ROBERT WOOD JOHNSON UNIVERSITY HOSPITAL VS. PLYMOUTH ROCK ASSURANCE INSURANCE COMPANY (L-4307-16, MIDDLESEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4195-17T3
ROBERT WOOD JOHNSON
UNIVERSITY HOSPITAL,
Plaintiff-Respondent,
v.
PLYMOUTH ROCK
ASSURANCE INSURANCE
COMPANY and JOSEPH
CALDERONE,
Defendants-Appellants,
and
HORIZON NJ
HEALTH,
Defendant.1
1
Defendant Horizon NJ Health ("Horizon") was not served with the Notice of
Appeal and did not participate in this appeal. By letter dated September 28,
2016, counsel for Horizon asked the trial court to pend any formal answer or
motion from Horizon, as it appeared plaintiff was primarily pursuing Plymouth
Rock Assurance Company ("Plymouth Rock").
In support of this non-involvement, Horizon's counsel referred to N.J.A.C.
11:3-14.5(a), which prohibits naming a Medicaid provider as primary for
_____________________________
Argued May 28, 2019 – Decided June 25, 2019
Before Judges Sabatino, Haas and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Middlesex County, Docket No. L-4307-16.
Glenn D. Curving argued the cause for appellants
(Riker Danzig Scherer Hyland & Perretti LLP,
attorneys; Glenn D. Curving, of counsel and on the
briefs; Peter M. Perkowski, Jr., on the briefs).
Kristen Ottomanelli argued the cause for respondent
(Celentano, Stadtmauer & Walentowicz, LLP,
attorneys; Kristen Ottomanelli and Steven Stadtmauer,
on the brief).
PER CURIAM
Defendant Plymouth Rock Assurance Insurance Company appeals from
the trial court's rulings on cross-motions for summary judgment. Defendant also
appeals the trial court's award of $184,040.98 in favor of plaintiff Robert Wood
Johnson University Hospital ("plaintiff" or "RWJUH"), which was rendered
after a subsequent bench trial. Defendant contends that the trial court
purposes of personal injury protection ("PIP"), and as such, defendants "are
unable to invoke Bailey v. Garden State Hosp. Plan Rights see 280 N.J. Super.
206 (Law Div. 1994)." Horizon's position was that "the hospital expenses
associated with injuries caused by the motor vehicle accident in question are the
responsibility of Plymouth as the personal injury protection carrier."
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improperly granted summary judgment to plaintiff on the issue of liability for
unpaid bills incurred by Joseph Calderone ("Calderone" or "the insured") who
was insured by defendant at the time he was involved in a serious accident that
caused his stay at RWJUH. Having reviewed the record and the governing law,
we conclude that defendant properly processed the claim to maximize the
benefits to its insured as expressly permitted by Bailey v. Garden State Hosp.
Plan Rights, 280 N.J. Super. 206 (Law Div. 1994), aff'd, 290 N.J. Super. 277(App. Div. 1996). We therefore reverse the trial court's summary judgment
orders and vacate the damages award.
We derive the following facts from the record. In September 2015,
Calderone was in a serious auto accident, which rendered him quadriplegic. He
received inpatient hospital services from plaintiff between September 16, 2015
and September 28, 2015 as a result of this accident, the charges for which totaled
$393,774.72.
At the time of the accident, Calderone was insured under an automobile
policy issued to him by the High Point Property and Casualty Insurance
Company, which was administered by defendant. The High Point Policy
provided personal injury protection ("PIP") benefits to Calderone in the
statutory maximum amount of $250,000. Among other things, the High Point
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Policy provided coverage for approved medical expenses, as well as the cost of
home modifications and renovations needed to make the insured's house
handicap accessible.
As a result of Calderone's severe injuries, he needed extensive home
modifications. To accommodate these modifications, defendant deferred
consideration and payment of other medical invoices pending payment of home
modification expenses.
Defendant paid $184,040.98 in home modification costs and $65,959.02
in approved medical expenses that were incurred as a result of Calderone's
accident. These payments exhausted Calderone's available coverage under his
automobile policy.
