21 Fla. L. Weekly Supp. 578a

Online Reference: FLWSUPP 2106PEREInsurance — Personal injury protection — Coverage — Medical expenses — Exhaustion of policy limits — Where insurer wrongly paid medical bills in accordance with permissive reimbursement limitation of section 627.736(5)(a)2.f, despite fact that policy obligated it to pay 80% of reasonable medical expenses, insurer’s exhaustion of benefits will not shield insurer from having to pay in excess of policy limits

GABLES INSURANCE RECOVERY, INC., a/a/o LEYANIS MORALES PEREZ, Plaintiff, v. PROGRESSIVE EXPRESS INSURANCE COMPANY, Defendant. County Court, 11th Judicial Circuit in and for Miami-Dade County. Case No. 13-198 SP 24. January 21, 2014. Rodolfo Ruiz, Judge. Counsel: Melisa Coyle, Miami, for Plaintiff. Byron T. Jackson, Ft. Lauderdale, for Defendant.

REVERSED. 25 Fla. L. Weekly Supp. 11a.

ORDER GRANTING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT ON EXHAUSTION OF BENEFITS AND DENYING DEFENDANT’S MOTION FOR FINAL SUMMARY JUDGMENT ON EXHAUSTION OF BENEFITS

THIS CAUSE having come before the Court on September 17, 2013 on Defendant’s, PROGRESSIVE EXPRESS INSURANCE COMPANY (“Progressive”), Motion for Final Summary Judgment on Exhaustion of Benefits and Plaintiff’s, GABLES INSURANCE RECOVERY, INC., a/a/o LEYANIS MORALES PEREZ (“GIR”), Motion for Partial Summary Judgment on Exhaustion of Benefits, and the Court having considered said Motions and the argument of counsel, reviewed the record and applicable law, and being otherwise fully advised in the premises, it is hereby ORDERED and ADJUDGED that Defendant’s Motion for Final Summary Judgment on Exhaustion of Benefits is DENIED and Plaintiff’s Motion for Partial Summary Judgment on Exhaustion of Benefits is GRANTED for the reasons set forth herein.

BACKGROUND

The underlying facts of this claim are not in dispute. This matter involves a suit for personal injury protection (“PIP”) benefits under a policy of insurance issued by Progressive. On August 15, 2008, the Plaintiff’s assignor was involved in an automobile accident and subsequently sought treatment for injuries purportedly sustained in the accident from Ocean Blue Rehabilitation Center (“Ocean”) and Plaintiff’s predecessor in interest, All X-Ray Diagnostic Services, Corp. (“X-Ray”). Ocean and X-Ray provided Plaintiff’s assignor with treatment and submitted their bills to Progressive for payment. It is undisputed that Progressive paid said bills in the order in which they were received up to the full $10,000.00 policy limit, determined that it only owed 200% of the Medicare Part B fee schedule for each amount billed, and therefore issued payment to each provider equal to 80% of 200% of the Medicare Part B fee schedule. As such, Progressive issued payments under the policy as follows:

a. On September 16, 2008, Progressive received bills from Ocean for dates of service from August 19, 2008 through September 5, 2008. The amount billed by Ocean was $7,550.00, and Progressive issued payment in the amount of $3,316.70.

b. On September 17, 2008, Progressive received a bill from X-Ray for diagnostic services rendered on August 19, 2008. The amount billed by X-Ray was $2,700.00, and Progressive issued payment in the amount of $356.70.

c. On October 6, 2008, Progressive received a set of bills from Ocean for dates of service from September 8, 2008 through October 2, 2008. The amount billed by Ocean was $9,000.00, and Progressive issued payment in the amount of $4,144.51.

d. On November 17, 2008, Progressive received a set of bills from Ocean for dates of service from October 2, 2008 through November 5, 2008. The amount billed by Ocean was $7,200.00, and Progressive issued payment in the amount of $2,182.09.

On or about November 6, 2008, Progressive received a pre-suit demand letter from the Plaintiff, which sought payment for the August 19, 2008 date of service in the amount of $1,803.30 — the difference between 80% of X-Ray’s bill ($2,700.00) and Progressive’s payment of $356.70. At the time of receiving the provider’s bill and at the time Defendant received the demand letter from the Plaintiff, benefits remained under the policy. However, by the time Defendant was served with Plaintiff’s Complaint on or about January 29, 2013, PIP benefits had been exhausted.

