21 Fla. L. Weekly Supp. 868b
Online Reference: FLWSUPP 2109COTOInsurance — Personal injury protection — Coverage — Medical expenses — Deductible — Where it is impossible to determine whether jury, having heard evidence of deductible, did or did not apply deductible to expenses before rendering verdict, new trial is required — Expert witnesses — Where prior appellate court erred in incorporating provisions of 2008 PIP statute into 2001-2002 policy to determine scope of expert’s testimony, current appellate court is not bound to adhere to law of case — Error to admit expert’s deposition testimony on managed care fee schedules for purposes of evaluating reasonableness of medical charges — Statutory changes creating new reimbursement criteria cannot be applied retroactively to policy and transactions that predate enactment of those changes
HIALEAH MEDICAL ASSOCIATES, INC. a/a/o JANY COTO, Appellant, v. UNITED AUTOMOBILE INSURANCE COMPANY, A Florida corporation, Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 11-712 AP. L.T. Case No. 02-16536 CC 05. May 2, 2014. UNITED AUTOMOBILE INSURANCE COMPANY, A Florida corporation, Appellant, v. HIALEAH MEDICAL ASSOCIATES, INC. a/a/o JANY COTO, Appellee. Case No. 12-197 AP. L.T. Case No. 02-16536 CC 05. An appeal from the County Court of the 11th Judicial Circuit; Gladys Perez, Judge. Counsel: Marlene S. Reiss, of Law Offices of Marlene Reiss, P.A., for Appellant/Cross Appellee. Michael J. Neimand, General Counsel of United Automobile Insurance Co., for Appellee/Cross-Appellant.
CONSOLIDATED OPINION
(Before SOTO, BLAKE, and DIAZ, JJ.)
(DIAZ, Judge.) Pending before this Court is an appeal and cross-appeal of a purportedly adverse decision rendered by the County Court. In its decision, the County Court reduced the sum of the jury’s verdict by the amount of the insurance deductible, permitted the insurer’s expert witness to testify to certain reimbursement practices, and denied a request for attorney’s fees. This Court, having considered the briefs, the record, the law and oral argument, is reversing, in part, and affirming, in part, the County Court’s decision.
Procedural History
The pending appeal and cross-appeal stem from a PIP claim filed by Hialeah Medical Associates, Inc. (Hialeah Med), the assignee of Jany Coto.
Following an automobile accident occurring in December 2001, Jany Coto sought and received medical and rehabilitative treatment from Hialeah Med for the injuries sustained from the accident. Ms. Coto assigned her PIP claim for the payment of medical benefits to Hialeah Med. Hialeah Med timely submitted its bills to Coto’s insurer, United Automobile Insurance Company (United Auto). The bills totaled to $3,470. United Auto refused to pay the bills submitted. In September 2002, Hialeah Med filed its law suit against United Auto for the unpaid claim. United Auto filed its answer to the complaint, and ultimately filed, in December 2003, a proposal for settlement which offered $100 to settle the lawsuit. The $100 settlement sum included attorney’s fees, costs, interests and penalties, in addition to covering PIP benefits. Hialeah Med rejected the offer, and the case proceeded to trial. On June 13, 2006, the jury found in favor of Hialeah Med and awarded Hialeah Med $5000. Two days later, a final judgment was entered by the trial judge, who reduced the award to $3,605.53. The final award consisted of the costs incurred for medical services, reduced to 80%, plus pre judgment interest on the reduced amount. United Auto appealed the final judgment.
On appeal, this circuit, sitting in its appellate capacity, reversed the final judgment. In an opinion, dated December 14, 2007, the appellate court determined that the trial court erred regarding the competency of the expert witness, among other things. Specifically, the appellate court ruled that United Auto’s expert witness was competent to testify as to the reasonableness of Hialeah Med’s fees. The court noted that the PIP statute, although amended after the date of the claim, permits expert witnesses to rely on various state and federal managed-care fee schedules when relevant to the reasonableness of charges for medical services, treatment or supplies. Accordingly, the appellate court remanded the matter for further proceedings consistent with that court’s ruling.
