July 23, 2012
MARY DELGRANDE, PLAINTIFF-APPELLANT,
NEW JERSEY MANUFACTURERS (NJM) INSURANCE GROUP, AND UNITED HEALTHCARE INSURANCE COMPANY, IMPROPERLY PLED AS UNITED HEALTHCARE SERVICES, INC., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-1700-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 24, 2012 -
Before Judges Messano and Yannotti.
On March 17, 2005, plaintiff Mary Delgrande was injured in an automobile accident when her vehicle was struck from behind by a car driven by Donald Coords. Plaintiff filed a personal injury action against Coords in March 2006.
While that litigation was pending, plaintiff filed suit against her insurer, defendant New Jersey Manufacturers Insurance Group (NJM), seeking personal injury protection (PIP) benefits under her policy. The record does not include this complaint or NJM's answer, but, it is undisputed that the parties settled the litigation in October 2007, the release providing that plaintiff "retain[ed] all legal rights to pursue any claims relating to . . . future medical care, including challenging any denials by NJM for services or payment."
A dispute again arose between plaintiff and NJM regarding the payment of five bills submitted by various medical providers that rendered treatment between December 2007 and June 2008. The matter was submitted to the National Arbitration Forum (NAF), and the dispute resolution professional (DRP) was asked to determine whether these services were "reasonable and medically necessary" as a result of the accident.
On October 8, 2008, following consideration of the documentary evidence and plaintiff's testimony, the DRP concluded that the treatment reflected in only one of the five disputed bills -- a December 2007 re-evaluation by plaintiff's treating orthopedist -- "arose out of injuries sustained in the subject accident." Payment of the remaining four bills -- which dealt with diagnosis and treatment of neck and upper back pain and involved significantly greater monetary amounts -- was denied. The DRP entered an award in plaintiff's favor for $120 together with costs and counsel fees.
On September 17, 2009, plaintiff filed suit against NJM seeking PIP benefits associated with cervical surgery performed in 2009, alleging it was related to the 2005 motor vehicle accident. On October 23, plaintiff filed an amended complaint naming United Healthcare Insurance Company (United) as an additional defendant. The amended complaint alleged that United, which administered an employee medical benefit plan (the plan) through plaintiff's employer "[was] asserting a medical lien on the proceeds" of plaintiff's suit against Coords. It was undisputed that United had paid a total of $93,733.24 in medical benefits on plaintiff's behalf. Among the relief sought in her amended complaint, plaintiff requested declaratory judgment that her "cervical surgery [wa]s causally related" to the accident.
Before either defendant answered, plaintiff settled her suit against Coords for $250,000. She executed a release in that action on November 16, 2009.
On December 17, 2009, NJM filed its answer and asserted a cross-claim against United seeking declaratory relief that United could not assert any lien without establishing its right to do so under the terms of the plan. On May 14, 2010, United filed its answer and asserted a counterclaim against plaintiff. In particular, United alleged that under the terms of the plan, it was entitled to an "equitable lien/constructive trust upon that portion of [plaintiff's] settlement proceeds which represent money owed to [United] for the paid medical benefits . . . ."
Thereafter, NJM moved to dismiss the complaint contending that plaintiff was required to submit the dispute to arbitration pursuant to N.J.S.A. 39:6A-5.1. The motion judge agreed and entered an order on August 27 dismissing the complaint as to NJM without prejudice, and ordering plaintiff to "re-file a demand with [NAF] . . . ." Plaintiff did so on September 14.*fn1
Plaintiff then moved for summary judgment against United, and United, in turn, cross-moved for summary judgment dismissing plaintiff's complaint. In a written opinion, a different motion judge concluded that "[u]nder the terms of the plan, [plaintiff] must pay the monies she recovered in her lawsuit to reimburse the [p]lan for the medical benefits paid on her behalf." He entered orders denying plaintiff's summary judgment motion and granting United summary judgment. This appeal followed.
Plaintiff argues that: (1) the first motion judge's order dismissing her complaint and compelling arbitration against NJM was inequitable because it forced plaintiff to litigate the same issue in two different forums; (2) the second motion judge erred by granting summary judgment to United because genuine issues of material fact exist; and (3) in the event we affirm the order as to NJM, and reverse as to United, all parties should be compelled to participate in the NAF arbitration. We have considered these arguments in light of the record and applicable legal standards. We affirm.
Plaintiff contends that it was error to dismiss her complaint against NJM and compel arbitration because the critical issue of causation could be decided inconsistently in two different forums, leading to an inequitable result. We disagree.
