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Allstate Insurance Company v. Richard Simone


August 18, 2011


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-3642-08.

Per curiam.


Argued June 8, 2011

Before Judges Axelrad and Lihotz.

Plaintiff Allstate Insurance Company filed a recovery action pursuant to the New Jersey Insurance Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -30, seeking repayment of medical benefit reimbursements it remitted to defendant Richard Simone under the terms of his personal injury protection (PIP) policy. Plaintiff also sought treble damages, counsel fees and costs of its investigation. Plaintiff based its claims on the fact that the expenses had already been paid under a separate health insurance policy and defendant received a prohibited double recovery. Defendant responded he was entitled to the benefits based on the statute in force at the time of his accident. The trial court disagreed and awarded summary judgment to plaintiff. We affirm the court's finding that defendant violated the IFPA; however, we reverse the trial court's entry of summary judgment based on an incorrect conclusion that defendant received a prohibited double recovery. The matter is remanded to the trial court for additional proceedings consistent with our opinion.

These facts are taken from the summary judgment record. Defendant suffered injuries resulting from an automobile accident on December 14, 1981. He was insured under an automobile insurance policy issued by plaintiff, which contained a PIP clause that stated plaintiff would pay basic benefits consisting of "medical expense benefits," defined as all reasonable expenses incurred for medical, surgical and dental treatment, professional nursing, hospital and rehabilitation services, x-ray and other diagnostic services, prosthetic devises, ambulance services, medication and other reasonable and necessary expenses incurred for treatment prescribed by persons licensed to practice medicine, surgery, psychology or chiropractic . . . . [(emphasis added).]

Plaintiff declined defendant's request for payment of expenses related to his personal injuries until ordered to do so by the Law Division in a declaratory action filed by defendant (L-041868-83). The judgment required plaintiff to "pay for future prescriptions for medications for pain and depression as prescribed by [defendant's] treating physicians. This obligation shall be a continuing obligation for as long as such medications are medically necessary as determined by [defendant's] treating physicians."

Since his accident, defendant has been prescribed medication for pain management for which he sought reimbursement from plaintiff. Sometime in 1988, defendant retired, opting to accept a reduced pension benefit in exchange for the provision of health insurance coverage. The medical coverage administered by Caremark included a $1500 deductible. Prescription costs are paid by the plan subject to defendant's responsibility for a $10 to $20 co-payment. Defendant's pharmacy invoiced the insurance carrier directly.

From 2000 through 2005, while covered by the above-described prescription coverage, defendant filed six claims with plaintiff for reimbursement of the full cost of the prescription for Talwin, a pain medication, taken for symptoms associated with the 1981 automobile accident. As support for the claims, defendant attached what purported to be records from Boyd's Pharmacy where he filled his prescriptions. Plaintiff paid each claim, totaling $18,413.31.

Although the documents accompanying his claims to plaintiff originated from the pharmacy, defendant admitted he altered the pharmacy's actual receipts to replace the co-pay amounts he paid with the total medication costs. Defendant explained he did not submit claims to plaintiff for every drug he was prescribed, but only those for which he would receive sufficient compensation for the costs of his health insurance.

Steve Hazen, the owner of Boyd's Pharmacy, certified that the documents submitted to Allstate were not from his pharmacy and he never signed the invoices submitted to plaintiff. Defendant denies forging Hazen's signature and affirmed he merely modified the amount paid.

Plaintiff moved for summary judgment and defendant filed a cross-motion for partial summary judgment on his counterclaim that sought reimbursement for additional expenses. Following oral argument, the motion judge denied plaintiff's motion, and granted defendant's. Plaintiff moved for reconsideration and the court again allowed oral argument. On May 26, 2010, the motion judge entered an order granting plaintiff relief by vacating the relevant portions of his earlier order, and awarding plaintiff compensatory damages of $16,443.05, treble damages, and attorney fees and costs. Defendant appealed.

A motion for summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits . . . show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). Whether issues of material fact are in dispute is ascertained by examining "the competent evidential materials presented, when viewed in the light most favorable to the non-moving party," to determine whether they "are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party[.]" Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "The law is well settled that '[b]are conclusions in the pleadings without factual support in tendered affidavits, will not defeat a meritorious application for summary judgment.'" Brae Asset Fund, L.P. v. Newman, 327 N.J. Super. 129, 134 (App. Div. 1999) (quoting U.S. Pipe & Foundry Co. v. Am. Arbitration Ass'n, 67 N.J. Super. 384, 399-400 (App. Div. 1961)).

