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Kimba Medical Supply v. Allstate Insurance Company of N.J.

Superior Court of New Jersey, Appellate Division

July 5, 2013

KIMBA MEDICAL SUPPLY, a/s/o CARLOS GALEANO, Plaintiff-Respondent/ Cross-Appellant,
ALLSTATE INSURANCE COMPANY OF NJ, Defendant-Respondent, and NATIONAL ARBITRATION FORUM, FORTHRIGHT, Defendant-Appellant/ Cross-Respondent. ROY J. PICKELL, Plaintiff-Respondent,

Argued March 11, 2013

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4482-11 (A-1443-11T2) and Chancery Division, Ocean County, Docket No. C-138-11 (A-1902-11T2).

Arthur J. Timins argued the cause for appellant/cross-respondent National Arbitration Forum, Forthright in A-1443-11T2 and for appellant Forthright in A-1902-11T2 (Shiriak & Timins, attorneys; Mr. Timins, on the briefs).

Sean T. Hagan argued the cause for respondent/cross-appellant Kimba Medical Supply in A-1443-11T2.

David J. Klinger argued the cause for respondent Allstate in A-1443-11T2 (Gutterman, Markowitz & Klinger, LLP, attorneys; Mr. Klinger and Frank W. Farrell, on the brief).

Deborah J. Davison argued the cause for respondent Roy J. Pickell in A-1902-11T2 (Law Offices of Riaz A. Mian, attorneys; Ms. Davison, on the brief).

Michael R. Eatroff argued the cause for respondent Travelers in A-1902-11T2 (Methfessel & Werbel, attorneys; Mr. Eatroff, on the brief).

Before Judges Parrillo, Sabatino and Fasciale.



These two companion[1] appeals, both arising out of cases involving contested automobile personal injury protection ("PIP") benefits, raise a common jurisdictional question. The common question concerns whether the trial court, under the New Jersey Alternative Procedure for Dispute Resolution Act ("APDRA"), N.J.S.A. 2A:23A-1 to -19, and associated PIP regulations cross-referencing that statute, has the authority to remand unresolved factual questions to a dispute resolution professional ("DRP") after that court has vacated or modified a DRP's decision. The organization that contractually provides the State with DRPs who hear PIP matters, Forthright, insists that the trial court has no such power to remand any PIP cases. Consequently, Forthright does not want to proceed with the present cases a second time, despite remand orders from the trial court directing it to do so.

Exercising our supervisory appellate function, we reject Forthright's interpretation of the law. We conclude that Sections 13 and 14 of the APDRA, N.J.S.A. 2A:23A-13 and -14, must be sensibly construed to authorize such remands to a DRP, in certain limited situations where a PIP arbitration award has been judicially vacated or modified. We therefore affirm the trial judges' sound decisions to remand each of these two PIP cases to Forthright in the circumstances presented, so that open issues can be decided in that arbitral forum on an appropriate record. In addition, we affirm the trial judge's separate ruling in A-1443-11 determining the PIP coverage limits that apply to the insured in that particular case.


Pursuant to N.J.S.A. 39:6A-5.1(a) ("the PIP statute"), "[d]isputes between an insurer and a claimant as to whether benefits are due under the PIP statute may be resolved, at the election of either party, by binding arbitration or by civil litigation." Riverside Chiropractic Grp. v. Mercury Ins. Co., 404 N.J.Super. 228, 235 (App. Div. 2008). The Legislature has empowered the Commissioner of Banking and Insurance to designate an organization to serve as an arbitration forum for such PIP disputes, where the parties have elected that procedure. N.J.S.A. 39:6A-5.1(b). The organization that presently serves in that capacity is Forthright, otherwise known as the National Arbitration Forum ("NAF"). The submissions on appeal and the Department's website indicate that over 50, 000 PIP cases are filed with that arbitral forum each year.[2]

The Legislature has further authorized the Commissioner to adopt rules and regulations for the conduct of such PIP arbitration proceedings. N.J.S.A. 39:6A-5.1(b). The Commissioner has duly adopted such regulations, which are codified at N.J.A.C. 11:3-5.1 to -5.12. Among other things, the statute specifies that "[a]ll decisions of the [DRP] shall be in writing, . . . shall state the issues in dispute, [and] the findings and conclusions on which the decision is based[.]" N.J.S.A. 39:6A-5.1(c) (emphasis added); see also N.J.A.C. 11:3-5.6(d) (mandating such findings and other requirements).

The PIP statute further declares that "[a]ll decisions of a [DRP] shall be binding." N.J.S.A. 39:6A-5.1(c). However, both the Commissioner's own regulations and case law allow for a limited right of review of the DRP's rulings in the Superior Court, following internal review procedures that may be available within the arbitral forum itself.