In December 2010, prior to the second trial and 7 years after the first proposal, United Auto made a second pre-trial offer of judgment in the amount of $500. The terms of the second settlement proposal allocated $50 to cover Hialeah Med’s attorney’s fees and costs incurred in the preceding years, and $450 for all medical claims, inclusive of interests. This offer was rejected by Hialeah Med. The second trial was then held in August 2011. In its pretrial motion, presented on the first day of trial, Hialeah Med moved to exclude and/or limit the videotaped deposition testimony of United Auto’s medical expert, Dr. Millheiser. Hialeah Med contended, once again, that Dr. Millheiser was not competent to testify on the reasonableness of medical charges given Dr. Millheiser is not an expert on managed care billing practices and methodologies. The trial court denied the pre-trial motion.
During the course of the second trial, the insurance policy was entered into evidence for the jury’s consideration. The policy’s declaration page, which includes references to a $2000 deductible, was admitted into evidence without objection. In addition, medical bills in the amount of $3,245 were presented also for the jury’s consideration. Plus, Dr. Millheiser’s videotaped deposition was played during United Auto’s case-in-chief. The trial court and attorneys offered little guidance to the jury in determining which factors may be considered in awarding damages. The jury again found in favor of Hialeah Med. However, the jury awarded Hialeah Med only $930.
Following the second trial, the trial judge held a post-trial hearing on the issue of whether the jury’s verdict should be offset by the amount of the PIP deductible, which is paid by the insured. The trial judge ruled in United Auto’s favor. Two thousand dollars ($2000) was deducted from the $930 verdict, resulting in a negative net judgment. The reduced verdict entitled United Auto to a judgment in its favor and attorney’s fees under the offer of judgment statute. However, the trial court denied United Auto’s motion for attorney’s fees, reasoning the settlement offer was just a token offer, not reasonable or propounded in good faith as required under the offer of judgment statute.
The trial judge also denied Hialeah Med’s post-trial Motion for Judgment Notwithstanding the Verdict or for New Trial. The court concluded the amount awarded by the jury did comport with the evidence presented at trial. In addition, the court, bound by the directive of the appellate court, concluded that Dr. Millheiser was qualified to render an expert opinion on managed care billing practices and on the underlying data which determines the managed-care fee schedules.
Based on the trial judge’s adverse rulings, both parties filed the pending appeals.
Net Judgment
In its appeal, Hialeah Med contends the trial judge erred in deducting the $2000 deductible from the jury’s verdict. In support of this contention, Hialeah Med notes that it can be readily deduced that the jury previously deducted the $2000 deductible in computing the award. Citing to portions of the record, Hialeah Med argues that based on mathematical calculations in which the $2000 deductible is subtracted from the $3,245 in medical bills, and the difference is reduced to 80% (pursuant to the policy’s terms), the remaining amount is $996, which is a small variation from the $930 awarded by the jury.
Although this Court finds the analysis is logical, the proposition is conjecture. It assumes the jury is cognizant of inflated damages and is knowledgeable of the collateral source concept requiring collateral source contributions be deducted from damages otherwise recoverable from the defendant. Such assumptions are not substantiated by the record.
In practice, it is the trial judge who reduces the amount of a jury verdict to offset certain payments made to or on behalf of the injured party by sources other than the defendant. Thus, the task of reducing damages is generally deemed a function of the court, not the jury. In such instances, reviewing courts of this state have consistently affirmed an award of damages, as determined by the trial judge, if the decision is supported by competent, substantial evidence. Pearce & Pearce, Inc v. Kroh Bros. Development Co., 474 So. 2d 369, 371 (Fla. 1st DCA 1985); Berges v. Infinity Ins. Co., 896 So. 2d 665, 676 (Fla. 2005) [29 Fla. L. Weekly S679a] (appellate court will not disturb a final judgment if there is competent, substantial evidence to support the verdict on which the judgment rests); North American Islamic Trust, Inc. v. Muslim Center of Miami, Inc., 771 So. 2d 1227 (Fla. 3d DCA 2000) [25 Fla. L. Weekly D2567b] (findings of fact by a judge in a nonjury case will be affirmed where there is competent and substantial evidence to support those findings).