When defendant received Calderone's bill for his treatment at RWJUH, it
informed Calderone of the exhaustion of his coverage and advised him to submit
any unpaid invoices to his health care insurance provider. At that time,
Calderone was insured under a Medicaid HMO policy provided and
administered by Horizon NJ Health ("Horizon").
Plaintiff subsequently sought payment of its invoices from defendant, but
was advised that payment would not be forthcoming due to the exhaustion of
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Calderone's policy limits. Plaintiff filed the instant complaint seeking payment
of the invoices.
Each party filed cross-motions for summary judgment on the issue of
whether defendant was liable for the cost of Calderone's medical expenses
incurred at RWJUH. Defendant argued that it was entitled to summary judgment
on the issue of liability because, pursuant to Bailey v. Garden State Hosp. Plan
Rights, 280 N.J. Super. 206 (Law Div. 1994), aff'd, 290 N.J. Super. 277 (App.
Div. 1996), it correctly maximized Calderone's PIP coverage by paying for the
cost of his home modifications before paying for plaintiff's claims. Plaintiff
argued that as a matter of law, Bailey does not apply because Medicaid can never
be an insured's primary insurer. Thus, Calderone was required to exhaust his
PIP coverage before Medicaid would pay for his medical expenses. The trial
court denied defendant's motion, and granted plaintiff's motion. The court
stated:
[W]hat's before me is a denial of a claim predicated
upon the – that the medical carrier, Horizon Health, is
responsible for all medical bills is inappropriate. Now,
how those bills could have or should have been paid is
wrong. But, certainly, High Point is presumed and
legally responsible for understanding that a Medicaid
carrier cannot be selected under Bailey as the primary.
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So, for that, -- and whether there's damages or the
amount of damages are not for me to determine at this
point[.]
The matter then proceeded to a damages trial where the trial court awarded
plaintiff $184,040.98, finding that defendant should have timely paid plaintiff's
bills for Calderone's treatment at RWJUH, but did not.
The court continued:
[Plaintiff] was entitled to be paid for the hospital
services it rendered to Calderone, whether or not such
claims exceeded the policy limit in light of High Point’s
misconduct. See, e.g., Katzian v. Barr, 81 N.J. 360, 367
(1979). Indeed, [plaintiff] should be put in the same
position that it would have been if High Point had
followed the law.
This appeal ensued.
On appeal, defendant contends that the trial court erroneously granted
summary judgment to plaintiff and notes that both the trial court and plaintiff
focused on the incorrect issue of whether Calderone was able to designate
Medicaid as his primary insurer for medical expenses. In fact, defendant
acknowledges that it was Calderone's primary insurer. Defendant argues that
the correct issue is whether, as Calderone's primary insurer, defendant was
permitted under Bailey to pay for home modification expenses that arose in
connection with Calderone's injuries. We conclude that Bailey controls and
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reverse the trial court's grant of summary judgment to plaintiff and denial of
summary judgment to defendant.
The standard of review for a grant of summary judgment is de novo.
Conley v. Guerrero, 228 N.J. 339, 346 (2017) (citing Templo Fuente De Vida
Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016)).
[W]hen deciding a motion for summary judgment under
Rule 4:46–2, the determination whether there exists a
genuine issue with respect to a material fact challenged
requires the motion judge to consider whether the
competent evidential materials presented, when viewed
in the light most favorable to the non-moving party in
consideration of the applicable evidentiary standard,
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,
523 (1995).]
"[S]ummary judgment will be granted if there is no genuine issue of
material fact and 'the moving party is entitled to a judgment or order as a matter
of law.'" Conley, 228 N.J. at 346 (quoting Templo Fuente, 224 N.J. at 199).
Plaintiff contends that defendant's handling of the claim violated federal
law dictating that Medicaid is always a payer of last resort and state law that
prohibits designating Medicaid as primary for purposes of PIP. In that regard,
Congress established the Medicaid Program, 42 U.S.C. §§ 1396 to 1396w-5, "for
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the purpose of providing federal financial assistance to States that choose to
reimburse certain costs of medical treatment for needy persons." Harris v.
McRae, 448 U.S. 297, 301 (1980). "Congress, in crafting the Medicaid
legislation, intended that Medicaid be a 'payer of last resort.'" Ark. Dept. of
Health and Human Servs. v. Ahlborn, 547 U.S. 268, 291 (2006).
