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Novak v. Liberty Mutual Insurance Co.


May 27, 2010


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-2910-06.

Per curiam.


Argued February 1, 2010

Before Judges Carchman and Lihotz.

We again review Liberty Mutual Insurance Company's (Liberty) appeal from a Law Division order entered upon plaintiff Elizabeth Novak's motion to vacate an arbitration award for personal injury protection (PIP) benefits. We again reverse.

Novak was injured in an automobile accident on March 11, 2002. She submitted requests for PIP benefits for medical care rendered by twenty-two different providers totaling $249,707.45. Most of the bills related to treatments for a temporomandibular joint dysfunction (TMJ) and a herniated disc. Liberty declined payment, asserting the conditions treated were not causally related to Novak's automobile accident or medically necessary. Novak submitted a demand for arbitration.

PIP arbitration was held on June 8, 2005, subject to American Arbitration Association (AAA) rules, N.J.S.A. 39:6A-5(g)*fn1 and governed by the provisions of the Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -30. See also N.J.S.A. 39:6A-5.1; N.J.A.C. 11:3-5.1 to -5.12. Both parties provided extensive documentary submissions. Novak testified, and one treating dental physician, Robert Federman, D.D.S., appeared by telephone.

We provide only a brief overview of the course of medical treatment described by Novak. In the first three months, she was treated by a chiropractor and commenced physical therapy. In July 2002, claiming her left lower back and neck pain were getting worse, she sought the services of neurologist Ulises Sabato, M.D., who ordered an MRI of her cervical and lumbar spine, provided epidural injections, and made a referral for review of possible TMJ. Novak sought treatment from an orthopedist, who also commenced a course of epidural injections, and recommended physical therapy. Novak then underwent trigger point injections, supervised by a pain management specialist. In October 2002, Novak was referred to Neville Mirza, M.D., a neurosurgeon, who recommended a selective endoscopic lumbar discectomy at L4-L5, thermodiscoplasty with laser and a provocation lumbar discography at lumbar discs at L3-L4 and L4-L5. Dr. Mirza treated Novak's neck pain with steroid injections. Pre-certification for the surgical procedures was sought and denied by Liberty.

On November 12, 2002, Novak sought an emergency evaluation and comprehensive review by a Medical Review Organization (MRO). See N.J.S.A. 39:6A-5.1(d) (providing for review by an MRO when the PIP-reimbursement dispute concerns "the diagnosis, the medical necessity of the treatment or diagnostic test administered to the injured person, whether the injury is causally related to the insured event or is the product of a pre-existing condition, or disputes as to the appropriateness of the protocols utilized by the provider"); Orthopaedic Assocs. v. Dep't of Banking and Ins., 405 N.J. Super. 54, 62 (App. Div. 2009). Prior to receipt of the MRO report, Novak underwent surgery on December 17, 2002.

Novak was again hospitalized on January 26, 2004, complaining of lower back pain that radiated to both legs. A neurosurgical consultation with Marvin Friedlander, M.D., occurred on January 29, 2004. Dr. Friedlander noted a herniated disc and scheduled and completed "a complete discotomy at L4-L5, Gill-type decompression and complete fusion" three days later.

Novak's TMJ symptoms were treated by Robert Federman, M.D. from August 12, 2002 to January 16, 2003. Dr. Federman suggested, in all probability, the TMJ resulted from the auto accident. He also disagreed with Liberty's independent medical expert, Frederick Meiselman, M.D., who examined Novak on November 1, 2002 and opined the cause of any TMJ symptoms was other than the accident as Novak had not "experienced any trauma to the mandible . . . and there was no causal relationship." Dr. Federman contended that TMJ can result from causes other than direct head trauma and maintained the accident was the cause of Novak's condition. A bilateral TMJ arthroscopy was performed on November 12, 2002.

Liberty submitted its expert evaluation reports. An October 31, 2002 peer review analysis rejected a course of injection treatments, which the attending physician admitted was a "clerical mistake." A second peer review of the requested six to eight weeks of cervical trigger point injections was rejected as "not medically necessary and in accord with the NJCP criteria[,]" because Novak had already undergone the same treatment. A November 14, 2002 independent medical examination (IME) by Daniel S. Rosenberg, M.D., concluded Novak suffered from cervical and lumbar sprain. He noted no muscle spasms or trigger points, normal range of motion in the upper and lower extremities and somewhat decreased lumbar range of motion but normal cervical range of motion. Dr. Rosenberg recommended a "home exercise program" for stretching and strengthening Novak's lumbar spine. He concluded Novak needed no further conservative care to treat her accident injuries.