Most significantly, the Commissioner has incorporated aspects of the APDRA to govern PIP arbitrations in the designated forum. See N.J.A.C. 11:3-5.6(g) (declaring that "[t]he final determination of the [DRP] shall be binding upon the parties, but subject to clarification/modification and/or appeal as provided by the rules of the dispute resolution organization, and/or vacation, modification or correction by the Superior Court in an action filed pursuant to N.J.S.A. 2A:23A-13 for review of the award"). In that vein, we have held that "when [a]lternative [d]ispute [r]esolution is applied to PIP disputes, it must be conducted pursuant to the APDRA." Riverside Chiropractic, supra, 404 N.J.Super. at 235 (citing Coalition for Quality Health Care v. N.J. Dep't of Banking & Ins., 348 N.J.Super. 272, 312 (App. Div.), certif. denied, 174 N.J. 194 (2002)).

The APDRA's mechanism for the limited review of decisions made by neutral DRPs, [3] N.J.S.A. 2A:23A-13 ("Section 13"), which the Commissioner has adopted for PIP arbitrations, is at the heart of the present appeals. Because Section 13 is critical to our analysis, we initially present the relevant full portions of its text here for ease of reference:

Application to court for review of award[.]
a. A party to an alternative resolution proceeding shall commence a summary application in the Superior Court for its vacation, modification or correction within 45 days after the award is delivered to the applicant, or within 30 days after receipt of an award modified pursuant to subsection d. of [s]ection 12 of this act, unless the parties shall extend the time in writing. The award of the umpire shall become final unless the action is commenced as required by this subsection.
b. In considering an application for vacation, modification or correction, a decision of the umpire on the facts shall be final if there is substantial evidence to support that decision; provided, however, that when the application to the court is to vacate the award pursuant to paragraph (1), (2), (3), or (4) of subsection c., the court shall make an independent determination of any facts relevant thereto de novo, upon such record as may exist or as it may determine in a summary expedited proceeding as provided for by rules adopted by the Supreme Court for the purpose of acting on such applications.
c. The award shall be vacated on the application of a party who either participated in the alternative resolution proceeding or was served with a notice of intention to have alternative resolution if the court finds that the rights of that party were prejudiced by:
(1) Corruption, fraud or misconduct in procuring the award;
(2) Partiality of an umpire appointed as a neutral;
(3) In making the award, the umpire's exceeding their [sic] power or so imperfectly executing that power that a final and definite award was not made;
(4) Failure to follow the procedures set forth in this act, unless the party applying to vacate the award continued with the proceeding with notice of the defect and without objection; or
(5) The umpire's committing prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution.
. . . .
f. Whenever it appears to the court to which application is made, pursuant to this section, either to vacate or modify the award because the umpire committed prejudicial error in applying applicable law to the issues and facts presented for alternative resolution, the court shall, after vacating or modifying the erroneous determination of the umpire, appropriately set forth the applicable law and arrive at an appropriate determination under the applicable facts determined by the umpire. The court shall then confirm the award as modified.
[N.J.S.A. 2A:23A-13.]

As we have previously recognized, the APDRA's enumerated grounds for vacating an award under subsection 13(c) are limited. See Riverside Chiropractic, supra, 404 N.J.Super. at 235 (noting that "[t]he APDRA sets strict limits on the appeal of an arbitration award").[4] Assuming that the enumerated grounds for relief are not met, the decision of the DRP (or, as the APDRA describes the neutral, the "umpire") "shall be final if there is substantial evidence to support [his or her] decision." N.J.S.A. 2A:23A-13(b).

To expedite the achievement of finality, the statute further prescribes in Section 18 that, after the trial court's review of the decision, "[t]here shall be no further appeal or review of the judgment or decree." N.J.S.A. 2A:23A-18(b). However, case law has clarified that our appellate courts retain the discretion to exercise supervisory authority over such trial court rulings for reasons of public policy. See Mt. Hope Dev. Assocs. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 152 (1998); see also Riverside Chiropractic, supra, 404 N.J.Super. at 235-36.

The core question presented here is whether, within this scheme of alternative dispute resolution for PIP matters patterned after the APDRA, a trial court possesses the inherent authority to refer certain PIP arbitration cases back to the DRP or alternative dispute resolution forum, in instances where additional fact-finding or other decision-making on unresolved material issues is necessary. Before we address that question, we provide, for context, a summary of the relevant facts and procedural history in the two companion appeals.

Pickell (A-1902-11)

On or about April 20, 2007, Roy J. Pickell, plaintiff in A-1902-11, was involved in a motor vehicle accident. Pickell thereafter sought and received medical treatment for injuries, which he alleges were a direct and proximate result of that accident.

Pickell submitted claims for payment to his automobile insurer, defendant Travelers Auto Insurance Company ("Travelers"), under the PIP provision in his private passenger policy, seeking medical expense benefits and reimbursements for treatment allegedly related to the accident. Travelers initially made certain payments to Pickell, but then stopped doing so. The unpaid expenses that remain at issue include $133, 337.72 for various prescription medications, as well as medical deductibles that Pickell paid to Garden State Pain Control and another $1, 495.86 he paid to an orthopedist.

