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Citizens United Reciprocal Exchange v. New Jersey Back Institute


April 24, 2012


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1034-11.

Per curiam.


Submitted January 30, 2012

Before Judges Sabatino and Ashrafi.

These appeals arise from arbitration of a dispute about payment of personal injury protection (PIP) benefits after a motor vehicle accident. See N.J.S.A. 39:6A-5, -5.1, -5.2. Defendant New Jersey Back Institute (the Back Institute), a medical provider, prevailed in arbitration pursuant to the Alternative Procedure for Dispute Resolution Act (the Act), N.J.S.A. 2A:23A-1 to -19, against plaintiff Citizens United Reciprocal Exchange (CURE), an insurance carrier. Both parties appeal from orders of the Law Division entered after the arbitration.

In A-5221-10, the Back Institute appeals from an order of May 27, 2011, which confirmed the arbitration award but denied its application for attorney's fees. In A-5285-10, CURE appeals from an order of March 24, 2011, which denied its application to vacate the arbitration award, and the order of May 27, 2011, to the extent it confirmed the award. Addressing the appeals together, we affirm both orders.


CURE provided automobile insurance coverage including PIP benefits to its insured, Daniel Gomez. Gomez suffered injuries in a motor vehicle accident. The Back Institute treated his injuries, including surgery that was pre-approved by CURE and performed on May 19, 2009. When the Back Institute submitted its charges of $60,000 for reimbursement, CURE paid only $12,412.79 plus $287.19 interest, and it declined to pay the balance of the amount charged.

In September 2009, the Back Institute, as assignee of Gomez, filed a demand for arbitration against CURE under the Act. The parties engaged in an arbitration hearing conducted by the National Arbitration Forum. On December 15, 2010, the dispute resolution umpire issued a written decision awarding $32,587.26 in medical fees to the Back Institute, plus attorney's fees of $1,300 for the arbitration proceedings and costs of $231.15.

Contending that the umpire misapplied the law and made an excessive award, CURE filed a complaint and an order to show cause in the Law Division to vacate the arbitration award. The Back Institute filed an answer seeking confirmation of the award and its attorney's fees incurred in the Law Division action. After oral argument on March 24, 2011, the Law Division placed on the record its oral decision at a time when counsel were not present. The court concluded that the umpire did not err, it confirmed the arbitration award, and it ruled that each party would pay its own attorney's fees for the proceedings in the Law Division. The court's accompanying March 24, 2011 order indicated denial of CURE's application to vacate the award, but it contained no provision regarding the ruling on attorney's fees.

On May 2, 2011, the Back Institute filed a motion for attorney's fees. Counsel were then directed to the transcript of the March 24, 2011 oral decision by which the court had already denied the application for attorney's fees. By order and written decision on May 27, 2011, the Law Division again denied the application for attorney's fees based on two grounds:

(1) the "American rule" would apply, by which each party bears its own costs of litigation, and (2) the motion for attorney's fees was actually a motion for reconsideration of the court's March 24, 2011 ruling, and the motion was not timely filed within the twenty-day deadline of Rule 4:49-2.


We address first the appeal of CURE in A-5285-10 seeking to vacate the arbitration award.

CURE argues the Law Division made factual and procedural errors when it concluded that the umpire had applied the correct evidentiary standard and consequently confirmed the arbitration award. CURE contends that it paid to the Back Institute the usual, customary, and reasonable fee for the surgery based upon the 2009 Wasserman Physician Fee Reference, and also that the Back Institute presented insufficient contrary evidence in the arbitration supporting its much higher charges. The Law Division's confirmation of the arbitration award, however, is not subject to further appeal before us. Appellate review of arbitration awards is limited by the Act to rare circumstances, and such circumstances do not exist here.