The MRO report by Edward Josell, D.O., board certified in neurology, reviewed Novak's complete medical treatment file. Dr. Josell found the record failed to show any acceptable rationale for the December 17, 2002 back surgery and concluded there was "no clinical definitive evidence of a disc herniation that might cause pressure on a sciatic nerve root" and that "this sort of operation is not routinely done for simple low back pain." Specifically, his report stated:

The offer of surgery on [the October 9, 2002] consultation with Dr. Mirza was unwarranted. He fails to indicate how the MRI demonstrated any compression of sciatic nerve root on either side. Only a bulging annulus is recorded which is not an acceptable reason for disc surgery.

There is no adequate documentation of why this patient was put on total disability.

Nor is there any indication of why [Novak] was being treated for depression (using Zoloft) at the time of her original injury.

A psychiatric evaluation should have been preferable as a pre-cursor to any surgery as outlined above.

Liberty included the reports of two experts who examined Novak regarding her TMJ dysfunction and sought consideration of an arbitration award rendered in a related arbitration proceeding brought by Dr. Modugno, the physician who assisted Dr. Federman in the surgery. That proceeding resulted in a denial of the claims for TMJ treatment because the TMJ condition was not related to the accident.

The arbitrator closed the case on October 6, 2005. On December 6, 2005, he rendered an award to Novak of $1,475 plus counsel fees and costs.*fn2

Novak filed an Order to Show Cause and Verified Complaint in the Law Division seeking to vacate the award, generally asserting legal errors in the determination and arguing the award was issued more than forty-five days from the close of the hearing, rendering it null and void. See AAA Rule 28. Liberty cross-moved to confirm the award, arguing Novak failed to raise the jurisdictional issue, N.J.S.A. 2A:23A-13(c)(4), or object to the untimely receipt of the award prior to its issuance, N.J.S.A. 2A:23A-12(b).

The Law Division denied Liberty's motion to confirm and granted Novak's motion to vacate the award. The court ordered arbitration to proceed anew. Liberty appealed.

In an unpublished opinion, we reversed the trial court's order denying Liberty's request to confirm the award. Novak v. Liberty Mut. Ins. Co., A-0356-06T5 (App. Div. Nov. 28, 2007) (slip op. at 6-7). However, because the court's finding was based on an incorrect procedural determination, it had not reviewed the substantive claims set forth in Novak's motion, necessitating a remand for consideration of her application. Ibid.

On remand, following oral argument on December 2, 2008, a different Law Division judge again vacated the award and directed the matter be presented in a new arbitration proceeding. In the statement of reasons accompanying the order, the court stated:

There is no dispute that Dr. Federman testified at the arbitration hearing by telephone. However, the [a]bitrator in his award totally ignores that testimony and avers that no one appeared telephonically.

[W]hile a [j]udge is not permitted to modify an arbitrator's decision because, if presented with the same facts, he would decide the matter differently, a judge has an obligation to ensure that justice prevails. In this matter, the undisputed facts clearly show[] that the arbitrator failed to consider relevant and material evidence, the testimony of Dr. Federman, a treating physician. A court of law cannot speculate that that testimony would not have changed the award or that it would have changed it.

Therefore, the award must be vacated and a new arbitration hearing held in accordance with the law.

Novak proceeded to initiate a new arbitration proceeding and Liberty moved before the Law Division for reconsideration and a stay of any arbitration proceedings.

In his February 5, 2009 order denying Liberty's motion for reconsideration, the judge clarified his prior decision stating:

Defendant's vehement opposition to the [c]court's decision and order stems from the mistaken belief that my decision was based exclusively on the arbitrator's disregard of Dr. Federman's testimony. Although the court cited that disregard as a glaring example of what the arbitrator failed to do, the decision was based on a careful consideration of all the submissions and oral argument of two very qualified and able attorneys.

