14 Fla. L. Weekly Supp. 438b

NOT FINAL VERSION OF OPINION
Subsequent Changes at 14 Fla. L. Weekly Supp. 1013a

Insurance — Personal injury protection — Coverage — Exhaustion of policy limits — Escrow of disputed amount — Insurer was not required to reserve remaining PIP benefits when claim was paid in reduced amount or denied — However, where there were sufficient benefits to pay medical provider’s claim at time insurer denied claim on erroneous belief that provider was required to register as clinic, and insurer disregarded provider’s priority claim and exhausted benefits on subordinate claims, insurer is responsible for provider’s claim as well as interest and penalties

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. JRA DIAGNOSTICS, INC., f/k/a R.O.M. DIAGNOSTICS OF ORANGE COUNTY, as assignee of Mary Taylor, Appellee. Circuit Court, 9th Judicial Circuit (Appellate) in and for Orange County. Case No. CVA1-05-60. L.C. Case No. SCO-03-005361. March 8, 2007. Appeal from the County Court for Orange County, Nancy L. Clark, Judge. Counsel: Hinda Klein, Conroy, Simberg, Ganon, Krevans and Abel, P.A., Hollywood, for Appellant. Thomas Andrew Player, Weiss Legal Group, P.A., Maitland, for Appellee.

(Before J. ADAMS, KIRKWOOD, and ROCHE, JJ.)

FINAL ORDER AFFIRMING TRIAL COURT’S“ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT”AND GRANTING “APPELLEE’S AMENDED MOTION TO TAX ATTORNEY’S FEES AND COSTS”

(PER CURIAM.) State Farm Mutual Automobile Insurance Company (State Farm) timely appeals the trial court’s summary judgment entered on June 1, 2005 in favor of JRA Diagnostics (JRA). This Court has jurisdiction. See Fla. R. App. P. 9.030(c)(1)(A). The facts contained in the record are as follows:

On February 25, 2003, Mary Taylor executed an assignment of PIP benefits in favor of JRA. The assignment directed State Farm to hold any reduced or denied claims in reserve until the parties resolved the disputed amount.¹ On May 16, 2003, JRA filed suit against State Farm seeking $522.82, plus statutory interest, for services rendered to Mary Taylor for injuries that she sustained in an automobile accident. State Farm filed an answer on October 7, 2003 asserting that JRA was not registered as a clinic with the Department of Health as required by section 456.0375, Florida Statutes. State Farm then filed a motion for summary judgment based on JRA’s failure to register as a clinic with the Department of Health. JRA filed a response to State Farm’s motion and filed its own motion for summary judgment.

State Farm then moved to amend its answer and affirmative defenses. The trial court allowed the amendment and State Farm filed another motion for summary judgment arguing that the insured’s benefits were exhausted at the time suit was filed and thus, State Farm was not responsible for payment of JRA’s claim. JRA filed its own motion for summary judgment regarding this issue. The trial court held a hearing on April 26, 2005. At the hearing, State Farm withdrew its motion for summary judgment regarding JRA’s failure to register as a clinic with the Department of Health. On June 1, 2005, the trial court entered an order granting JRA’s motion for summary judgment and denying State Farm’s motion for summary judgment.

State Farm filed a motion for rehearing on June 6, 2005, based on Simon v. Progressive Express Ins. Co., 904 So. 2d 449 (Fla. 4th DCA 2005). On June 16, 2005, the trial court entered an order denying State Farm’s motion for rehearing. This appeal followed.

The standard of review for summary judgment is de novo. Krol v. City of Orlando, 778 So. 2d 490 (Fla. 5th DCA 2001) (citations omitted). Accordingly, this Court must determine if there is any genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Id. citing Fla. R. Civ. P. 1.510(c). It is the moving party’s burden to show that no genuine issue of material fast exists. Id. (citation omitted). Therefore, this Court must consider the evidence in the light most favorable to the nonmoving party, and if the slightest doubt exists, summary judgment must be reversed. Id.

On appeal, State Farm argues that the trial court incorrectly granted summary judgment in favor of JRA because policy benefits were exhausted at the time JRA filed suit. In absence of bad faith, State Farm contends that it is not obligated to pay more than the policy limits. Additionally, State Farm maintains that it was not required to set aside a “reserve” fund before PIP benefits were exhausted from which it could pay JRA’s claim.

On the other hand, JRA argues that it properly submitted its claim to State Farm when there were sufficient benefits remaining under the PIP policy. However, JRA asserts that State Farm elected to deny payment and continued to pay subsequent claims submitted by other providers. Thus, JRA asserts that State Farm violated its assignment of benefits and its right to priority payment over subsequent claims. Accordingly, JRA argues that the bill is now overdue pursuant to section 627.736, Florida Statutes, and that State Farm is obligated to pay JRA’s claim plus statutory interest and penalties.

In Simon v. Progressive Express Insurance Company, 904 So. 2d 449 (Fla. 4th DCA 2005) the Fourth District Court of Appeal held that an insurance company has no obligation to set aside or reserve funds for claims that are reduced or denied. In Simon, a physician (Simon) accepted a reduced payment from Progressive for services rendered to its insured. 904 So. 2d at 449. Simon resubmitted the claim seeking the balance owed. Id. Progressive informed Simon that the remaining funds were committed to another provider because he had accepted a reduced payment without advising Progressive that the claim would be resubmitted. Id. Simon argued that Progressive should not have paid other providers and that he had a priority claim to the funds. Id. However, the court determined that Simon did not have a priority claim because he accepted partial payment and did not notify Progressive that he was amending his claim. Id. at 450.