We undertake the same two-part inquiry as the trial court:

(1) whether there exists an issue of material fact, and (2) if not, whether the correct law was applied. Prudential Prop. & Cas. Ins. Co. v. Boyland, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Summary judgment is proper when the evidence is "so one-sided" that the moving party is entitled to judgment as a matter of law. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); R. 4:46-2(c). In our review, "no deference is due to the trial court's legal conclusions." Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 381 (2010).

On appeal, defendant acknowledges he submitted documents to plaintiff that were misleading insofar as they purported to be from the pharmacy, but had been altered by him. He contends, however, that his demands for payment accurately reflected the expenses to which he was entitled to reimbursement. Defendant challenges the court's legal determination, arguing he was legally entitled to the full amounts claimed and, therefore, the documents "contained no false information that was material to his claim," and the statute was not violated. Prior to addressing plaintiff's IFPA claim, we first examine the basis of defendant's entitlement to PIP payments.

We presume defendant's recovery was pursuant to an insurance policy that was contemporaneous to the date of the accident, 1981, although the policy's precise date is not in the record. At that time, the PIP statute, L. 1977, c. 310, § 1 (eff. Jan. 5, 1978), codified at N.J.S.A. 39:6A-4(a), allowed for "[p]ayment of all reasonable medical expenses incurred as a result of a personal injury sustained in an automobile accident," without regard to fault. Under the statute, medical expense benefits were payable as loss accrues, upon written notice of such loss and without regard to collateral sources, except that benefits collectible under workmen's compensation insurance, employees temporary disability benefit statutes and Medicare provided under Federal law, shall be deducted from the benefits collectible . . . .

[L. 1981, c. 95, § 1 (eff. Mar. 31, 1981), codified at N.J.S.A. 39:6A-6.]

Viewing this statutory provision, the parties agree defendant's private health insurance is not an enumerated collateral source of benefits -- i.e., workers compensation, employees' temporary disability or Medicare -- that would preclude PIP benefits. N.J.S.A. 39:6A-6. However, the parties disagree on whether defendant "incurred" the expenses submitted, entitling him to reimbursement in the amounts claimed. Plaintiff argues defendant's entitlement is limited to the expense he paid, that is, his co-pays. Defendant maintains he is legally entitled to reimbursement of the full cost of his prescriptions because he expended sums to purchase the health insurance.

In Sanner v. Government Employees Insurance Co., 150 N.J. Super. 488 (App. Div. 1977), aff'd o.b., 75 N.J. 460 (1978) and Curts v. Atlantic Mutual Insurance Co., 246 N.J. Super. 385 (App. Div. 1991), we reviewed similar questions regarding the liability of a no-fault insurance carrier for medical expenses "incurred," under the statute governing defendant's PIP claims. A discussion of these opinions guides our review.

In Sanner, the plaintiff, a National Guardsman on active duty at Fort Dix, injured himself when the jeep he was driving collided with a private passenger vehicle. 150 N.J. Super. at 490. The plaintiff was treated for his injuries at a Veterans Administration facility pursuant to 10 U.S.C.A. § 1074. Id. at 490. The plaintiff's claim for medical expenses pursuant to the PIP coverage of the automobile policy was rejected. Ibid. The automobile insurance clause defined medical expense benefits in a similar fashion as the policy at issue, meaning "all reasonable expenses incurred." Id. at 491. The trial court ordered payment, specifically rejecting the three bases cited for denial of coverage, including that the plaintiff had not "incurred" any expenses. Ibid.

On appeal, we concluded an insured "incurs" medical expenses by "either paying them or becoming liable to pay them." Id. at 493. The plaintiff had never paid for treatment nor became liable for the medical expenses. Id. 491. Thus, he met neither of these criteria. Id. at 495-96. Therefore, he could not be said to have incurred the medical costs and was not entitled to PIP reimbursement. Ibid.