The [c]court considered the failure of the arbitrator to consider the plaintiff's testimony, hospital records, and other treatment records as well as Dr. Federman's testimony and other indicia of a failure to properly consider all of the evidence.

Liberty again appealed. By agreement, the parties have stayed the arbitration proceedings pending this appeal.

Once an award is delivered by the arbitrator, it becomes final unless a party commences a summary action in the Superior Court to vacate, correct, or modify the award within forty-five days. N.J.S.A. 2A:23A-13(a); Mt. Hope Dev. Assocs. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 146 (1998).

Limited judicial review is a central component of the APDRA. The Superior Court can vacate an award only in circumscribed instances that cause the rights of a party to be prejudiced, including:

(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 [sic] 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).]

Generally, once the Superior Court makes its determination, "[t]here shall be no further appeal of review of the judgment or decree." N.J.S.A. 2A:23A-18(b). Accordingly, our role is limited "to determine whether the trial judge acted within APDRA's bounds. Fort Lee Surgery Ctr., Inc. v. Proformance Ins. Co., 412 N.J. Super. 99, 103 (App. Div. 2010); see also Mt. Hope Waterpower, supra, 154 N.J. at 152 (allowing appellate court review as necessary to carry out its "supervisory function over the courts"); Morel v. State Farm Ins. Co., 396 N.J. Super. 472, 475-78 (App. Div. 2007) (stating exercise of appellate jurisdiction is permissible when a trial court has exceeded its jurisdiction).

We are not precluded from providing a remedy when a trial judge has failed to limit review of an arbitration award to the grounds set forth in N.J.S.A. 2A:23A-13. Liberty's argument on appeal is limited to this issue. Thus, we confine our review to whether the trial judge failed to "steer[] a course well within" its limited scope of review. New Jersey Citizens Underwriting Recip. Exch. v. Kieran Collins, D.C., LLC, 399 N.J. Super. 40, 50 (App. Div.), certif. denied, 196 N.J. 344 (2008).

A trial court's consideration of an application to vacate an award must defer to the arbitrator's decision "on the facts[,]" which "shall be final if there is substantial evidence to support that decision[.]" N.J.S.A. 2A:23A-13(b). The trial court does not have authority to overturn or modify an award merely because it would have decided the matter differently. New Jersey Transit Bus Opers., Inc. v. Amalgamated Transit Union, 187 N.J. 546, 554 (2006). "Under th[is] standard, a reviewing court may not substitute its own judgment for that of the arbitrator, regardless of the court's view of the correctness of the arbitrator's interpretation." Ibid. However, 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[.]

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

As grounds to support her motion, Novak cited N.J.S.A. 2A:23A-13(c)(3) and asserted the arbitrator "so imperfectly execut[ed] his powers requiring the award to be vacated." Essentially, Novak's position maintains the arbitrator's findings were not supported by substantial evidence. Novak argues the opinions of her treating physicians must prevail over those of an examining expert, and that the arbitrator's reliance on the MRO was erroneous. We disagree.

The arbitrator, as a factfinder, is free to accept or reject proffered evidence, including expert evidence. Additionally, the MRO determination "shall be presumed to be correct by the dispute resolution professional," unless rebutted by a preponderance of the evidence. N.J.S.A. 39:6A-5.1(d). The MRO's decision has been characterized as "akin to [an] arbitrator[]," and serves as "'an umpire appointed as a neutral' for the purposes of N.J.S.A. 2A:23A-13(c)(2)." Orthopaedic Assocs., supra, 405 N.J. Super. at 66 (quoting N.J.S.A. 2A:13(c)(2)); see also New Jersey Coal. of Health Care Prof'ls, Inc. v. N. J. Dep't of Banking and Ins., 323 N.J. Super. 207, 267 (App. Div.), certif. denied, 162 N.J. 485 (1999). This presumption results from the MRO's independent nature.

Pursuant to N.J.S.A. 39:6A-5.2(e), the identity of the MRO physician is not revealed to the insurer until the MRO report is received and distributed to the parties by NAF. In addition, the MRO physician does not know the identity of the insurance carrier involved in the arbitration when the MRO review is taking place. To facilitate implementation of this requirement, the identity of the MRO physician is not revealed to the claimant until the report is circulated. [Orthopedic Assocs., supra, 405 N.J. Super. at 59 n.2.]