Based on a review of the record, this Court finds the trial judge’s decision to reduce the award of damages by the amount of the insurance deductible is not supported by competent, substantial evidence. The record discloses that the policy’s declaration page, which includes references to a $2000 deductible payable by the insured, may have been inadvertently presented to the jury for consideration. Because the collateral source evidence was not excluded from consideration by the jury, nor expressly reserved for consideration by the judge in post-verdict proceedings; it is possible that the jury’s calculation of damages may have vitiated the need for a post-trial set off. It is likewise possible the jury may have completely overlooked the collateral source evidence when assessing damages. Both parties acknowledge that the trial court and attorneys offered little guidance to the jury in determining which factors may be considered in awarding damages.
Given the uncertainty as to the appropriate amount of compensation considered by the jury, it is difficult to determine whether the jurors were generally able to avoid being influenced by relevant but inadmissible insurance information, of which they are aware. To determine whether the jury verdict, tainted by an error, may or may not have included the deductible in computing the amount of damages to be awarded would require the trial court to speculate on the deliberative process of the jury. Since the trial judge cannot ascertain from the general verdict form whether the jury may or may not have included the deductible, the trial judge did not have competent substantial evidence to support its decision to reduce the amount awarded. Therefore, this Court cannot with certainty sustain the County Court’s verdict. Thus, the County Court’s decision is reversed, and a new trial is ordered. Great American Ins. Co. of N.Y. v. Suarez, 146 So. 644, 713-714 (1932) (when evidence of damages are so fragmentary and lacking in essential particulars material to a reasonably appropriate estimate of damages that it is insufficient to sustain the amount of the verdict, and the court cannot with satisfactory certainty determine what would be a proper remittitur, the judgment must be reversed for a new trial); Goldman v. Bernstein, 906 So. 2d 1240 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1806a] (when it is shown that the verdict was the product of a misconception of the law or the evidence, it is appropriate to grant a new trial).
Expert’s Competency
This Court is likewise reversing the trial court’s decision which admitted the deposition testimony of Dr. Millheiser on the subject of billing and reimbursement practices.
In Coto I, the preceding appellate court instructed the trial court judge to admit Dr. Millheiser’s expert testimony on managed care fee schedules for purposes of evaluating the reasonableness of medical charges. In the current appeal, Hialeah Med contends that the appellate court’s directive was erroneous; and thus non-binding. In support of this contention, Hialeah Med contends the statutory provision, upon which the appellate court relied, does not apply retroactively to insurance claims which pre-date the provision. Consequently, the trial judge was not bound by the appellate court’s directive. This Court agrees.
Usually, successive appeals require the succeeding appellate court to honor the prior appellate court’s decision. Fla. Dep’t of Transp. v. Juliano, 801 So. 2d 101, 105 (Fla. 2001) [26 Fla. L. Weekly S784a]. However, as a corollary to the law-of-the-case doctrine, its application may be limited if there is a change in the law or material facts, or the prior appellate decision was erroneous. Id., at 106. Under such circumstances, successive appellate courts are not bound to adhere to the law of the case, particularly if the prior ruling was in error. VLX Props., Inc. v. S. States Utils., Inc., 792 So. 2d 504, 509 (Fla. 5th DCA 2001) [26 Fla. L. Weekly D1336a].
In the pending appeal, this Court deems the prior appellate court, in reviewing Coto I, erred in incorporating the 2008 PIP provisions within a 2001-2002 insurance policy; and thereby ultimately erred as to the scope of Dr. Millheiser’s testimony. Subsection (5) of §627.736, Fla. Stat., which sets forth the criteria for determining the appropriate charges for medical services provided to a PIP claimant in a PIP case, was significantly changed in 2003 and 2007. The Florida legislature reenacted and revised §627.736(5) by adding provisions which permit PIP insurers to limit reimbursement for medical services. The revisions, effective October 1, 2003 and January 1, 2008, extended to PIP insurers the option to apply federal Medicare coding policies and payment methodologies to determine the appropriate amount of reimbursement. The revised and added text also granted PIP insurers authorization to rely on various federal and state medical fee schedules and managed care fee schedules in determining whether a charge for a particular service or treatment qualifies as reasonable. See §627.736(5)(a)(1) and (2), Fla. Stat.; Laws of Florida 2003, chapt. 2003-411, § 8, eff. Oct. 1, 2003; and Laws of Florida 2007, chapt. 2007-324, § 20, eff. Jan. 1, 2008.
