23 Fla. L. Weekly Supp. 524c
Online Reference: FLWSUPP 2306HORIInsurance — Personal injury protection — Coverage — Emergency services — Exhaustion of policy limits — Despite statutory mandate that insurer reserve $5,000 for emergency service providers, insurer was not required to reserve funds for emergency service provider’s claim reduced through erroneous application of statutory fee schedule and, absent showing of bad faith, is not liable for balance of reduced claim after exhaustion of benefits
AUTO OWNERS INSURANCE COMPANY, Appellant, vs. FLORIDA EMERGENCY PHYSICIANS KANG & ASSOCIATES, M.D., P.A. a/a/o PHILLIP HORIE, Appellee. Circuit Court, 18th Judicial Circuit (Appellate) in and for Seminole County. Case No. 14-42-AP. L.T. Case No. 2011-SC-1774. April 21, 2015. Appeal from the County Court for Seminole County, Honorable Jerri L. Collins, County Court Judge. Counsel: Carri S. Leininger, Williams, Leininger & Cosby, PA, N. Palm Beach, for Appellant. Dean A. Mitchell, Ocala, for Appellee.
(GALLUZZO, Judge.) The Appellant, Auto Owners Insurance Company (Auto Owners) seeks review of the trial court’s entry of summary judgment in favor of the Appellee, Florida Emergency Physicians Kang and Associates (FEP). The Court dispenses with oral argument pursuant to Fla. R. App. P. 9.320.
BACKGROUND
In this case, an insurance policyholder was involved in an accident on January 29, 2011. Auto Owners received a bill from FEP on February 28, 2011 for $347. Auto Owners had not elected, in the policy, to pay medical bills in accordance with the schedule of maximum values under section 627.736(5)(a)2, Florida Statutes (2011).1 Nonetheless, Auto Owners limited reimbursement to 200% of the participating physicians schedule of Medicare Part B, under § 627.736(5)(a)2.f. Auto Owners subsequently exhausted the full amount of PIP benefits ($10,000) on June 29, 2011.
FEP filed suit on August 12, 2011, alleging that Auto Owners breached the insurance policy contract when it applied the Medicare fee schedule amount, and, in so doing, failed to properly reserve benefits as required under § 627.736(4)(c). Auto Owners filed a motion for summary judgment, contending that once PIP benefits were fully exhausted, FEP’s claim was extinguished and that Auto Owners was not liable beyond the contractual amount of PIP benefits. In response, FEP filed its own motion for summary judgment arguing that subsequent exhaustion of benefits is not a defense where the insurer improperly uses the fee schedule and pays out funds to be held in reserve under § 627.736(4)(c).
The trial court found that Auto Owners had violated § 627.736(4)(c) by failing to reserve the amount of FEP’s claim beyond the 30-day notice period, and could not therefore be protected by the defense of exhaustion of benefits. The court further found that Auto Owners had breached the policy when it limited reimbursement to the fee schedule under § 627.736(5)(a)2. The court granted summary judgment in favor of FEP, and denied Auto Owners’ competing motion. For the reasons stated below, this Court reverses the granting of summary judgment in favor of FEP.
ANALYSIS
A trial court’s ruling on a motion for summary judgment is reviewed de novo. Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000) [25 Fla. L. Weekly S390a]. Similarly, statutory interpretation is a pure legal matter subject to a de novo standard of review. Kephart v. Hadi, 932 So. 2d 1086, 1089 (Fla. 2006) [31 Fla. L. Weekly S375a].
Reserve Requirement under § 627.736(4)(c), Fla. Stat.
This case addresses the interpretation of Fla. Stat. § 627.736(4)(c), providing for a prioritization of certain PIP benefits, and whether that section requires the reservation of PIP benefits for claims by emergency services providers that have been reduced or denied.
Section 627.736(4)(c) requires that “[u]pon receiving notice of an accident that is potentially covered by personal injury protection benefits, the insurer must reserve $5,000 of personal injury protection benefits for payment of” claims made by a certain category of medical care providers. § 627.736(4)(c), Fla. Stat. “After the 30-day period, any amount of the reserve for which the insurer has not received notice of such claims may be used by the insurer to pay other claims.” Id. FEP argues that this language allows an insurer to release only the balance of the $5000 reserve fund for which no priority provider notices of claim have been received within 30 days. Any amounts for which a notice of claim has been received must be held indefinitely until any potential litigation has been resolved or the statute of limitations for suit has passed.2 Auto Owners, on the other hand, argues that nothing in this language requires funds to be held for claims which have been reduced or denied, but rather requires only that the insurer use those funds for the regular function of processing those claims for which notice has been received.