Similarly, New Jersey's Medicaid program directs "that benefits provided
[by the New Jersey Medical Assistance and Health Services Act] shall be the
last resource benefits notwithstanding any provisions contained in contracts,
wills, agreements or other instruments." N.J.S.A. 30:4D-2. As a result, the
Department of Medical Assistance and Health Services (DMAHS), which
administers the New Jersey Medicaid program, N.J.A.C. 10:49-1.1(a),
promulgated N.J.A.C. 10:49-7.3, which states, in pertinent part:
(a) Third-party liability (TPL) exists when any person,
institution, corporation, insurance company, health
insurer, self-insured plan, group health plan as defined
in section 607(1) of the Federal Employee Retirement
and Income Security Act of 1974, 29 U.S.C. § 1167(1),
service benefit plan, managed care organization or
other prepaid health plan, pharmacy benefits manager,
third-party administrator as defined in N.J.S.A.
17B:27B–1, absent parent, Medicare program, or any
other public, private, or governmental entity or party is
or may be liable in contract, agreement, tort, or
otherwise by law or equity to pay all or part of the cost
of medical assistance payable by the Medicaid or NJ
FamilyCare program.
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....
(b) Medicaid and NJ Family Care benefits are last-
payment benefits. All TPL, for example, health
insurance, Medicare, CHAMPUS, prepaid health plans,
workers' compensation, and auto insurance, shall, if
available, be used first and to the fullest extent in
meeting the cost of the medical needs of the Medicaid
or NJ Family Care beneficiary, subject to the
exceptions listed in (h) below. If, at the time the
provider's claim is filed, either the existence of third-
party liability cannot be established or third-party
benefits are not available to pay the beneficiary's
medical expenses at the time the provider's claim is
filed, then the Division will pay the full amount allowed
under its payment schedule and seek post-payment
recovery in accordance with 42 CFR 433.139(c), (d)(2),
and (d)(3).
[(Emphasis added).]
Although automobile insurers in New Jersey are permitted to offer
applicants the option to designate their health insurance providers as the primary
payer of PIP benefits, see N.J.S.A. 39:6A-4.3(d), those insured through
Medicaid are not permitted to designate their Medicaid insurer as primary for
PIP coverage. See N.J.A.C.11:3-14.5(a). Thus, "[a]s a matter of New Jersey
law, . . . as between Medicaid and no-fault insurance, it is plain that no-fault is
primary." Lusby By and Through Nichols v. Hitchner, 273 N.J. Super. 578, 585
(App. Div. 1994).
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We find, however, that the fact that Calderone designated his Medicaid
provider as primary is a red herring. Despite the designation, defendant
acknowledged its status as primary insurer and, ultimately, it provided medical
coverage on a primary basis and exhausted its $250,000 policy limits. Thus,
defendant's instructions to Calderone that, upon exhaustion of its policy limits,
any remaining medical bills should be submitted to his health insurance in no
way contravened the laws dictating that Medicaid is to be the "payer of last
resort." See Ahlborn, 547 U.S. at 291; N.J.S.A. 30:4D-2. As defendant
exhausted Calderone's coverage, Medicaid, as the payer of last resort, must now
step in to cover Calderone's remaining medical expenses in accordance with the
terms of its policy and its contract with the hospital.
The pertinent issue here is the allocation of coverage, i.e., if PIP can
choose to pay anticipated medical expenses for home modification first and,
once those expenses are covered, use the remaining coverage under the policy
to cover bills for hospital and other medical providers. In a well-reasoned
decision, the Honorable Robert Longhi, A.J.S.C., held that in cases of
catastrophic injuries, insurers are permitted to allocate coverage to maximize
benefits for the injured policy holder. See Bailey, 280 N.J. Super. at 212.
