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County of Bergen Employee Benefit Plan v. Horizon Blue Cross Blue Shield of New Jersey

February 24, 2010

COUNTY OF BERGEN EMPLOYEE BENEFIT PLAN AND THE COUNTY OF BERGEN, PLAINTIFFS-RESPONDENTS,
v.
HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, ACS RECOVERY SERVICES, INC., PRIMAX RECOVERIES, INC., DEFENDANTS-APPELLANTS, AND INSURANCE DESIGN ADMINISTRATORS, DEFENDANT.



On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1922-09.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued January 20, 2010

Before Judges Carchman, Parrillo and Lihotz.

We granted leave to appeal to determine whether plaintiffs' claims against defendants, for failure to pursue subrogation actions to recover medical expenses plaintiffs paid to certain insureds who brought personal injury claims against third-party tortfeasors, are barred by the Collateral Source Rule, N.J.S.A. 2A:15-97 (Section 97). For reasons that follow, we conclude that the trial court erred in denying defendants' Rule 4:6-2(e) motion to dismiss plaintiffs' complaint and therefore reverse.

Plaintiff Bergen County (County) is a public entity of the State which, pursuant to N.J.S.A. 40A:10-6(e), established plaintiff County of Bergen Employee Benefit Plan (Plan), a self-insured benefits plan for its employees' and their dependents' healthcare. Effective July 1, 2006, defendant Horizon Blue Cross Blue Shield of New Jersey (Horizon) and the County entered into an Administrative Services Agreement (ASA) pursuant to which Horizon became the Plan's Administrator.*fn1 In this role, Horizon provided claims processing, adjudication, and other services related to the Plan. Although Horizon was the Plan's Administrator, it subcontracted subrogation issues to defendants Affiliated Computer Services, Inc. (ACS) and Primax Recoveries, Inc. (Primax) (jointly ACS/Primax). The Plan's insuring agreement contains a provision permitting it to recover amounts paid to its insureds as a result of third-party negligence:

If you or your dependent incur medical expenses as a result of the actions of a Third Party (anyone other than you) or the Plan and that Plan has made payment for those expenses, the Plan has the right to recoup those payments.

This means that if your medical expenses are reimbursed by a Third Party, satisfied judgment or other means, you are required to return any health benefits paid for illness, Accidental Injury, Biologically-based Mental Illness and Non-Biologically Based Medical Illness or substance abuse to the Plan....

This repayment agreement will be binding whether the payment received from the Third Party is the result of a legal judgment, arbitration award, a compromise settlement, or any other arrangement, or whether the Third party has admitted liability for the payment.

The instant lawsuit arose out of plaintiffs' efforts to seek reimbursement for medical expenses they paid under the Plan on behalf of an employee, Andres Tineos. In August of 2002, his wife, Wanda, became pregnant and advised her physician that she was predisposed to bear a child inflicted with myotubular myopathy (MTM), "a congenital muscular disease which causes severe physical disability." Wanda underwent an amniocentesis procedure to detect MTM and other abnormalities. Justin was born on April 7, 2003, with MTM.

In 2004, the Tineos filed a medical malpractice lawsuit, alleging that due to the negligence of physicians, laboratory workers, and possibly others, the test samples were either not tested or reported to be false-negative for MTM. In February 2007, a jury returned a verdict for $28,000,000, and the case was settled, post-judgment, for $18,000,000.

The Plan paid approximately $575,701.91 in net benefits associated with Justin Tineos' care. In December 2003, the Tineos' inquired of Horizon and IDA as to any lien they intended to pursue on plaintiffs' behalf, on the Tineos' recovery. Horizon forwarded counsel's request to its subrogation consultant, ACS/Primax. In February and May 2006, ACS/Primax advised the Tineos' counsel that it would not seek subrogation against any recovery from the medical malpractice litigation.

Plaintiffs claim not to have had any direct knowledge of the Tineos' lawsuit at the time it was filed. Nor were they aware of any of the correspondence between the Tineos' attorney and either Horizon or ACS/Primax. According to plaintiffs, Horizon failed to inform them that it did not intend to seek subrogation or reimbursement on their behalf. In October 2007, when plaintiffs first learned about the Tineos' settlement and defendants' decision not to seek subrogation, plaintiffs filed an action against defendants, alleging breach of contract, breach of fiduciary duty, and negligence in failing to pursue plaintiffs' claimed right of subrogation to ...


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