Prior to the effective date and implementation of §627.736(5)(a), Fla. Stat., as revised, most reimbursements for medical services were not capped or pegged to fee schedules. Instead, providers were generally free to set their fee for services, limited only by the requirement that the charge be “reasonable” based on the customary charges in the community. Russel Lazega, Fla. Motor Vehicle No-Fault Law (PIP), 7 Fla. Prac. § 5:4 (2013-2014 ed.). With the advent of state and federal pre-set fees and managed care fee schedules, the PIP statute was amended in 2003 and 2007 to add text incorporating these schedules as an alternative reimbursement system. Consequently, insurers can consider charges derived from public sector programs and managed care plans, in addition to the customary billed-charges of private providers.
This Court notes the 2003 revisions — which granted PIP insurers authorization to rely on various federal and state medical fee schedules — only apply to treatment and services occurring on or after October 1, 2003. Laws of Florida 2003, chapt. 2003-411, § 8, eff. Oct. 1, 2003. Thus, in this case, the 2003 revisions do not apply to the pending 2002 reimbursement claim.
Conversely, the 2008 revisions apply to insurance policies in existence on or issued after the Act’s effective date of January 1, 2008. Laws of Florida, Chapt. 2007-324, §21(2), eff. Jan. 1, 2008. Therefore, by its terms, the 2008 statute is retroactive as well as prospective in its application. Thus, as in the pending case, insurance policies issued prior to 2008, yet still in effect in 2008, would be subject to the 2008 PIP revisions.
The Florida Supreme Court, however, has precluded retroactive application of certain legislation if its application poses a legal impediment. In our view, a retroactive implementation of the new reimbursement scheme poses a legal impediment.
In Menendez v. Progressive Exp. Ins. Co., Inc., 35 So. 3d 873 (Fla. 2010) [35 Fla. L. Weekly S81a], the Florida Supreme Court limited retroactive legislation applied to insurance policies issued before the effective date of the legislation. The Court expressed concern as to the fundamental unfairness in retroactively altering substantive rights. Specifically, in Menendez v. Progressive Exp. Ins. Co., Inc., 35 So. 3d 873 (Fla. 2010) [35 Fla. L. Weekly S81a], the Florida Supreme Court held that an amendment to the PIP statute, which constitutes a substantive change (and not a procedural change) to the statute, cannot be retroactively applied to insurance policies issued before the effective date of the amendment. The Florida Supreme Court applied a two-fold inquiry for determining whether a statute enacted after the issuance of an insurance policy should be applied to the pre-enactment policy. The Court considered the threshold question of whether the state legislature expressed its intent regarding retroactive or prospective application. If the legislature intended the statute to apply retroactively, the Court next determined whether a retroactive application would violate constitutional principles.
In Menendez, the Court concluded the legislature intended a statutory pre-suit notice provision, enacted after the issuance of an insurance policy, be applied retroactively. However, the Court also concluded that its retroactive application was problematic. It impaired a vested right, created new obligations, and imposed a new penalty. The Court noted the new provision, in effect, substantively altered an insurer’s general obligation to pay, and an insured’s right to sue under the policy. These substantive changes to the statute, as it existed before the amendment, could not be applied retroactively.
This Court applied the Menendez standard to the pending case, which required a comparison of §627.736(5)(a) as it existed in 2001/2002 versus the section as amended in 2008. The comparison discloses substantive changes which appear to adversely modify contractual obligations between the insurer and the insured. For example, payment for medical services may now be limited by the insurer to the Medicare allowable amount for services, state and federal fee schedules, or managed care schedules. In some cases, this will mean the physician’s reimbursement for services rendered will be less than the customary billed-charges of private providers. This revision decreases the level of payment, alters the manner in which reimbursements are calculated or deemed reasonable, and provides the insurer with considerable flexibility in determining reimbursement rates for health care. This revision could also result in the insured being required to pay the difference between the charge actually billed and the reimbursement made by the insurer, once PIP benefits are exhausted.