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In Bailey, the plaintiff incurred extensive medical bills and home
modification costs, which exceeded her $250,000 in PIP coverage, as the result
of an auto accident that rendered her quadriplegic. Id. at 209. She was insured
under an auto policy administered by Prudential that provided her PIP coverage
and a private medical insurance plan provided by the Garden State Hospital Plan
("Garden State"), which did not cover home modifications. Id. at 208-09. The
plaintiff was faced with a situation where the payment of her first-submitted
medical bills would exceed her PIP policy limits, leaving no money for the
payment of needed home modification costs. Id. at 209-10. Thus, the plaintiff
requested that Prudential satisfy costs that would be incurred for home
modification benefits prior to paying other earlier submitted medical bills. Id.
at 210. This was opposed by Garden State, which argued that as the "primary
insurer," Prudential was required to consider and pay all medical bills in the
order of receipt. Ibid.
The court determined that the ultimate objective should be to allocate
coverage to maximize benefits available to a grievously injured policyholder,
and to that end, notions of "primary" and "secondary" coverage were largely
irrelevant and should not control allocation of insurance benefits. Id. at 212.
The court recognized that although the plaintiff's auto policy was "primary", and
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therefore, "at first blush" Prudential would be required to pay health benefits in
chronological order until its policy limits had been exhausted, doing so "would
create an injustice in the event of a catastrophic injury[.]" Ibid. The court noted
that "[i]t is simply unfair to have payment of expenses determined by
happenstance. Yet, that is exactly what Garden State is asking to do when two
or more policies of medical insurance exist. Coverage should not depend on the
fortuity of when certain bills accrue or are received." Id. at 214.
This case is exactly on point under Bailey. As in Bailey, Calderone was
catastrophically injured and rendered quadriplegic in an automobile accident.
See id. at 209. As in Bailey, defendant, acting as Calderone's primary insurer,
anticipated that the necessary modifications to Calderone's home would utilize
a significant portion of his coverage. See id. at 210. As the court recognized in
Bailey, requiring defendant to pay for the claims arising from an insured's
accident in chronological order "would create an injustice" when accidents cause
catastrophic injuries and claims must be prioritized in this manner. See id. at
212. Thus, it would be "simply unfair to have payment of expenses determined
by happenstance. . . . Coverage should not depend on the fortuity of when
certain bills accrue or are received." See id. at 214.
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We affirmed Bailey, 290 N.J. Super. 277 (App. Div. 1996), and now re-
endorse its holding that in cases of catastrophic injury, PIP carriers are permitted
to allocate coverage to maximize benefits for its insureds. We discern no
reasoned basis to distinguish cases where a private insurance carrier must
provide coverage once PIP is exhausted, and cases where Medicaid, as the payer
of last resort, must do so. Accordingly, we conclude defendant processed the
claim in good faith for the benefit of its insured, and in justifiable reliance on
the decision in Bailey.
Because we are reversing the trial court's rulings on summary judgment,
we must also vacate the damages awarded to plaintiff. While appellate review
of a bench trial is limited, we review conclusions of law de novo. See
Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
An insurance carrier may be liable for payments even if such payment
exceeds the policy's coverage limit, if the manner in which the carrier has
handled a claim evidences "misconduct or bad faith." Kotzian v. Barr, 81 N.J.
360, 367 (1979). See also N.J. Mfrs. Ins. Co. v. Nat'l Cas. Co., 393 N.J. Super.
340, 352-53 (App. Div. 2007) (finding that an insurance carrier can be liable for
claims that exceed the policy's coverage limits when it acts in bad faith).
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The trial court briefly cited to Kotzian, to support its decision to grant
damages above the $250,000 statutory maximum. However, Kotzian would
apply only if defendant's handling of Calderone's claims evidenced "misconduct
or bad faith." See 81 N.J. at 367. Here, defendant acted in good faith reliance
on Bailey, which is evidenced by the fact that it actually exhausted Calderone's
policy in paying for his necessary home modifications. Thus, because
defendant's actions did not evidence "misconduct or bad faith," the trial court's
reliance on Kotzian was misplaced. See ibid. Therefore, we vacate the trial
court's award of damages. We do so without prejudice to the hospital seeking
full or partial payment from Horizon, the Medicaid administrator, consistent
with the terms of the Medicaid program.
To the extent we have not specifically addressed any arguments raised by
plaintiff, we conclude they lack sufficient merit to warrant discussion in a
written opinion. R. 2:11-3(e)(1)(E).
Reversed. We do not retain jurisdiction.
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