By utilizing the Act, the parties waived their right to appeal to this court. Mt. Hope Dev. Assocs., EAJ, Inc. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 149 (1998). The Act provides a streamlined and limited process for a party seeking to challenge an arbitration award. The proceedings are "summary in nature and expedited. . . . to effectuate [the Act's] remedial purpose of allowing parties by agreement to have resolution of factual and legal issues in accordance with informal proceedings and limited judicial review in an expedited manner." N.J.S.A. 2A:23A-19 (emphasis added). In Mt. Hope, the Court succinctly explained the process:

After the award is delivered by the umpire, the parties have forty-five days (thirty days if the award is modified) to commence a summary action in the [Chancery or Law Division] to vacate, correct, or modify the award. The [Act] further provides that once a court grants an order confirming, modifying, or correcting an award, "a judgment or decree shall be entered by the court in conformity therewith and be enforced as any other judgment or decree.

There shall be no further review of the judgment or decree." [Mt. Hope Dev. Assocs., supra, 154 N.J. at 146 (citing N.J.S.A. 2A:23A-13a and quoting subsection -18b and adding emphasis).]

The fundamental policy of the Act is "finality and limited judicial involvement." Id. at 149 (quoting Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 361 (1994)). The authority of appellate courts is limited to "those 'rare circumstances' grounded in public policy that might compel . . . limited appellate review." Id. at 152 (quoting Tretina Printing, supra, 135 N.J. at 364-65); see Ft. Lee Surgery Ctr., Inc. v. Proformance Ins. Co., 412 N.J. Super. 99, 102 (App. Div. 2010); N.J. Citizens Underwriting Reciprocal Exch. v. Kieran Collins, D.C., LLC, 399 N.J. Super. 40, 47-48 (App. Div.), certif. denied, 196 N.J. 344 (2008).

Such "rare circumstances" exist, for instance, where the trial court acted with bias, Mt. Hope Dev. Assocs., supra, 154 N.J. at 152; imposed an unauthorized remedy, Open MRI & Imaging of Rochelle Park v. Mercury Ins. Group, 421 N.J. Super. 160, 166 (App. Div. 2011); applied a standard of review that is contrary to the statute, Morel v. State Farm Ins. Co., 396 N.J. Super. 472, 475-76 (App. Div. 2007); or acted contrary to the policy embodied in the Act, Selective Ins. Co. of Am. v. Rothman, 414 N.J. Super. 331, 341-42 (App. Div. 2010), aff'd, 208 N.J. 580 (2012). Additionally, appellate review is permitted where the non-delegable supervisory function of the courts is implicated. See Faherty v Faherty, 97 N.J. 99, 109 (1984) (child support order); Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 472-76 (App. Div. 2005) (attorney's fees award). Appellate review is not available where a party argues mistaken findings or conclusions of either the umpire or the trial court, even if the trial court may have exercised its review function "imperfectly." Ft. Lee Surgery Ctr., supra, 412 N.J. Super. at 104.

CURE relies primarily on Morel, supra, 396 N.J. Super. 472, to argue for appellate jurisdiction to review the arbitration award. In Morel, the plaintiff sought to vacate an award because the umpire improperly shifted the burden of proof and decided the matter without an adequate evidentiary basis. Id. at 473-74. The trial court summarily rejected the plaintiff's arguments because it believed "review was limited to considering whether the arbitration was marred by fraud, corruption, conflict of interest, et cetera." Id. at 474. We reversed and remanded because the trial court had misunderstood the broader scope of its authority under N.J.S.A. 2A:23A-13c.*fn1 Morel, supra, 396 N.J. Super. 476.

In this case, unlike Morel, the Law Division correctly understood its statutory authority. It concluded that CURE did not demonstrate any grounds under N.J.S.A. 2A:23A-13 to vacate the umpire's award. As to the contention that the umpire applied the wrong law, the court concluded that N.J.A.C. 11:3- 29.4e, the regulation CURE relied upon, did not apply in this case because it was not in effect when the medical services were provided to the insured, and the regulation was not retroactively applicable. When the Law Division confirms an award with a rational explanation and under the correct standard of review, we do not have authority to review further its factual findings and legal conclusions. Ft. Lee Surgery Ctr., supra, 412 N.J. Super. at 104.