Because the decision to compel arbitration was based solely on an issue of law, our review is de novo. Cole v. Jersey City Med. Ctr., 425 N.J. Super. 48, 56 (App. Div. 2012). N.J.S.A. 39:6A-5.1 provides:
Any dispute regarding the recovery of medical expense benefits or other benefits provided under personal injury protection coverage . . . may be submitted to dispute resolution on the initiative of any party to the dispute, as hereinafter provided.
Accordingly, NJM had the statutory right to compel arbitration of plaintiff's claim for PIP benefits associated with the diagnosis and treatment of injuries to her cervical spine allegedly caused by the 2005 accident. Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 469-70 (App. Div. 2005); Coal. for Quality Health Care v. N.J. Dep't of Banking & Ins., 348 N.J. Super. 272, 310 (App. Div.), certif. denied, 174 N.J. 194 (2002).
Plaintiff does not dispute this. Instead, she argues that the judge should have disregarded the clear language of the statute because resolving the key issue of causation in two forums is contrary to the legislative purposes supporting PIP benefits. See Endo Surgi Center, P.C. v. Liberty Mut. Ins. Co., 391 N.J. Super. 588, 592 (App. Div. 2007) (noting "[t]wo major objectives" of New Jersey's No-Fault Insurance laws "are facilitating 'prompt and efficient provision of benefits for all accident injury victims' and 'minimiz[ing] resort to the judicial process'") (quoting Gambino v. Royal Globe Ins. Cos., 86 N.J. 100, 105-07 (1981)).
However, if plaintiff receives a favorable arbitration award, i.e., her injuries arose from the accident, NJM would be obligated to reimburse the reasonable and necessary costs of medical expenses associated with treatment of those injuries. No one suggests that these monies could not, or would not, ultimately be paid to United as reimbursement of monies it expended under the plan.
If plaintiff were to receive an unfavorable award, i.e., a determination that the accident was not the cause of the injuries to her cervical spine, we fail to see why she would want to re-litigate that issue against United. To the contrary, plaintiff would simply assert, as she continuously has, that United is not entitled to reimbursement from the settlement proceeds of the underlying litigation unless it proves a relationship between the benefits and the accident.
Ultimately, the second motion judge determined the issue of causation was irrelevant to United's right to reimbursement under the plan. We now turn to consideration of that issue.
Plaintiff argues that the judge erred by granting summary judgment to United because genuine factual disputes exist.
Specifically, plaintiff contends that United "failed to prove as a matter of law that (1) the medical treatments it seeks reimbursement for were causally related to [p]laintiff's car accident, and (2) [that] the . . . plan is a self-funded plan entitled to reimbursement." Again, we disagree.
In reviewing a grant of summary judgment, our review is de novo applying the same standards employed by the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006). To the extent factual disputes exist, we accord plaintiff the benefit of all favorable evidence and inferences in the motion record. Henry, supra, 204 N.J. at 329; see also R. 4:46-2(c). We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co., supra, 387 N.J. Super. at 231. In doing so, we owe no deference to the motion judge's conclusions on issues of law. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Whether plaintiff's 2009 cervical spine surgery was a consequence of injuries caused by the 2005 accident clearly remained a disputed fact when United's summary judgment motion was decided. However, for the following reasons, resolution of that disputed fact was unnecessary.
It is undisputed that the "Subrogation and Reimbursement" provisions of the plan provided:
[R]egardless of whether a Covered Person has been fully compensated or made whole, the Plan may collect from Covered Persons the proceeds of any full or partial recovery that a Covered Person or his or her legal representative obtain, whether in the form of a settlement (either before or after any determination of liability) or judgment. The proceeds available for collection shall include, but not be limited to any and all amounts earmarked as non-economic damage settlement or judgment.
[T]he Plan shall also have an independent right to be reimbursed by Covered Persons for the reasonable value of any services and Benefits the Plan provides to Covered Persons, from . . . [t]hird parties, including any person alleged to have caused a Covered Person to suffer injuries or damages.
In seeking summary judgment, United argued that these provisions permitted the plan to seek reimbursement from the proceeds paid to plaintiff -- "a Covered Person" -- from a third party --Coords -- "alleged to have caused" plaintiff's injuries and damages "before . . . any determination of liability." The judge agreed and stated in his written opinion:
Plaintiff now argues that [United] is not entitled to reimbursement because the settling defendant was not found to have caused plaintiff's injuries. However, under the terms of the Plan, a participant is required to reimburse the Plan for medical benefits paid on his or her behalf out of any monies recovered in connection with a third-party action. The settlement funds are certainly "monies recovered in connection with a third-party action."
Under the terms of the plan, [plaintiff] must pay the monies she recovered in her lawsuit to reimburse the Plan for the medical benefits paid on her behalf.
