PIP Carrier Not Entitled To Subrogate Against Health Insurance Carrier For Medical Expenses Paid In Error

Palisades Insurance Company (“Palisades”) filed a claim for reimbursement against Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) to obtain recoupment for health insurance benefits it paid to 4 insureds who were involved in automobile accidents and received treatment.  Palisades contended that it made those payments in error because the insureds had designated Horizon as the primary for payment of medical expenses incurred as a result of an automobile accident.  In Palisades Insurance Co. v. Horizon Blue Cross Blue Shield of New Jersey, 2021 N.J. Super. LEXIS 104 (App. Div. July 27, 2021), the plaintiff Palisades argued upon appeal that it should be entitled to be reimbursed for the health insurance expenses it paid under its personal injury protection (PIP) coverage for its insureds which should have been paid by the insureds’ health insurance carrier.

Pursuant to N.J.S.A. 39:6A-43(d), plaintiff (Palisades) allows its customers to designate their health insurance company as primary for payment of medical expenses incurred as a result of an automobile accident.  In this case, plaintiff’s insureds had opted to designate the defendant Horizon to provide medical coverage on a primary basis.  Each insured was involved in an automobile accident in which they received treatment.  Despite the designation, each insured and/or their provider requested payment of their medical expenses from Palisades.  With three of the insureds, Palisades sent a letter notifying Horizon that its subscribers had submitted expenses related to injuries suffered during motor vehicle accidents, and under the terms of their policies, Horizon was the primary provider of medical benefits.  Palisades requested confirmation that it would process the claims.  After Horizon failed to respond to the letters, Palisades voluntarily paid the claims of these three the insureds.

In the fourth case involving one of the insureds, Palisades began payment upon receipt of the claim.  Subsequently, it realized that the insured had selected the health care carrier as a primary designation on their automobile policy.  In that case, the insured requested confirmation from Horizon that it would provide primary coverage for their automobile accident related injuries.  Horizon responded with a letter indicating that their insured’s contract permitted only secondary coverage for PIP eligible expenses.  That prompted the fourth insured’s medical provider to send Palisades a letter, requesting that the insured’s coverage designation be changed to PIP’s primary.  Palisades then began to provide primary coverage for the remaining expenses.

Palisades filed a lawsuit requesting reimbursement under a theory of subrogation for the medical expenses it paid on behalf of these insureds.  The defendant Horizon filed for a summary judgment to dismiss the lawsuit. 

On the trial court level, the defendant Horizon argued that the statutory and regulatory schemes which govern the payment of automobile accident-related expenses amongst PIP and health insurers, do not provide any right of recovery to PIP insurers that voluntarily pay claims for which they are not liable.  Plaintiff Palisades contended that the payments were not voluntary because they were made only after its request for confirmation that the insureds held policies with the defendant health insurance carrier and that request went unanswered.  Plaintiff argued that the summary judgment was improper because it was in dispute whether the defendant Horizon properly processed their claims.  The trial court judge granted defendant’s motion for summary judgment, ruling that subrogation did not exist as to PIP–to health insurer reimbursement claims and dismissed the complaint with prejudice.

The plaintiff Palisades appealed that ruling and argued that the judge made a mistake in concluding that there was no subrogation right.  While it acknowledged that the automobile statute “does not expressly permit inter-company reimbursements amongst PIP and health insurers,” it contended that “the insurance industry has developed a practice, which defendant refuses to honor, of voluntarily providing reimbursements when overpayments are made.”  Further, Palisades argued that the No-Fault Act “simply does not contemplate a situation where a health insurer refuses to acknowledge or address a dispute,” Palisades argued that this situation puts PIP insurers “between a rock and a hard place in that PIP providers are subject to penalties if prompt payments are not made.”  Finally, the plaintiff argued that the No-Fault Act does not preclude health insurance–to-PIP reimbursement and it should be permitted to proceed with its claim.

After reviewing the statute and pertinent regulations, the Appellate Division noted that No-Fault requires PIP insurers to make prompt payment of claims.  However, if a PIP insurer provides secondary coverage, the duty to provide primary coverage arises only after it has received notice that the health insurer has determined it will not act as the primary.  When a PIP-as-secondary insurer receives a claim eligible for primary coverage, the Appellate Division noted that it must deny coverage and send the insured a notice advising them to submit the claim to their health insurer.  Health insurers are also required to make prompt payments of claims.  They are required to pay claims within thirty (30) calendar days of receipt if submitted electronically or forty (40) calendar days as submitted by other means.  However its duty to pay does not arise until it has received a claim directly from the insured or a healthcare provider.

The Court noted that reimbursements of payments incorrectly made by auto carriers are permitted by inter-company agreement or arbitration amongst PIP insurers.  However, the Appellate Division stated that health insurers are not subject to PIP arbitration.  Therefore, the No-Fault statutes do not provide an enforcement mechanism that PIP carriers may use against health insurers.  However, the regulatory scheme “depends upon PIP insurers to deny claims falling under primary coverage, in order to notify the healthcare providers that the expenses must be submitted to the health insurer for payment.”  The Appellate Division noted that “[w]hen a PIP carrier voluntarily pays a claim it is only secondarily liable for the [Commissioner of Banking] scheme breaks down, in that the provider remains unaware that the claim was improperly submitted, removing any incentive for the provider to pursue the health insurer.”

More specifically as to the claims of the insureds in which the plaintiff did not receive any response from the health insurer as for coverage, nothing under the No-Fault or Commissioner of Banking laws required the health insurer to respond, or process the alleged claims, until they were properly submitted.

As for the fourth insured in which the plaintiff did receive notice that the healthcare provider was not acting as the primary insurer, the plaintiff Palisades did become obligated to provide primary coverage despite the insureds designation as its health carrier as primary.  The Appellate Division ruled that its recourse “is not reimbursement from defendant, rather, it is to recover the premium reductions the insured saved as electing health as primary on their auto policy.”  The Court further noted that “[i]f plaintiff believed that defendant unreasonably denied coverage, it could have requested that this insured pursued defendant’s internal appeals process, or obtained an assignment of rights from the insured and pursued the appeal itself.” 

The Appellate Division noted that, instead, the plaintiff’s PIP carrier simply paid the claim. However, it has failed to establish any right of subrogation.  It has not provided an assignment of rights executed by its insured, nor is there any statutory right to subrogation under the No-Fault laws.  It may seek reimbursement from the healthcare providers that it paid out of turn or it must obtain an assignment of its insureds’ rights.  The Appellate Division ruled, however, that the PIP carrier may not recover the funds it paid toward expenses eligible for primary coverage directly from the health insurance carrier.

The bottom line is that the Appellate Division ruled that there is no cause of action for subrogation which allows a PIP carrier to pursue a health insurance carrier for reimbursement for claims mistakenly paid by it for injuries suffered in an automobile accident.

Tags: PIP, reimbursement, subrogation