The arbitrator's application of the statutory presumption when considering the evidence was appropriate. Additionally, the arbitrator relied upon his review of the other evidence submitted.

Novak suggests the trial judge properly rejected the arbitrator's insufficient award determination pursuant to N.J.S.A. 2A:23-13(c)(3). In his December 2, 2008 findings, the trial judge suggested the "undisputed facts clearly show[] that the arbitrator failed to consider relevant and material evidence, the testimony of Dr. Federman, a treating physician." The February 9, 2009 order on reconsideration added little to this limited comment, stating, "[t]he [c]court considered the failure of the arbitrator to consider the plaintiff's testimony, hospital records, and other treatment records as well as Dr. Federman's testimony and other indicia of a failure to properly consider all of the evidence."

These remarks insufficiently articulate a rational explanation for how the arbitrator "exceeding" or "so imperfectly execut[ed]" his powers or committed prejudicial error such that the final award should not be enforced. The existence of evidence to support a contrary factual conclusion than the one reached by the arbitrator does not mean that modification of the award was warranted.

The arbitrator's award articulated the evidence found in the reports of Liberty's experts, the peer reviewers and the MRO, supporting his conclusions that Novak's treatments and surgeries were unwarranted in light of the dearth of clinically supported symptoms, objective findings, physical tests, and neurological indications. Specific items cited include a September 12, 2002 MRI of Novak's jaw and cervical spine, taken before she proceeded to surgery, which reported the results as "normal bilaterally;" an April 29, 2003 MRI, completed after Novak's first surgery but before the second, stating her thoracic spine was normal except for "some congenital sacralization [of L-5 to S-1] but no dis[c] space narrowing" of the lumbosacral spine; and the November 2002 findings of Dr. Rosenberg, made prior to Novak's first surgery, revealing she appeared normal except for some lumbar limitations, which he suggested could be eased by stretching and exercising.

Moreover, the arbitrator's award details Novak's failure to complete therapeutic treatments prior to engaging surgery. He notes she kept only three of fourteen physical therapy appointments and attended only five of nineteen scheduled chiropractic appointments. The arbitrator also rejected Novak's contention that lower back complaints were sufficient to include the costs of a hospitalization for what turned out to be a kidney infection, finding the treatment unrelated to the accident.

Dr. Federman's fees and other treatment costs for TMJ were rejected by the arbitrator, who relied on two peer reviews and an IME that found the treatment not reasonable or necessary, Novak's five month delay in seeking treatment, her initial disclosure on a health insurance form for TMJ treatment that the condition was not related to an automobile accident, and the lack of any evidence that Novak sustained trauma to her face. The arbitrator also mentioned the prior arbitration determination, stating "[b]ased upon the findings in the previous arbitration that the TMJ complaints were not related to this accident, I find this to be the law of the case and deny the claim by this provider."

We are not persuaded by Novak's argument, accepted by the trial judge, that the arbitrator failed to consider Dr. Federman's testimony because the arbitrator's report stated "ALL PARTIES APPEARED at the oral hearing(s). NO ONE appeared telephonically." The statement standing alone is not determinative. A review of the entirety of the award determination reflects a discussion of Dr. Federman's claim of $7,465 for TMJ treatments for the period August 13, 2002 to January 1, 2003. Although there is no specific discussion of his testimony, the arbitrator's report does discuss the TMJ treatment and states the basis for concluding the condition was unrelated to the accident.

Consequently, we perceive no factual or legal basis to disturb the arbitrator's reasoned assessments. N.J.S.A. 2A:23-13(a). The evidence sufficed to support the arbitrator's determinations that Novak's treatment was not justified. Because the arbitration award was based on substantial evidence in the arbitration record, it did not require modification, and the trial judge was obligated to adopt the factual findings of the arbitrator. N.J.S.A. 2A:23A-13(e). Therefore, we conclude the trial judge exceeded APDRA's jurisdictional parameters in vacating the award. Accordingly, the trial court's order is reversed, and we remand for entry of an order confirming the arbitration award.

Reversed and remanded for proceedings consistent with this opinion.

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