Plaintiff does not directly address these provisions. Instead, she contends that, unless United is required to prove some causal relationship between the accident and the surgery, the literal language of the plan yields absurd results, e.g., United could "seek reimbursement for medical treatments for cancer from settlement proceeds of a wholly unrelated litigation regarding a broken leg from a car accident." This overlooks the obvious difference, however, because it was plaintiff who "alleged" the cervical spine injuries were caused by a third-party, Coords.
Although we discuss in further detail below plaintiff's contentions regarding the funding of the plan, it is undisputed that the plan was governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. §§ 1001 to 1461. The Third Circuit has stated:
[N]otwithstanding "the ennobling purposes which prompted passage of ERISA, courts have no right to torture language in an attempt to force particular results . . . the contracting parties never intended or imagined. To the exact contrary, straightforward language . . . should be given its natural meaning." [Ryan by Capria-Ryan v. Federal Express Corp., 78 F.3d 123, 126 (3rd Cir. 1996) (quoting Burnham v. Guardian Life Ins. Co. of Am., 873 F.2d 486, 489 (1st Cir. 1989)).]
The plain language of the plan permitted United to seek reimbursement from plaintiff's settlement proceeds.
Plaintiff argues, however, that pursuant to N.J.S.A. 2A:15-97, the so-called collateral source rule, United was not entitled to reimbursement unless it was a "self-funded plan." She contends that United did not prove as "a matter of law" that it was, and she was not permitted to engage in discovery as to this critical question. We reject these arguments.
The collateral source rule prohibits a health insurer "who expends funds on behalf of an insured, to recoup those payments through subrogation or contract reimbursement when the insured recovers a judgment against a tortfeasor." Perreira v. Rediger, 169 N.J. 399, 403 (2001). However, whether the collateral source rule applies is impacted by the comprehensive legislative and regulatory scheme of ERISA. O'Brien v. Two W. Hanover Co., 350 N.J. Super. 441, 446 (App. Div. 2002). If an ERISA plan is "self-funded," recovery is not barred. White Consol. Indus., Inc. v. Lin, 372 N.J. Super. 480, 482 (App. Div. 2004). On the other hand, "if the plan is insured, and therefore subject to State regulation, New Jersey's collateral source rule . . . operates to bar the health insurer from seeking subrogation against the tortfeasor or reimbursement from the employee who successfully has sued." Ibid.
"A plan is ordinarily defined as self-funded when 'it does not purchase an insurance policy from any insurance company in order to satisfy its obligations to its participants.'" Id. at 486 (quoting FMC Corp. v. Holliday, 498 U.S. 52, 54, 111 S. Ct. 403, 112 L. Ed. 2d 356 (1990)). "Provided that the administrator does not assume any financial risk relating to benefit claims, a plan remains self-funded even if it contracts with an insurance company to provide administrative services." Ibid.
In support of its motion for summary judgment, United submitted the "Summary Plan Description," which in part, provides:
Sources of contributions under the Plan:
There are no contributions to the Plan. All Benefits under the Plan are paid from the general assets of the Plan Sponsor. Any required Employee contributions are used to partially reimburse the Plan Sponsor for Benefits under the Plan.
United also submitted an affidavit from Sylvia Dover, the Senior Manager of Health Services at Clear Channel Communications, plaintiff's employer and the plan's sponsor. According to Dover, "[a]ll of the medical benefits paid on behalf of [plaintiff] were paid from the general assets of Clear Channel Communications . . . and funded solely by contributions from Clear Channel Communications and its employees." Dover also stated that no benefits were paid by insurance.
In support of plaintiff's summary judgment motion, counsel certified that discovery ended on September 3, 2010, and United failed to furnish any answers to interrogatories or respond to plaintiff's document demands until September 28. At oral argument on December 17, plaintiff's counsel stated that United's argument "that it's a self-funded ERISA plan . . . came up after the discovery end period."
United's counsel countered in his certification that he believed discovery would be extended because the case was being case-managed, plaintiff's counsel "unilaterally cancelled the case management conference scheduled for September 10, 2010," and United responded to plaintiff's document request on September 10. At oral argument, United's counsel noted that the documents supporting its summary judgment motion were, for the most part, "provided to plaintiff['s] counsel prior to [the] discovery end date in other contexts."
Although the judge did "not condone the way [United] . . . handled discovery," he observed that "plaintiff has not even argued that [she was] prejudiced by the delay." He further noted that "plaintiff provide[d] no evidence to contradict, the sworn affidavit of . . . Dover, and the language of the plan; both of which assert [the plan] is self-funded."
