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Ifa Insurance Company v. Millburn Surgical Center A/S/O James Warrelmann

April 13, 2011


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3948-10.

Per curiam.


Telephonically Argued February 3, 2011-

Before Judges Parrillo and Espinosa.

Defendant Millburn Surgical Center (Millburn or defendant) appeals the Law Division's denial of its request for attorney's fees and costs incurred in successfully defending an action filed by plaintiff IFA Insurance Company (IFA or plaintiff) seeking to modify an arbitration award in defendant's favor. For the following reasons, we reverse and remand.

Briefly, by way of background, on August 4, 2007, James Warrelmann sustained injuries in an automobile accident while insured by IFA with an automobile insurance policy that included PIP benefits pursuant to N.J.S.A. 39:6A-5, providing for no fault medical expense benefits to the insured or his assignees. On April 2, 2008, Warrelmann sought ambulatory surgical services from Millburn. As a result, Warrelmann provided Millburn with an Assignment of Benefits pursuant to his IFA policy. On April 4, 2008, Millburn submitted a claim to IFA for PIP benefits, which IFA ultimately denied after it deemed that Millburn's services were not medically necessary.*fn1

On April 18, 2008, Milburn filed its demand for arbitration of PIP benefits, claiming a total of $53,914.90. Additionally, counsel for Millburn submitted a Certification of Services for attorney's fees of $3,375 plus costs of $265. The arbitrator held a hearing on February 1, 2010, and on April 2, 2010, awarded Millburn $53,914.90 for PIP benefits and $2,065 for attorney's fees and costs.

IFA then filed a verified complaint and order to show cause in the Law Division seeking to modify the arbitrator's award under the "New Jersey Alternative Procedure for Dispute Resolution Act" (APDRA), N.J.S.A. 2A:23A-1 to -30. Although IFA did not dispute the arbitrator's findings that Millburn's services were medically necessary, IFA claimed that the arbitrator did not adequately determine "the usual, customary, and reasonable fees that were charged by [Millburn]." Consequently, prior to resolution by the Law Division, on May 25, 2010, IFA paid only $14,089.06 to Millburn for what it believed was "appropriate, usual, and customary and reasonable" reimbursement, as well as $2,065 for attorney's fees and costs incurred by Millburn during the arbitration.

In response to the order to show cause, Millburn defended the arbitrator's award and requested an additional award for attorney's fees and costs incurred as a result of the Law Division's proceeding. In support of Millburn's request, its counsel filed a fee certification for $2,263.26 in fees and costs relating to the order to show cause.

Following argument, the Law Division concluded that the arbitrator conducted "an exhaustive analysis" of the reasonableness of Millburn's charges and reimbursement rates "[a]nd that the services were at the usual customary and reasonable charges." Consequently, the judge entered an order, confirming the award and ordering IFA to pay to Millburn an additional $33,117.36 plus interest, representing the difference between what IFA had already paid Millburn and the arbitrator's award. Although Millburn successfully defended against IFA's action, the judge declined to grant Millburn's request for additional attorney's fees and costs, reasoning:

[T]he statute in and of itself allows for, and I know it was [Millburn's] argument that [IFA's] getting a second bite of the apple.

But the code, administrative code and the statute allow for it. And there were questions that were raised, the Court signing an Order to Show Cause. But the Court's not going to award fees on the action by IFA, and finds that they had standing to . . . bring the case. But not that the standing wasn't sufficient to overturn the [arbitrator's] award.

This appeal follows in which Millburn challenges the denial of additional attorney's fees and costs as not based on the appropriate factors. We agree.

The award of attorney's fees is governed by statute, court rules, and the Rules of Professional Conduct, RPC 1.5. Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 473 (App. Div. 2005) (Sabato II). The "New Jersey Automobile Reparation Reform Act" (No Fault Act), N.J.S.A. 39:6A-1 to -35, allows attorney's fees when an insured claimant prevails in an arbitration proceeding for PIP benefits. N.J.S.A. 39:6A-5; see also Knight v. AAA Midlantic ...

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