In January 2010, as a result of Travelers' refusal to cover Pickell's disputed medical expenses, Pickell filed a demand for arbitration against Travelers with the NAF, now known as Forthright. In his arbitration demand, Pickell requested reimbursement for the unpaid bills, the payment of future expenses, and pre-certification for recommended knee replacement surgery. Among other things, Travelers specifically disputed the sizeable prescription payments, based on its contention that the benefits sought lacked a causal relationship to the subject accident.

On May 10, 2011, an arbitration hearing was conducted before the DRP assigned by Forthright. After the DRP considered the matter, a letter of award was mailed to the parties with his decision, relieving Travelers of liability under PIP to pay for the requested medical expenses. Among other things, the letter of award summarized Travelers' reasons for disputing causation, noting Travelers' reliance upon a report submitted by an expert physician, who opined that none of Pickell's treatment proposals were related to the subject accident.

The DRP did not, however, make any determination on the causation issue. Rather, the DRP based his decision solely on a finding of misrepresentation by Pickell, the insured. In particular, the DRP noted Pickell had produced pharmacy records reflecting overlapping prescriptions for the same drugs seemingly provided to him by two different physicians. As the DRP noted in his decision:

I have carefully reviewed the proofs submitted in this matter and have considered the arguments of counsel and I find that respondent [Travelers] has proven by a preponderance of the evidence that . . . claimant [Pickell] did, in fact, misrepresent material facts concerning the prescribing of and the obtaining of prescription medication, the bulk of which constitutes the basis for the within claim. Therefore, this precludes the claimant from recovering any part of his claim and the claims pressed herein are denied in their entirety.

Because the DRP rested his analysis entirely upon a finding of the insured's misrepresentation, he did not reach the other contested issues in the matter, including causation.

After receiving the DRP's adverse decision, Pickell filed a verified complaint and order to show cause in the Law Division, seeking to vacate the award in its entirety pursuant to N.J.S.A. 2A:23A-13. Through his counsel, Pickell further requested to have the court schedule the matter for a hearing to consider testimony and other evidence "and make an independent determination of the facts relevant thereto de novo as it may determine in a summary expedited proceeding[.]" Pickell argued, in relevant part, that there was no actual overlap in the filled prescriptions and that he therefore did not make any fraudulent misrepresentations to Travelers.

The order to show cause was argued before Hon. John A. Peterson, Jr., J.S.C. Upon considering the parties' arguments and the written submissions, Judge Peterson concluded that Travelers' claims of misrepresentation and prescription abuse by Pickell were unfounded. In particular, the judge found that the left margin on one of the prescription logs provided by Pickell to Travelers had been cut off during its reproduction. The cutoff document incorrectly seemed to indicate that certain prescriptions had been provided to Pickell during the months of January and February of 2008, when, in fact, a complete copy of the documents showed that those drugs were actually prescribed in November and December of 2008. The correctly-copied documents thus conclusively refuted Travelers' earlier claims of misrepresentation and prescription abuse. Given this photocopying glitch, Judge Peterson concluded that the DRP's award had been based upon erroneous facts.[5]

At oral argument before Judge Peterson, Travelers did not dispute, in light of the corrected photocopies, that the arbitration award had been erroneous and should be vacated. Instead, Travelers contended that, upon the court vacating the DRP's award, the appropriate process would be to remand the matter back to Forthright for a new hearing before a DRP on the merits. Conversely, Pickell's counsel argued that the trial court was constrained to retain its jurisdiction and to adduce additional proofs itself, pursuant to N.J.S.A. 2A:23A-13(b).

Ultimately, Judge Peterson vacated the award in its entirety, concluding that:

[I]n applying [N.J.S.A. 2A:23A-13] in conjunction with the Forthright rules, the [c]ourt looks at N.J.S.A. 2A:23A-13(c) and certainly subsection (5) [i.e., N.J.S.A. 2A:23A-13(c)(5)] without a doubt applies herein and that reads that, "The umpire's committing prejudicial error by erroneously applying law to the issues and facts presented for alternate resolution."
There's no question whatsoever about this individual's . . . misapplying the law to the issues and the facts. That is a given. It's virtually conceded herein.
. . . .
[W]ith the [c]ourt having reviewed the statutory parameters as well as the Forthright rules and finding that subsection (5) [of N.J.S.A. 2A:23A-13(c)] clearly has been established, a remand is the appropriate relief before this [c]ourt.
[Emphasis added.]

On September 30, 2011, an order memorializing Judge Peterson's decision was entered. The order specified that (1) the matter be remanded to Forthright, (2) Forthright set the matter down for an arbitration hearing to occur on an expedited basis, and (3) Forthright was precluded from assigning the case to the same DRP, given his overturned prior ruling.

Pickell's counsel forwarded the trial court's order to Forthright, requesting that Forthright, as judicially directed, schedule the arbitration hearing. Instead, Forthright filed a motion to intervene as of right pursuant to Rule 4:33-1, seeking to vacate "that part of the order of ...

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