This Court has reviewed § 627.736(4)(c) somewhat extensively in regards to the application of a deductible to claims by emergency services providers, wherein similar arguments have been advanced.3 Most recently, in Progressive v. Emergency Physicians of Central Fla., LLP a/a/o Timothy Newsome, Case No. 14-34-AP, (Fla. 18th Jud. Circ., App. Div., March 27, 2015) this Court held that after the 30-day time period under § 627.736(4)(c), insurers are not required to reserve funds indefinitely for claims for which notice has been received. Rather, the reserve funds are to be used for processing of those claims, with such processing to include the insurer’s regular determination of which claims involve reasonable, related, and necessary services, as well as for application of any unmet deductible. This Court found this interpretation to be in line with both the language of the statute and the intent behind PIP law to ensure prompt payment. This Court noted that, even with the enactment of § 627.736(4)(c), there is no elimination of the duty and right of insurers to pay, reduce, or deny claims and to maximize the amount of coverage available under the policy. Simon v. Progressive Express Ins. Co., 904 So. 2d 449, 450 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1156b]; Farinas v. Fla. Farm Bureau Gen. Ins. Co., 850 So. 2d 555 (Fla. 4th DCA 2003) [28 Fla. L. Weekly D1611b].
Based on this Court’s previous decision and a re-evaluation of the statutory language, this Court finds that an insurer is not required to maintain, in reserve, any amounts not paid on emergency provider claims, regardless if they have been reduced or denied, in whole or in part.
Consequently, Auto Owners did not violate § 627.736(4)(c) by failing to reserve the balance of the FEP’s claim which had been reduced. Summary judgment for Appellee is therefore reversed.
Exhaustion of Benefits
Although this Court finds no violation of § 627.736(4)(c), the Court addresses the exhaustion of benefits issue, as a review of the current case law would suggest that exhaustion of benefits is a valid defense in this case, and that the trial court’s granting of summary judgment for FEP must be reversed on those grounds as well.
The Fourth District Court of Appeals first addressed exhaustion of benefits in PIP cases in Simon v. Progressive Express Insurance Co., 904 So. 2d 449 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1156b]. In Simon, the insurer paid out a medical provider’s PIP benefits claim at a reduced rate, which the medical provider accepted. Id. at 449. The provider subsequently resubmitted the claims, and the insurer declined to pay them on the basis that it had already exhausted all available PIP benefits. Id. The provider argued that exhaustion of benefits was not a defense as the insurer was under an obligation to hold a sum in reserve indefinitely to cover any partially denied claims. Id. The Fourth District Court affirmed summary judgment for the insurer, specifically declining to create a reserve fund requirement, especially where the provider did not contend that its claim was denied or reduced in bad faith. Id. at 450. The court noted that such a reserve requirement would subject the insurance company to unreasonable exposure, would be a detriment to the insured and other providers, and would be inconsistent with PIP’s prompt pay provisions. Id.
Subsequently, the Fifth District Court of Appeals, in Progressive American Insurance Co. v. Stand-Up MRI of Orlando, 990 So. 2d 3, 5-6 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D1746a], followed the reasoning of Simon, reiterating that there is no legal requirement that an insurer set aside a reserve fund for denied or reduced claims. As in Simon, the court noted that such a reserve fund would be a detriment to all parties other than the provider and would contravene the legislative intent to have PIP bills promptly paid. Id. at 6. The court affirmed the trial court’s ruling for the insurer as to exhaustion of benefits, stating that “Plaintiff cannot gain more from the insurance company than the contractual benefit amount in the absence of a showing of bad faith on the part of Defendant.” Id. at 5.
The Fourth District Court revisited the issue again in 2014 in Northwoods Sports Medicine & Physical Rehab., Inc. v. State Farm Mutual Auto. Insurance Co., 137 So. 3d 1049 (Fla. 4th DCA 2014) [39 Fla. L. Weekly D491a]. In Northwoods, the insurer reduced the medical provider’s bill according to the § 627.736(5)(a)2 fee schedule prior to payment. Id. at 1051. After the provider brought suit, the trial court granted summary judgment for the insurer based on exhaustion of benefits, without addressing the propriety of the use of the fee schedule. Id. at 1051-52. The Fourth District Court affirmed summary judgment, citing Simon and Stand-Up MRI with approval, and holding that “[o]nce the PIP benefits are exhausted through the payment of valid claims, an insurer has no further liability on unresolved, pending claims, absent bad faith in the handling of the claim by the insurance company.” Id. at 1057.