Before us, plaintiff argues that United's evidence submitted in support of the summary judgment motion was inadequate to prove as a matter of law that the plan was self-funded, and cites O'Brien in support. In O'Brien, supra, 350 N.J. Super. at 443, the parties stipulated that ERISA governed the plan at issue, but, we nevertheless reversed and remanded because the stipulation was inadequate to resolve the self-funded question. Id. at 448. Here, based upon Dover's affidavit, the language of the plan and a lack of evidence to the contrary, there was no unresolved factual dispute as to that issue.
Plaintiff further contends that United relied upon documents produced outside the discovery period, and she was denied the opportunity to engage in discovery about the crucial issue of whether the plan was self-funded. However, plaintiff never moved to extend discovery, apparently never sought to compel discovery from United before the discovery period expired and was aware from an early date in the litigation that United asserted the plan was self-funded. The record contains a letter from United's counsel to the first motion judge, dated March 31, 2010, furnished as part of its motion to vacate a default previously entered. It specifically provided that "United . . . is the Claims Administrator for a self-funded ERISA plan . . . ." Plaintiff's counsel was copied with this letter. Lastly, we have said that "[w]hen the incompleteness of discovery is raised as a defense to a motion for summary judgment, that party must establish that there is a likelihood that further discovery would supply the necessary information." Kaczorowska v. Nat'l Envelope Corp., 342 N.J. Super. 580, 591 (App. Div. 2001) (quoting J. Josephson, Inc. v. Crum & Forster Ins. Co., 293 N.J. Super. 170, 204 (App. Div. 1996) (internal quotation marks omitted)). Plaintiff has failed to demonstrate a likelihood that further discovery would belie the express language of the plan documents.
For the sake of completeness we address one final point. After the briefs were filed, plaintiff brought to our attention the Third Circuit's decision in US Airways, Inc. v. McCutchen, 663 F.3d 671 (3rd Cir. 2011), cert. granted, 80 U.S.L.W. 3707 (U.S. June 25, 2012), and the Ninth Circuit's decision in CGI Technologies & Solutions, Inc. v. Rose, __ F.3d __ (9th Cir. June 20, 2012). See R. 2:6-11(d). Succinctly stated, in McCutchen, id. at 676, the court recognized that an ERISA plan's right to reimbursement may be limited to "what is 'appropriate' under traditional equitable principles." Plaintiff argues that it would be inequitable if she is "required to reimburse an ERISA lien asserted against settlement proceeds if the lien is for medical costs that are unrelated to the settlement proceeds."
However, the issue in McCutchen was whether the ERISA plan was entitled to recover the entire amount "it had paid without allowance for McCutchen's legal costs, which had reduced his net recovery to less than the amount it demanded." Id. at 672. The court ultimately held that permitting a full recovery constitute[d] inappropriate and inequitable relief. Because the amount of the judgment exceeds the net amount of McCutchen's third-party recovery, it leaves him with less than full payment for his emergency medical bills, thus undermining the entire purpose of the Plan. At the same time, it amounts to a windfall for US Airways, which did not exercise its subrogation rights or contribute to the cost of obtaining the third-party recovery. Equity abhors a windfall. [Id. at 679.]
In Rose, id. at ___, the Ninth Circuit was asked to decide whether in granting "appropriate equitable relief" [a] court, in its balancing of equities, should take into account traditional equitable defenses that may limit [the ERISA plan's] recovery to less than full reimbursement . . . or instead give primacy to basic contract interpretation to entitle [the ERISA plan] to full reimbursement and to exempt [the ERISA plan] from responsibility for [Rose's] attorney's fees.
The court held that the parties "may not by contract deprive the . . court of its power to act as a court in equity" and directed the District Court to apply traditional equitable defenses to determine the amount to which the ERISA plan was entitled to recover.
In the case before us, plaintiff asserts no traditional equitable defenses. She has not claimed that the amount of United's lien represents a "windfall". Instead, she has argued that United is entitled to no reimbursement unless it proves the accident caused the injuries resulting in her surgery. Neither McCutchen nor Rose support such a claim.
More importantly, the plan document in McCutchen specifically provided:
If the Plan pays benefits for any claim you incur as the result of negligence, willful misconduct, or other actions of a third party, the Plan will be subrogated to all your rights of recovery. You will be required to reimburse the Plan for amounts paid for claims out of any monies recovered from a third party, including, but not limited to, your own insurance company as the result of judgment, settlement, or otherwise. [Id. at 673.]
As already noted, the language of the plan in this case was significantly broader and was triggered by plaintiff's own allegation that her neck injuries were caused by the motor vehicle accident.