIP) provisions of their automobile insurance, as their primary coverage for injuries sustained in automobile accidents. N.J.S.A. 39:6A-4.3d. If the insured makes this election, the PIP coverage functions as secondary insurance. Another statutory provision, N.J.S.A. 39:6A-5.1, provides for arbitration of PIP claims. This appeal presents the narrow issue whether a health insurer whose insured has designated the health insurance as primary under N.J.S.A. 39:6A-4.3d, is required to participate in arbitration of claims pursuant to N.J.S.A. 39:6A-5.1. We conclude that this statutory arbitration provision does not apply to health insurers. We therefore reverse a September 7, 2007 trial court order vacating an arbitration award against New Jersey Manufacturers Insurance Company (NJM) and requiring Horizon Blue Cross Blue Shield of New Jersey (Horizon) to participate in arbitration concerning a dispute over PIP benefits.


This case arises from the following facts. Pursuant to N.J.S.A. 39:6A-4.3d, Joseph Kutschman, Jr. designated his health insurer as his primary insurance for treatment of auto accident injuries. Thus, the PIP coverage provided by his auto insurer, NJM, was his secondary insurance. See N.J.A.C. 11:3-37.6 and-37.7. Kutschman was involved in an automobile accident on April 18, 2005. He received treatment from Dr. Anthony Cifelli, a chiropractor, from July 25, 2005 through October 31, 2005, and he assigned his right to PIP benefits to Dr. Cifelli. Following almost a one-year gap in treatment, Kutschman returned to Dr. Cifelli and received additional treatment from May 26, 2006 through October 18, 2006.

There is no dispute that NJM paid for Kutschman's care from April 18, 2005 through September 7, 2005. The initial dispute between the parties arose when NJM refused to pay for additional care because it was after "cut-off," meaning that the treatment was in excess of that which NJM had authorized.*fn1 NJM eventually paid for the treatment rendered through October 31, 2005, but refused to pay for the 2006 treatment. Therefore, on January 6, 2006, Dr. Cifelli filed a demand for arbitration pursuant to N.J.S.A. 39:6A-5.1, naming as respondents NJM and Blue Cross Blue Shield (Horizon). Horizon declined to participate in the arbitration. Dr. Cifelli later amended his arbitration demand to include additional treatments he had rendered to Kutschman in 2006.

NJM participated in the arbitration, initially submitting a June 14, 2006 pre-hearing letter raising the issue of medical necessity. In a December 21, 2006 pre-hearing submission to the arbitrator, NJM again contended that Dr. Cifelli's 2006 treatment was not medically necessary. However, NJM also contended that the claimant had not presented NJM with explanations of benefits (EOBs) showing what amounts Horizon had already paid.

The arbitrator conducted a hearing on January 17, 2007. At or shortly after the hearing, the arbitrator requested that Dr. Cifelli produce proof that he had submitted "the bills and Blue Cross EOBs [to NJM] prior to filing the [arbitration] demand." On January 22, 2007, Dr. Cifelli's counsel responded that the doctor's office had sent his 2005 bills and the Horizon EOBs to NJM and had received payment for the treatments rendered through September 7, 2005. With respect to the 2006 treatments, he asserted that Horizon should be required to participate in the arbitration and "should be responsible for either paying the bills from May 26, 2006 through October 18, 2006 or at least providing EOBs for those dates so that NJM would pay them as per their contract." However, his letter did not indicate what if anything Dr. Cifelli or Kutschman had done to try to obtain those documents from Horizon.

The arbitrator rendered his decision on March 26, 2007. In the arbitration award, he addressed the following issues: whether Horizon was a proper party to the arbitration; whether the treatment rendered from May 26, 2006 through October 18, 2006 was reasonable, medically necessary, and causally related to the auto accident; whether the bills for treatments from July 25, 2005 through October 31, 2005 were "properly paid by NJM on July 30, 2006;" and, finally, "were the bills and EOB's from Horizon... submitted to NJM prior to the filing of the demand for arbitration on January 12, 2006, entitling claimant to an award of counsel fees and costs?"

The arbitrator first concluded that N.J.S.A. 39:6A-5.1 did not require Horizon to participate in arbitration, because that section only mandated arbitration of disputes regarding "benefits [provided] under'personal injury protection coverage.'" He concluded that the claim against Horizon was for "health benefits under the Horizon plan" rather than for PIP benefits, and that disputes regarding Horizon benefits were "governed by the terms of [the Horizon] contract." Since that contract had not been submitted to the arbitrator, there was no proof that Horizon had ever agreed to arbitration of disputes over its coverage. Hence, he dismissed the claim against Horizon.

Next the arbitrator determined, based on the medical evidence submitted to him, that the treatment rendered from May 26, 2006 through September 22, 2006 was medically necessary. He denied the claim for treatment after September 22, 2006 due to "lack of documentation." He also concluded that "once respondent [NJM] has terminated benefits, claimant has no obligation to submit bills to NJM for payment." In other words, once NJM notified Dr. Cifelli that it would not pay any future claims because the treatment was not medically necessary, the doctor was not required to submit bills and EOBs to NJM before seeking arbitration, and Dr. Cifelli would not be precluded from obtaining counsel fees and costs if he prevailed on the medical necessity issue. Finally, the arbitrator noted that the parties "do not dispute" that NJM properly paid for the 2005 treatments on July 30, 2006.

Since the arbitrator decided that the 2006 treatments were medically necessary, he awarded counsel fees and costs to Dr. Cifelli. See Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 473-74 (App. Div. 2005). He also awarded Dr. Cifelli $4,950 for his medical fees. However, since Dr. Cifelli had not yet provided NJM with his bills and the EOBs from Horizon, the award was made "subject to the medical fee schedule, any remaining deductible and/or co-payment of [Kutschman], usual, customary and reasonable rates as determine by respondent (if applicable), and submission of the bills to NJM along with EOB's from Horizon."

On April 24, 2007, NJM filed a complaint seeking to vacate the arbitration award and seeking a remand to the National Arbitration Forum for a new arbitration in which Horizon would be required to participate. In response, Horizon filed a certification attesting that Horizon was not Kutschman's insurer, although it licensed another entity, Highmark, to administer a self-funded group health benefit plan provided by Kutschman's employer. Horizon also contended that NJM's claims were preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 to 1461, which precluded state regulation of self-funded insurance plans. Horizon's counsel further argued that Kutschman, or Dr. Cifelli, should have been required to pursue "all of the administrative remedies afforded by his employer benefit plan" before pursuing arbitration against NJM.

By order dated September 7, 2007, the Law Division judge vacated the arbitration award, remanded the matter to arbitration, and directed that Horizon participate. The judge construed N.J.S.A. 39:6A-5.1 as requiring arbitration of any dispute over insurance covering injuries sustained in an auto accident, whether it involved automobile or health insurance. He also based his decision on N.J.S.A. 39:6A-4.3d, which requires health insurers and auto insurers to coordinate benefits where the insured has designated the health insurer ...

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