Most recently, the Third District Court of Appeals decided GEICO v. Gables Insurance Recovery, Inc., a/a/o Rita M. Lauzan, 2014 WL 6911333, 39 Fla. L. Weekly D2561a (Fla. 3d DCA 2014). Similar to the insurer in Northwoods, GEICO paid a medical provider’s claim in accordance with 80% of Medicare Part B, despite the fact that it had not specifically noted in its policy its election to do so. Id. at *1. GEICO subsequently exhausted PIP benefits paying out other claims. Id. At trial, the court held that exhaustion of benefits did not apply and granted summary judgment against GEICO. Id. The Third District Court reversed this ruling, noting that
the PIP statute does not, on its face, require an insurer to pay in excess of the $10,000 limit in PIP coverage. Nor does it require an insurer to ‘set aside’ funds in anticipation of litigation over the unpaid claim in order to avoid being at risk of paying more than its coverage limits.
Id. at *2. In its opinion, the Third District Court noted that the prior holdings in Simon and Stand-Up MRI are still binding authority, and adopted the Fourth District Court’s ruling in Northwoods, that “a showing of bad faith is required before the insurer can be held liable for benefits above the statutory limit.” Id. at *3.4
While none of these cases address the effect of the 2008 PIP amendments adding the § 627.736(4)(c) reserve, and as no Florida District Court of Appeals has made a ruling directly on this point, this Court still finds the above cited cases to be authoritative.5 In addition, those Florida circuit court cases cited by FEP that have held contrary to the above, have applied reasoning that this Court finds unpersuasive.6
As noted in the cases and this Court’s analysis above, the PIP statute still does not require an insurer to reserve funds indefinitely in anticipation of litigation over unpaid claims. Although, the 2008 amendments to the PIP statute created a reserve requirement for payment of claims by emergency services providers, with its specific 30-day period, this statute cannot be read to require the insurer to hold funds indefinitely nor to hold them specifically for litigation rather than for normal processing of claims. These amendments, additionally, cannot reasonably be read to require an insurer to pay more than the amount contracted for, absent bad faith.
This Court further finds GEICO v. Gables Insurance Recovery to be directly instructive as to the effect of the fee schedule on an exhaustion of benefits defense. Since the Kingsway Amigo Ins. Co. v. Ocean Health, Inc., 63 So. 3d 63 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a] decision, in order to apply the fee schedule to a claim, insurers are required to specifically state within their policy their election to do so. FEP contends that any insurer improperly processing claims using a fee schedule after the Kingsway decision may not use the defense of exhaustion of benefits. Although there is a dispute between the parties as to what is considered “processing” and whether Kingsway had been issued prior to the “processing” of FEP’s bill, this Court finds such dispute to be irrelevant to the ultimate determination of exhaustion. Importantly, in GEICO v. Gables Insurance Recovery, the Third District Court specifically noted that there is no need to address whether the payments made by the insurer, under the fee schedule, were proper in order to determine the exhaustion issue. 2014 WL 6911333 at *1, n.2. In that case, the insurer had not elected in its policy to use the fee schedule, and had even conceded that such election was required for its use to be proper. Id. Despite this, the court still found that exhaustion of benefits was an available defense for the insurer. Id. at *3. This Court finds GEICO v. Gables Insurance Recovery to be directly on point to the facts of the case at hand, and, consistent with that case, holds that an insurer cannot be liable beyond the $10,000 PIP benefits where there has been no showing of bad faith in exhausting those benefits.
Therefore, absent a showing of bad faith, Auto Owners cannot be held liable for additional amounts beyond the full PIP benefits already paid. In this case, FEP has not argued bad faith on the part of Auto Owners and exhaustion of benefits applies. Summary judgment in favor of FEP is reversed.
Attorney’s Fees
As this Court reverses summary judgment in favor of FEP and remands to the trial court, Appellant, Auto Owners’, Motion for Attorney’s Fees Pursuant to Proposal for Settlement is similarly remanded for hearing as to both entitlement and amount of award, if any. Appellee, FEP’s, Motion for Appellate Attorney’s Fees is denied.
REVERSED and REMANDED.
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1Section 627.736(5)(a)2 has subsequently been renumbered as § 627.736(5)(a)1. However, this Court refers to the section title as referenced in the trial court record and party briefs.
2FEP’s argument, in its Answer Brief, focused on the proper application of a deductible to the § 627.736(4)(c) reserve. As there is no deductible in this case, the Court has considered FEP’s arguments only so far as they properly apply to this case.
3See Direct General Insurance Co. v. Emergency Physicians of Central Florida, LLC a/a/o Oriol Saintilma, 22 Fla. L. Weekly Supp. 209b (Fla. 18th Jud. Circ., App. Div., August 29, 2014); Direct Gen. Ins. Co. v. Emergency Physicians of Central Florida, LLC a/a/o Tina Watts, 22 Fla. L. Weekly Supp. 209c (Fla. 18th Jud. Circ., App. Div., August 29, 2014); USAA General Indem. Co. v. Emergency Physicians of Central Fla., LLP a/a/o Adriel Rodriguez, 22 Fla. L. Weekly Supp. 341a (Fla. 18th Jud. