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Selective Insurance Company of America, Selective Way Insurance v. Hudson East Pain Management Osteopathic Medicine and Physical Therapy

July 18, 2012

SELECTIVE INSURANCE COMPANY OF AMERICA, SELECTIVE WAY INSURANCE COMPANY, SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, SELECTIVE INSURANCE COMPANY OF THE SOUTH EAST, SELECTIVE INSURANCE COMPANY OF NEW YORK, AND SELECTIVE AUTO INSURANCE COMPANY OF NEW JERSEY, PLAINTIFFS-APPELLANTS,
v.
HUDSON EAST PAIN MANAGEMENT OSTEOPATHIC MEDICINE AND PHYSICAL THERAPY, ESSEX SURGERY CENTER L.L.C., ESSEX PAIN MANAGEMENT, TOWER WEST CHIROPRACTIC, GIORDANO CHIROPRACTIC, AND ADVANCED NEUROLOGICAL ORTHOPEDIC ASSOCIATES, DEFENDANTS-RESPONDENTS AND SENTE AND FERRARO CHIROPRACTIC, DEFENDANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 416 N.J. Super. 418 (2010).

The opinion of the court was delivered by: Judge Wefing

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized.)

Selective Insurance Company of America v. Hudson East Pain Management

(A-105-10) (067133)

Argued March 1, 2012

Decided July 18, 2012

WEFING, P.J.A.D. (temporarily assigned), writing for a unanimous Court.

This appeal presents a discrete, narrow legal question: is a health care provider who has received an assignment of personal injury protection (PIP) benefits from an insured obligated upon request to furnish to the insurer broad information with respect to the provider's ownership structure, billing practices, and regulatory compliance?

Plaintiffs in this matter consist of six "Selective Insurance Company" entities. For ease of understanding, the Court refers to "plaintiff" in the singular or to "Selective." Individuals insured by Selective sought medical treatment from defendants for injuries received in automobile accidents. Those insureds assigned to defendants the benefits to which they were entitled under their PIP coverage, giving defendants the contractual right to seek PIP reimbursement under those policies. In reviewing claims submitted for payment, Selective detected what it considered to be suspicious patterns in both the treatments defendants had provided and the corporate links among the treating entities. Selective requested that defendant supply to it a variety of data with respect to their ownership, structure, billing practices, and compliance with certain regulations. In support of its request, Selective cited the provision within the insureds' insurance policies requiring the insureds to cooperate with Selective in the investigation of any claim under the policy.

When defendants did not agree to supply the material Selective sought, Selective filed a verified complaint in which it alleged that defendants' failure to supply the information was a breach of the duty to cooperate and a violation of the PIP discovery statute, N.J.S.A. 39:6A-13(b). Selective sought a declaratory judgment that defendants were obligated to provide the information and documents it sought and that if they failed to do so, they would be ineligible to receive PIP reimbursement. Defendants filed a motion under Rule 4:6-2(e) to dismiss Selective's complaint. After hearing oral argument, the trial court denied defendants' motion to dismiss and granted Selective the relief it had requested by directing defendants to respond to Selective's discovery requests. Defendants thereafter moved for reconsideration, but the trial court denied that motion, together with defendants' request for a stay.

Defendants appealed to the Appellate Division and that Court granted a stay of the trial court's order pending resolution of the appeal. In a published opinion, the Appellate Division reversed, concluding that Selective was not entitled to the discovery it sought. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt., 416 N.J. Super. 418, 425 (App. Div. 2010).

The Supreme Court granted plaintiff's petition for certification. 206 N.J. 64 (2011).

HELD: An insured had no duty to provide information to plaintiff with respect to the ownership structure, billing practices, or referral methods of the medical providers from whom he or she sought treatment for his or her injuries. Because an insured had no obligation to supply that information to plaintiff, the assignment of benefits executed by an insured could not serve to impose that duty on the providers.

1. This matter calls for the Court to interpret the language in an insurance policy issued by plaintiff. An insurance policy is a form of contract and the interpretation of contract language is a question of law requiring application of the de novo standard of review. Certain general principles guide the Court as it considers the proper interpretation to be given to the policy language at issue. That is, coverage provisions are to be read broadly, exclusions are to be read narrowly, potential ambiguities must be resolved in favor of the insured, and the policy is to be read in a manner that fulfills the insured's reasonable expectations. (pp. 8-10)

2. The Court is satisfied that the result reached in this matter by the Appellate Division with respect to the proper construction of the cooperation clause should be affirmed. It is fundamental that the rights of an assignee can rise no higher than the rights of the assignor. If an assignee can have no greater rights than his assignor, it must follow that an assignee can have no greater duties than his assignor. Here, an insured's duty to cooperate with Selective referred to the duty to cooperate with the "investigation, settlement or defenses" of the insured's underlying claim. An insured had no duty to provide information to Selective with respect to the ownership structure, billing practices, or referral methods of the medical providers from whom he or she sought treatment for his or her injuries. Because an insured had no obligation to supply that information to Selective, the assignment of benefits executed by an insured could not serve to impose that duty on the providers. (pp. 10-13)