Relevant to the matter at hand, we commented:

Contrary to the views expressed by the trial judge, there exists a valid distinction between benefits received by an injured person pursuant to some private medical payment insurance purchased by him and benefits received pursuant to 10 U.S.C.A. § 1074. Under a private policy the insured becomes liable for, and therefore incurs, the expenses which he must pay if his private carrier for some reason declines to do so; as a serviceman receiving medical treatment to which he is absolutely entitled with no obligation of reimbursement, he does not become liable for the reasonable value of the treatment. Hence, under the private policy, medical expenses are incurred by the insured; when treatment is afforded by the Federal Government with no obligation to reimburse, such expenses are not incurred. [Id. at 495-96 (internal quotation marks omitted).]

N.J.S.A. 39:6A-4 was amended in 1990 to delete the word "incurred" from the definition of medical expense benefits. L. 1990, c. 8, § 4 (eff. March 12, 1990). See also Curts, supra, 246 N.J. Super. at 389.

While Curts also examined whether the medical expenses were "incurred," the circumstances differed from those in Sanner. In Curts, supra, the plaintiff had contracted with a non-profit corporation to provide services that included meals, housing, medical and hospital care in a senior residence facility in exchange for a capital fee and monthly occupancy charge. 246 N.J. Super. at 386. The covered medical care included both onand off-site hospitals. Id. at 387. The facility "reports annually to each resident the amount of monthly occupancy charges which has been attributed to the medical care provisions." Ibid. The plaintiff was not required to pay outof-pocket for the medical expenses related to her accident because they were covered by her contract with the facility. Ibid. The trial court granted summary judgment to the insurance carrier, concluding the plaintiff had not incurred any medical expenses. Id. at 387-88.

On appeal, we reversed. Id. at 393. In our opinion, we undertook a review of prior case authorities and the history of the statute to glean the Legislative intent. We cited the comments attributed to the statute's draftsmen, stating:

"A duplication of payments of medical expenses will result in those instances, for example, wherein one's own personal hospitalization insurance policy provides coverage similar to that provided within the [No-Fault] Act. The medical expense benefits provided within the Act are not reduced by the amounts collectible under such hospitalization insurance. In such event, the injured person is justified in collecting not only medical expense benefits, but also the hospitalization insurance benefits." [Curts, supra, 246 N.J. Super. at 389 (quoting Iavicoli, No Fault & Comparative Negligence in New Jersey § 13, at 44-45 (1973)).]

We also reaffirmed our holding in O'Boyle v. Prudential, 241 N.J. Super. 503, 509 (App. Div. 1990), where we stated, "We see no intent in N.J.S.A. 39:6A-6 [addressing collateral income continuation benefits] to require deduction of privately available collateral benefits from PIP benefits. If the Legislature had so intended, the statute no doubt would have mentioned such voluntary or private benefits purchased independently by automobile accident victims . . . ." Curts, supra, 246 N.J. Super. at 390-91 (footnote omitted).

We identified the trend to eliminate double recovery when benefits were provided by collateral sources, and noted the recent amendments to N.J.S.A. 39:6A-6 and N.J.S.A. 39:6A-4.3 that had been adopted in 1991, but which were not applicable to the matter at hand.

The statute governing the plaintiff's claim, which is the one under examination in this matter, did not preclude PIP recovery of expenses also covered under a private health benefit plan. Id. at 388-89.

Thus, while we recognize the existence of a general policy in the State against permitting double recoveries, we are not free to disregard the overwhelming legislative and interpretive authority which recognize a limited exception to this policy in cases where a PIP insured is also covered under a private health benefits contract.

[Id. at 391 (citations omitted).]

We concluded the plaintiff's facility contract was akin to a private hospitalization insurance policy, id. at 386-87, 392-93, stating the plaintiff would not have been barred from receiving personal injury benefit payments either on the basis of not having "incurred" any expenses or on the basis of her receipt of collateral benefits, had she been insured under a conventional medical benefits policy or with an HMO. We fail to see why a different rule must be applied to [her] because her medical benefits plan is part of an agreement which provides other extensive benefits to the elderly. [Id. at 392.]

Therefore, the plaintiff was found to have "incurred" expenses pursuant to N.J.S.A. 39:6A-4 and was entitled to recover reimbursement for the value of her treatment under her PIP policy. Id. at 392-93.