Because CURE has not shown "rare circumstances" permitting our appellate review, we dismiss its appeal in accordance with N.J.S.A. 2A:23A-18b.


In A-5221-10, the Back Institute contends that the Law Division erroneously denied its application for attorney's fees as untimely and improperly applied the "American rule" to this PIP action. Although we agree that the application for attorney's fees was timely filed, we also conclude that the Law Division did not abuse its discretionary authority in denying reimbursement of attorney's fees.

In its March 24, 2011 oral decision, the Law Division ruled without elaboration that "each party is to pay their own counsel fees and costs. The Court will employ the American Rule with respect to counsel fees."

Under the American rule, each party is ordinarily responsible for its own attorney's fees and expenses of litigation. Litton Indus. v. IMO Indus., Inc., 200 N.J. 372, 385 (2009); Mason v. City of Hoboken, 196 N.J. 51, 70 (2008). An exception to the American rule has been established for the successful enforcement of an insurance policy requiring payment of PIP benefits. Endo Surgi Ctr. P.C. v. Liberty Mut. Ins. Co., 391 N.J. Super. 588, 592-93 (App. Div. 2007) (citing Maros v. Transamerica Ins. Co., 76 N.J. 572, 579 (1978)); see Pressler & Verniero, Current N.J. Court Rules, comment 2.6 on R. 4:42-9 at 1715-16 (2012) (allowance of attorney's fees to successful PIP claimants is an "exception" to the limited applicability of Rule 4:42-9(a)(6), which provides that fees are reimbursable for coverage on a liability or indemnity policy but not in an action for casualty or other direct coverage on an insurance policy).*fn2

An award of attorney's fees in a PIP action may include counsel's efforts both before the umpire and before the trial court. Sabato, supra, 380 N.J. Super. at 474. Permitting reimbursement of attorney's fees reflects "[t]he theory . . . that one covered by a policy is entitled to the full protection provided by the coverage, and that benefit should not be diluted by the insured's need to pay counsel fees in order to secure its rights under the policy." Liberty Vill. Assocs. v. W. Am. Ins. Co., 308 N.J. Super. 393, 406 (App. Div.) (citing Sears Mortg. Corp. v. Rose, 134 N.J. 326, 356 (1993)), certif. denied, 154 N.J. 609 (1998). To effect that theory, "[a] successful insured is presumptively entitled to attorney's fees and need not establish that the insurer acted in bad faith or arbitrarily in declining a claim." Sabato, supra, 380 N.J. Super. at 473-74 (citing Liberty Vill., supra, 308 N.J. Super. at 405-06).

Despite the presumption in favor of reimbursement, however, under Rule 4:42-9(a)(6) "the trial judge has broad discretion as to when, where, and under what circumstances counsel fees may be proper and the amount to be awarded." Iafelice ex rel. Wright v. Arpino, 319 N.J. Super. 581, 590 (App. Div. 1999). Factors which the court may consider include: (1) the insurer's good faith in refusing to pay the demands; (2) excessiveness of plaintiff's demands; (3) bona fides of one or both of the parties; (4) the insurer's justification in litigating the issue; (5) the insured's conduct in contributing substantially to the necessity for the litigation on the policies; (6) the general conduct of the parties; and (7) the totality of the circumstances. [Enright v. Lubow, 215 N.J. Super. 306, 313 (App. Div.) (internal citations omitted), certif. denied, 108 N.J. 193 (1987).]

"[F]ee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion." Packard-Bamberger & Co., Inc. v. Collier, 167 N.J. 427, 444 (2001) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995).)

Here, the Law Division correctly concluded that Sabato, supra, 380 N.J. Super. at 474, is factually dissimilar to this case. Unlike Sabato, the trial court's denial of fees was not based on a mistaken understanding of the umpire's reasoning. Ibid. Although the Law Division should have explained more fully its reasoning in applying the American rule with supporting findings and conclusions, we do not find sufficient ground to disturb its exercise of discretion in denying reimbursement of additional attorney's fees.*fn3


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