3. The Legislature, in adopting N.J.S.A. 39:6A-13, set down clear directives with respect to discovery in connection with PIP benefits. Subsections (b) and (g) of that statute refer to discovery with respect to "history, condition, treatment, dates and costs of such treatment." The Court perceives no ambiguity in the statute's language; applying N.J.S.A. 39:6A-13 according to its clear terms does not lead to an absurd result, nor does it hinder the statute's purpose. The material sought by Selective in this matter far exceeds the statutory limitations of a patient's "history, condition, treatment, dates and cost of such treatment." N.J.S.A. 39:6A-13(g). The Court may not, under the guise of statutory construction, expand its scope in the boundless fashion plaintiff seeks merely because plaintiff has formed the belief that defendants may not have complied with the requirements of other statutes or regulations. (pp. 13-15)

4. In an effort to protect the public from insurance fraud, the Legislature passed the Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30, which created the Insurance Fraud Prosecutor, N.J.S.A. 17:33A-16, and the Bureau of Fraud Deterrence, N.J.S.A. 17:33A-8(a)(1). Defendants contend that the statute places responsibility for the detection and prevention of insurance on the Attorney General and the Department of Banking and Insurance, not on private entities such as Selective. The statute, however, does impose affirmative duties on insurers with respect to insurance fraud. Selective contends that these statutory provisions justify its request for the detailed information it sought from defendants. In the posture in which this matter reached the Court, it is not persuaded. When Selective filed its complaint, it articulated the legal theories under which it was proceeding: that defendants were obligated to respond to Selective's discovery demands under both the cooperation clause and the PIP discovery statute. Selective made no attempt to amend its complaint to set forth any alternative bases. Defendants were entitled to respond to the legal theories Selective had chosen to pursue, and the Appellate Division correctly analyzed the legal strengths and weaknesses of Selective's position on the basis of those legal theories. The Court is also not persuaded by earlier, apparently successful efforts to obtain discovery in other matters. The Court stresses that its holding is not to be understood as sanctioning attempts to hamper legitimate efforts to root out instances of fraudulent conduct. Nor should it be understood as restricting insurers' reasonable attempts to comply with their statutory obligations. The Court has done no more than address this issue within the framework plaintiff selected. (pp. 16-20)

The judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, HOENS, and PATTERSON join in JUDGE WEFING's opinion.

Argued March 1, 2012

Judge Wefing (temporarily assigned) delivered the opinion of the Court.

This appeal presents a discrete, narrow legal question: is a health care provider who has received an assignment of personal injury protection (PIP) benefits from an insured obligated upon request to furnish to the insurer broad information with respect to the provider's ownership structure, billing practices, and regulatory compliance? The trial court held that the provider was obligated, but the Appellate Division reversed. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt., 416 N.J. Super. 418, 421 (App. Div. 2010). We granted plaintiff's petition for certification to consider whether this determination was correct.*fn1 Selective Ins. Co. of Am. v. Hudson

E. Pain Mgmt., 206 N.J. 64 (2011). We also granted the motion of Insurance Council of New Jersey and Property Casualty Insurers Association of America to appear as amici curiae. We affirm, but for reasons other than those stated by the Appellate Division.

I.

Because this matter arose when defendants filed a motion under Rule 4:6-2(e) to dismiss plaintiff's complaint, the record before us is not voluminous. It consists of plaintiff's verified complaint and the pleadings and documents submitted to the trial court in connection with defendants' motion. According to that record, individuals insured by Selective sought medical treatment from defendants for injuries received in automobile accidents. Those insureds assigned to defendants the benefits to which they were entitled under their PIP coverage, giving defendants the contractual right to seek PIP reimbursement under those policies. Defendants, on the basis of those assignments, submitted claims for payment to Selective for the services they had provided to Selective's insureds.

In reviewing the claims submitted, Selective detected what it considered to be suspicious patterns in both the treatments defendants had provided and the corporate links among the treating entities. Wanting to pursue the questions generated by those perceived patterns, Selective requested that defendants supply to it a variety of data with respect to their ownership structure, billing practices, and compliance with certain regulations. In support of its request, Selective cited the provision within the insureds' insurance policies requiring the insureds to cooperate with Selective in the investigation of any claim under the policy. When defendants did not agree to supply the material Selective sought, Selective filed a verified complaint in which it alleged that defendants' failure to supply the information was a breach of the duty to cooperate and a violation of the PIP discovery statute, N.J.S.A. 39:6A-13(b). Selective sought a declaratory judgment that defendants were obligated to provide the ...


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