Curts and Sanner both reviewed N.J.S.A. 39:6A-6 prior to its amendment. The significant difference between the insurance coverage in Sanner and Curts is the cost to obtain the coverage paid by the plaintiff. In Sanner, by virtue of his employment with the military, the plaintiff, who was on active duty, was treated for his injuries without any expenditure. More important, the medical benefits were provided at no cost, making the situation much different than a contracted for private health care plan. In Curts, the plaintiff entered a contract with a facility to obtain benefits, including full medical coverage. Although she did not have an out-of-pocket expense for any course of post-accident treatment, she did pay to obtain this benefit -- just as an individual who contracts for private health insurance.

Here, defendant purchased health insurance with a prescription plan. He paid up front for this private insurance benefit. Further, if the health insurance carrier declined to cover a prescription he had submitted, defendant remained obligated to make full payment to Boyd's Pharmacy. The motion judge erred in distinguishing Curts, suggesting the amended statute controlled that result. The trial judge misread Curts. We noted the statute had been amended to delete the word "incurred" from the definition of medical expense benefits, but that did not occur until 1990. Curts, supra, 246 N.J. Super. at 388. We specifically recited P.L. 1977, c. 310 as the applicable law governing review of the plaintiff's claims. Ibid.

At issue here is whether defendant "incurred" expenses notwithstanding that they were substantially paid by a collateral source, his private health insurance. Applying the above legal authority to the facts at hand, we conclude defendant had the right to recover the full cost of his prescription expenses from plaintiff, despite payment by his private heath insurance carrier. This determination, however, does not resolve the question of whether plaintiff is entitled to summary judgment on its IFPA claim.

The IFPA is intended "to confront aggressively the problem of insurance fraud" by "facilitating the detection of insurance fraud, eliminating the occurrence of such fraud through the development of fraud prevention programs, requiring the restitution of fraudulently obtained insurance benefits, and reducing the amount of premium dollars used to pay fraudulent claims." N.J.S.A. 17:33A-2. See also Liberty Mut. Ins. Co. v. Land, 186 N.J. 163, 172 (2006). The statute imposes "stiff civil monetary penalties against perpetrators of insurance fraud," State v. Fleischman, 189 N.J. 539, 544 (2007) (citing N.J.S.A. 17:33A-5), including treble damages when the court finds the insured engaged in a pattern of violation. N.J.S.A. 17:33A-7(b).

An individual violates the IFPA if he or she:

(1) Presents or causes to be presented any written or oral statement as part of[] or in support of . . . a claim for payment or other benefit pursuant to an insurance policy . . . , knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim; or

(2) Prepares or makes any written or oral statement that is intended to be presented to any insurance company . . . in connection with[] or in support of . . . any claim for payment or other benefit pursuant to an insurance policy . . . knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim . . . . [N.J.S.A. 17:33A-4(a).]

Further, an insurer that suffers damages as the result of an individual's violations of the statute may initiate an action "to recover compensatory damages, which shall include reasonable investigation expenses, costs of suit and attorneys fees." N.J.S.A. 17:33A-7(a).

The court correctly concluded defendant violated the broad terms of IFPA by submitting a claim "knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim[.]" N.J.S.A. 17:33A-4(a)(2). Defendant suggested his requests for payment accurately reflected what he was owed. Applying our conclusion that defendant was entitled to the full payment of his prescription expense may show defendant's submitted requests were not overstated so that no overpayment was made by plaintiff. This must abide further proceedings on remand. Nevertheless, defendant's attempts at "self-help," by altering the statements attributed to the pharmacy, was a violation of IFPA.

We reverse the motion judge's determination that defendant was not entitled to recover PIP benefits for the expenses paid by his private medical insurance carrier. We remand this matter for further proceedings, including a determination of the PIP benefits to which defendant was entitled and whether his claims exceeded those amounts; whether plaintiff suffered compensable harm as a result of defendant's IFPA violation; and the amount of plaintiff's reasonable investigatory expenses, attorney fees and costs, after learning from Hazen that the amounts listed on the claim's supporting documentation differed from those of the pharmacy, as allowed by N.J.S.A. 17-33A-7(a). We do not retain jurisdiction.

Reversed and remanded.


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