The court declined to accept Simon’s argument that an insurance company is required to reserve any available funds at the time a claim is submitted. Id. Doing so, the court reasoned, “would result in unreasonable exposure of the insurance company and would be to the detriment of the insured and other providers with properly submitted claims.” Id. Further, any payments that were reduced or denied “would have to be held in reserve until the statute of limitations period expired or suit was filed and concluded.” Id. As a result, this would create delays in the payment of other claims and defeat the purpose of the PIP statute’s prompt pay provisions. Id.

Based on Simon, State Farm is correct that it was not required to hold remaining PIP benefits in a reserve fund when a claim has been reduced or denied. JRA concedes this point on appeal. However, Simon is not dispositive of the remaining issue in this case, which is whether State Farm violated JRA’s right to priority payment over subsequent providers and is therefore responsible for the claim plus statutory interest and penalties.

There have been numerous decisions regarding whether an insured or its assignee can maintain an action against the insurer once benefits have been exhausted. Circuit courts and county courts addressing this issue have come to varying conclusions. For example, some courts have ruled that when benefits are exhausted, an insured cannot recover additional PIP benefits but may still seek statutory penalties for an insurer’s late payment. Sanders v. State Farm Mut. Auto. Ins. Co., 10 Fla. L. Weekly Supp. 789b (Fla. 17th Cir. Ct. June 5, 2003); First Choice Med. Ctr. v. Progressive Express Ins. Co., 12 Fla. L. Weekly Supp. 994a (Fla. Seminole Cty. Ct. June 27, 2005). Other courts have held that an insurer must pay overdue claims even if benefits have been exhausted if the insurer wrongfully withheld or misapplied benefits. Physicians First Choice Interp. v. Allstate Ins. Co., 10 Fla. L. Weekly Supp. 675c (Fla. 11th Cir. Ct. July 15, 2003); Barton Lake Healthcare Ctr. v. Progressive Express Ins. Co., 13 Fla. L. Weekly Supp. 355a (Fla. Orange Cty. Ct. Jan. 11, 2006). Still other courts have held that when PIP benefits are exhausted, the insured/assignee has no further interest in the contract and the insurer is not required to pay more than it was obligated to pay in the contract of insurance. MTM Diagnostic, Inc. v. State Farm Mut. Auto. Ins. Co., 9 Fla. L. Weekly Supp 581e (Fla. 13th Cir. Ct. Nov. 20, 2000); Heartland Rehab. Serv. v. Nationwide Mut. Fire Ins. Co., 12 Fla. L. Weekly Supp. 601a (Fla. 4th Cir. Ct. April 6, 2005).

The purpose of the PIP statute is to ensure the prompt payment of PIP benefits. Ivey v. Allstate Ins. Co., 774 So. 2d 679 (Fla. 2000). “An insurer is required to pay bills in the order in which it receives them.” First Care Chiropractic Ctr., Inc. v. Progressive Express Ins. Co., 13 Fla. L. Weekly Supp. 1149a (Fla. 9th Cir. Ct. Aug. 14, 2006) citing State Farm v. Ray, 556 So. 2d 811 (Fla. 5th DCA 1990). An insurer has thirty days in which to verify and pay a claim and that time cannot be tolled. January v. State Farm Mut. Ins. Co., 838 So. 2d 604 (Fla. 5th DCA 2003). Furthermore, the English Rule gives priority to the assignee first giving notice to the creditor. State Farm v. Ray, 556 So. 2d 811 (Fla. 5th DCA 1990) citing Blvd. Nat’l Bank of Miami v. Air Metal Indus., Inc., 176 So. 2d 94 (Fla. 1965). When an insurer wrongly denies or withholds payment, it does so at its own risk and must suffer the consequences of its actions. Seminole Cas. Ins. Co. v. Schtupak, 9 Fla. L. Weekly Supp. 529a (Fla. 17th Cir. Ct. 2002).

Here, State Farm, at its own risk, elected not to timely pay JRA’s claim under the erroneous belief that JRA was required to register with the Department of Health pursuant to section 456.0375, Florida Statutes. JRA later withdrew this argument and asserted exhaustion of benefits as a defense. However, at the time of the initial denial, there were sufficient PIP benefits remaining under the policy to pay the amount billed by JRA. State Farm disregarded JRA’s priority claim per the assignment of benefits and paid benefits to other providers who had subordinate claims to JRA. Pursuant to section 627.736(4) and (8), Florida Statutes, the benefits are overdue. Accordingly, State Farm is responsible for JRA’s claim in addition to statutory interest and penalties.

JRA has timely filed a motion to tax attorney’s fees and costs pursuant to sections 627.736(8) and 627.428, Florida Statutes, and Florida Rule of Appellate Procedure 9.400. JRA should be awarded its appellate attorney’s fees and the assessment of those fees should be remanded to the trial court. In addition, JRA is entitled to have costs taxed in its favor by filing a proper motion with the trial court within thirty days after the issuance of the mandate in this case.

Based on foregoing, it is hereby ORDERED AND ADJUDGED that the trial court’s “Order Granting Plaintiff’s Motion for Summary Judgment and Denying Defendant’s Motion for Summary Judgment” is AFFIRMED and that the “Appellee’s Amended Motion To Tax Attorney’s Fees And Costs” is GRANTED.

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¹JRA was formerly known as ROM Diagnostics of Orange County. ROM Diagnostics is the name that appears on the assignment of benefits.