Progressive posits that it correctly reduced the aforementioned bills because its policy properly elects the alternative payment method set forth in Section 627.736(5)(A)2.f. More importantly, Progressive notes that there is no remaining coverage for Plaintiff’s claim because the $10,000.00 in PIP benefits available under the policy have been exhausted. Plaintiff argues, however, that Defendant has improperly exhausted benefits under the instant policy by issuing wrongfully reduced payments to providers, and is therefore exposed to liability beyond the policy limits.

STANDARD OF REVIEW

Pursuant to Rule 1.510(e) of the Florida Rules of Civil Procedure, a party is entitled to summary judgment in their favor if the “pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” The moving party bears the burden of demonstrating the non-existence of any genuine issue of material fact. Volusia County v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000) [25 Fla. L. Weekly S390a]; Holl v. Talcott, 191 So. 2d 40, 43 (Fla. 1966); Calarese v. Weissfisch, 87 So. 3d 1225, 1227 (Fla. 3d DCA 2012) [37 Fla. L. Weekly D1238c]. However, once the moving party has met its burden, the burden then shifts to the party opposing the motion to come forward with counter-evidence sufficient to reveal a genuine and material disputed issue of fact. Tropical Glass & Const. Co. v. Gitlin, 13 So. 3d 156, 158 (Fla. 3d DCA 2009) [34 Fla. L. Weekly D1163a]. As set forth above, the record conclusively establishes that there are no genuine issues of material fact regarding Defendant’s payment of claims in the order in which they were received up to the policy limit. Thus, the issue is whether Defendant is entitled to judgment as a matter of law on its affirmative defense of exhaustion.

ANALYSIS

To determine whether Progressive can be held liable for PIP benefits in excess of its policy limits, the Court must first analyze whether the plain meaning of Progressive’s policy entitled the Defendant to limit reimbursement of Plaintiff’s charges in accordance with the Medicare Part B fee schedule. See State Farm Mut. Auto. Ins. Co. v. Menendez, 70 So. 3d 566, 569 (Fla. 2011) [36 Fla. L. Weekly S469a] (holding that when “interpreting an insurance contract,” a Court is “bound by the plain meaning of the contract’s text.”). Only then may the Court ascertain whether benefits under the instant policy were properly exhausted.I. The Progressive Policy

As recently explained by the Florida Supreme Court in Geico Gen, Ins. Co. v. Virtual Imaging Servs., Inc., fee schedule provisions of the No-Fault Law cannot be applied absent a specific policy provision implementing said fee schedules. No. SCl2-905, 2013 WL 3332385, at *1 (Fla. Jul. 3, 2013) [38 Fla. L. Weekly S517a] (“Virtual Imaging”). In Virtual Imaging, the Court analyzed whether Geico Insurance Company could avail itself of the permissive payment option of Section 627.736(5)(A)2.f without placing its insured on notice that it was opting to pay only the 200% Medicare Part B fee schedule amount. Id. The Court concluded that because the Geico policy failed to clearly and unambiguously elect the aforementioned permissive payment option, Geico was not permitted to limit reimbursements in accordance with the Medicare fee schedules. Id. at *9.

In this case, Progressive’s PIP policy provides, in pertinent part, as follows:

PART II (A) PERSONAL INJURY PROTECTION COVERAGE

INSURING AGREEMENT

If you pay the premium for this coverage, we will pay benefits that an insured person is entitled to receive pursuant to the Florida Motor Vehicle No-Fault Law, as amended, because of bodily injury:

1. caused by an accident;

2. sustained by an insured person; and

3. arising out of the ownership, maintenance or use of a motor vehicle.

Personal Injury Protection Coverage benefits consist of:

1. medical benefits;

2. disability benefits; and

3. death benefits.

ADDITIONAL DEFINITIONS

When used in this Part II(A):

. . .

4. “Medical Benefits” means 80% of all reasonable expenses incurred for medically necessary medical, surgical, x-ray, dental, and rehabilitative services, including prosthetic devices and medically necessary ambulance, hospital, and nursing services. Medical benefits also include medically necessary remedial treatment and services recognized and permitted under the laws of the State of Florida for an injured person who relies upon spiritual means through prayer alone for healing, in accordance with his or her religious beliefs.

. . .

CONDITIONS

. . .

Unreasonable or Unnecessary Medical Benefits. If an insured person incurs medical benefits that we deem to be unreasonable or unnecessary, we may refuse to pay for those medical benefits and contest them.

We may reduce any payment to a medical provider under this Part II(A) by any amounts we deem to be unreasonable medical benefits. . .

Here, like the Geico policy in Virtual Imaging, the Progressive policy makes no reference to the permissive methodology of Section 627.736(5)(A)2.f, and fails to clearly put the insured on notice that Defendant will pay 80% of 200% of the Medicare Part B fee schedule. In fact, Part II(A) of the policy states that the insurance company “will pay benefits that an insured person is entitled to receive pursuant to the Florida Motor Vehicle No-Fault Law, as amended” and proceeds to define Medical Benefits as “80% of all reasonable expenses.” At no point in either of the aforementioned provisions does the Progressive policy reference the permissive Medicare fee schedule method of calculating reasonable medical expenses. See id. at * 10 (explaining that “even if the Medicare fee schedules are incorporated into the insured’s policy, neither the insured nor the provider knows, without the policy providing notice by electing the Medicare fee schedules, that the insurer will limit reimbursements.”) (emphasis added).

Defendant argues that the policy provision titled “Unreasonable or Unnecessary Medical Expenses” permits Progressive to pay in accordance with the Medicare fee schedule. However, such language fails to provide any indication to insureds or medical providers as to how payments under the policy will actually be made. A provision indicating that an insurer may limit reimbursements, without more, creates ambiguity as to whether this option will be exercised and provides no indication to policyholders as to what amount the insurer will pay for medically necessary services. As further explained by the Fourth District in Kingsway Amigo Ins. Co. v. Ocean Health, Inc., the choice of reimbursement methodology must be done in a manner that places policyholders on notice of the insurer’s intention to cap benefits pursuant to Section 627.736(5)(A)2.f. See Kingsway, 63 So. 3d 63, 68 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a].

Moreover, language permitting the reduction of any payment deemed unreasonable creates ambiguity when read alongside the specific payment methodology found in Part II(A), where Progressive promises to pay “80% of all reasonable expenses.” Such confusion is precisely what the Florida Supreme Court sought to eliminate in Virtual Imaging by mandating the clear election of Medicare fee schedules before they can be used to limit reimbursements, and said ambiguity must be resolved in favor of the insured. See, DCI MRI, Inc. v. Geico Indem. Co., 79 So. 3d 840, 842 (Fla. 4th DCA 2012) [37 Fla. L. Weekly D170e]; Am. Independent Ins. Co. v. Gables Ins. Recovery Inc., 19 Fla. L. Weekly Supp. 14b (Fla. 11th Cir. Ct. App., Oct. 12, 2011) (citing Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000) [25 Fla. L. Weekly S211a] (requiring that ambiguous provisions be liberally interpreted in favor of the insured and strictly against the drafter)).

Consequently, pursuant to Virtual Imaging and its progeny, Progressive’s failure to clearly and unambiguously elect the permissive payment methodology in its policy under Section 627.736(5)(A)2.f prevents Defendant from limiting its reimbursements based on the Medicare Part B fee schedule.II. Exhaustion of Benefits

Having found that Progressive failed to properly elect the alternative payment methodology set forth in Section 627.736(5)(A)2.f., the Court now turns to whether Defendant’s exhaustion of PIP benefits shields Progressive from liability. As a general rule, absent a showing of bad faith, an insurer who pays proper claims of other providers prior to receiving notice of a payment dispute is not liable for PIP benefits above policy limits. Geico v. Robinson, 581 So. 2d 230, 231 (Fla. 3d DCA 1991) (holding that “in the absence of ‘bad faith’, an automobile insurance carrier’s liability is restricted to the amount of its coverage limits.”); Sheldon v. United Servs. Auto. Ass’n, 55 So. 3d 593, 596 (Fla. 1st DCA 2010) [36 Fla. L. Weekly D23a] (finding insurer not liable for interest or attorney’s fees after benefits exhaust); Progressive Am. Ins. Co. v. Stand-Up MRI of Orlando, 990 So. 2d 3, 4 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D1746a] (finding that absent showing of bad faith, insurer not exposed beyond policy limits for failing to set aside a reserve fund and exhausting with payment of other proper claims); Simon v. Progressive Exp. Ins. Co., 904 So. 2d 449, 450 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1156b] (holding that absent a showing of bad faith an insurer who pays proper claims of other providers prior to receiving notice of a payment dispute is not liable for PIP benefits above policy limits; there is no requirement for the insurer to set aside a reserve fund).

However, the Third District Court of Appeal has held that an insurer may be exposed to damages beyond PIP policy limits where it made erroneous payment of another provider’s untimely and/or improperly-billed charges, thereby prematurely exhausting benefits. Coral Imaging Servs. v. Geico Indemn. Ins. Co., 955 So. 2d 11, 16 (Fla. 3d DCA 2006) [31 Fla. L. Weekly D2478a]. Such erroneous payments “must be characterized as ‘gratuitous,’ and should not be considered as having been made against the limits of the PIP policy.” Id.; see also Progressive Express Ins. Co. v. So. Fla. Institute of Medicine, 14 Fla. L. Weekly Supp. 520(a) (Fla. 11th Cir. Ct. App., Apr. 11, 2007) (holding that pursuant to Coral Imaging, a claimant may recover after benefits have exhausted if the insurer improperly paid “non-compensable” claims thereby exhausting the benefits prematurely or incorrectly).

In this case, there are no allegations of bad faith, and it is similarly undisputed that the Defendant paid the insured’s claims as they were received and attempted to settle as many claims as possible. Nevertheless, Plaintiff maintains that Defendant must be exposed beyond its policy limit because Progressive erroneously applied the statutory fee schedule to improperly reduce reimbursements. In support of this argument, Plaintiff relies upon Geico Indemnity Co. v. Gables Ins. Recovery, Inc. a/a/o Rita M. Lauzan, 20 Fla. L. Weekly Supp. 862a (Fla. 11th Cir. Ct. App., Jul. 25, 2013) (“Lauzan”). In Lauzan, the Eleventh Circuit Court of Appeals found that by limiting reimbursements to 80% of 200% of the Medicare Part B fee schedule without properly electing this alternative payment method under Section 627.736(5)(A)2.f, Geico “wrongly paid” the Plaintiff provider’s medical bills. Id. at 2 (holding that “Geico’s payment was wrongful, because instead of paying in accordance with the clear and unambiguous language of its policy (its contractual promise to its insured to pay 80% of ‘reasonable’ medical expenses), Geico chose to ‘roll the dice’ on the permissive provision of § 627.736(5)(a)2.f.”). Consequently, the Lauzan Court, relying on Coral Imaging, held that Geico’s improperly calculated payments under the Medicare Part B fee schedule were “gratuitous” in nature, and thus the fact that Geico had exhausted benefits did not shield it from having to pay above its limits of liability. Id. at 3.

This case is strikingly similar to Lauzan in that Progressive improperly availed itself of the permissive payment option of Section 627.736(5)(A)2.f without clearly and unambiguously electing this option as required by Virtual Imaging. See Fieselman v. Williams, 566 So. 2d 768, 770 (Fla. 1990) (holding that the decision of a Circuit Court acting in its appellate capacity is binding on all County Courts within the Circuit). In fact, like Geico in Lauzan, Progressive did not have the right to ignore the only payment methodology referenced within its policy, i.e. “80% of reasonable medical expenses.” See supra at 5. Thus, just as the payments made by Geico were deemed wrongful in Lauzan, the payments made to providers for services billed after X-Ray in the case sub judice are similarly gratuitous in nature. Accordingly, such payments may not be calculated as part of the available $10,000.00 in PIP benefits.

The Court notes that the facts in this case, as well as the facts in Lauzan, are distinct from the facts in Coral Imaging. The insurer in Coral Imaging improperly paid untimely, non-compensable claims and subsequently denied timely and compensable claims alleging that benefits had been exhausted. In this case, Progressive (like Geico in Lauzan), did not pay any claims that were non-compensable as a matter of law, but rather improperly reduced the reimbursement of compensable claims according to the Medicare Part B fee schedule. Despite this factual difference, however, Coral Imaging stands for the overarching proposition that payments made by an insurer in “express contravention of the [PIP] statute . . . should not be considered a ‘payment’ under the PIP policy.” Coral Imaging, 955 So. 2d at 16; see also So. Fla. Institute of Medicine, Inc., 14 Fla. L. Weekly Supp. 520a at 2-3 (explaining that Coral Imaging offers direction when providers are paid in a manner not contemplated by Section 627.736 by holding that wrongful payments should be considered gratuitous in nature). Pursuant to Virtual Imaging, Progressive’s decision to utilize the alternative payment method under Section 627.736(5)(A)2.f without clearly electing this option in its policy is in contravention of the 2008 amendments to the PIP statute. See Virtual Imaging, 2013 WL 3332385, at *11. Consequently, under Coral Imaging and Lauzan, if an insurer wrongfully or improperly reduces a charge by using the Medicare Part B fee schedule as prohibited by Virtual Imaging, the insurer cannot rely on the affirmative defense of exhaustion in order to escape liability for payment of the damages caused by such a breach.CONCLUSION

Based upon the foregoing, it is ORDERED and ADJUDGED that Defendant’s Motion for Final Summary Judgment is DENIED and Plaintiff’s Motion for Partial Summary Judgment on Exhaustion of Benefits is GRANTED for the reasons set forth herein.

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