In effect, a retrospective application of the re-enacted and amended provision would, potentially provides less coverage to the insured by substantially revising the reasonable charge method of reimbursement, and by shifting payment obligations from the insurer to the insured. In sum, the revision modifies contractual obligations between the insured and the insurer. This modification constitutes a substantive change to the statute as it existed at the time the insurance policy was issued. This Court concludes the 2008 revision should operate prospectively.
In Coto I, the prior appellate panel did not address or examine whether §627.736(5)(a), as amended, applied to the 2001-2002 policy or pre-enactment transactions. This oversight casts doubt as to the correctness of the prior appellate ruling. It appears the appellate court’s decision to retroactively apply new substantive reimbursement criteria to an insurance policy executed before the legislation’s enactment date is, per se, non-binding. Consequently, this Court, in reviewing the issue anew, is receding from Coto I; and correspondingly reversing the trial court’s decision to admit the videotaped deposition testimony of Dr. Millheiser. Consequently, this Court is remanding this matter for further proceedings regarding the reasonableness of the medical bills.
Attorney’s fees
With regard to United Auto’s cross appeal, this Court’s decision to reverse and remand for further proceedings renders the cross appeal moot. However, for purposes of judicial guidance and future reference, this Court offers some general observations.
As gathered from a review of the cross appeal, United Auto is seeking reversal of the trial court’s decision denying United Auto’s request for attorney’s fees, sought pursuant to the offer of judgment statute. In particular, United Auto contends it is entitled to invoke the attorney’s fees provisions of the offer of judgment statute in light of the successful net judgment and rejected settlement offers which were based on a realistic assessment of the (nominal) damages. United Auto claims the trial court has misconstrued case law and statutory law governing the award of attorney’s fees in instances involving offers of judgment deemed nominal. Thus, United Auto claims the trial court erred in refusing to grant attorney’s fees.
As noted, this Court declines to provide a definitive pronouncement on a matter which, at this time, is not required to be resolved. Nevertheless, we believe the trial judge did not exceed the bounds of the court’s discretion.
Under Florida’s offer of judgment statute, set forth in §768.79, Fla. Stat., a party is usually entitled to an award of costs and attorneys’ fees if the party follows the requirements of the statute, and the judgment in the case falls within certain statutorily prescribed parameters. However, an award of costs and fees is not an absolute if the court determines the settlement proposal lacks good faith. Event Svcs. America, Inc. v. Ragusa, supra at 884; Eagleman v. Eagleman, 673 So. 2d 946, 948 (Fla. 4th DCA 1996) [21 Fla. L. Weekly D1192a]. While an offeror does not necessarily act in bad faith in making a nominal offer which is vastly below the amount already expended on attorneys’ fees, as of the date of the offer; a belief that the amount offered will not be accepted is indicative of the absence of good faith. TGI Friday’s, Inc. v. Dvorak, 663 So. 2d 606, 613 (Fla. 1995) [20 Fla. L. Weekly S436a] (finding an offer was not made in good faith since the offeror did not intend to settle the case on the terms offered). Bridges v. Newton, 556 So. 2d 1170 (Fla. 3d DCA 1990)(when offeror has no intent to settle, the offer is a bad faith offer) (disapproved of on other grounds by TGI Friday’s, Inc. v. Dvorak, 663 So. 2d 606 (Fla. 1995) [20 Fla. L. Weekly S436a]).
The record supports an inference that United Auto’s nominal offers of judgment — which may have been based on a realistic assessment of (minimal) liability — did not have a reasonable prospect of acceptance, a factor indicative of bad faith; and simply were proffered as a means of gamesmanship to open the possibility of obtaining attorney’s fees, with no intent to settle. Essentially, this Court generally concurs with the trial court’s decision, albeit in theory.
Ruling
In sum, this Court is reversing the trial judge’s decision which: (1) reduced the amount of the jury’s verdict by the amount of the deductible, and (2) allowed the videotaped deposition testimony of Dr. Millheiser concerning contemporary fee schedules as a method of calculating reasonable medical costs. This Court is remanding this matter for further proceedings consistent with this opinion. In addition, this Court is dismissing the cross appeal in light of the decision to reverse and remand. Accordingly, both parties’ requests for appellate attorney’s fees are denied. (SOTO and BLAKE, JJ., concur.)
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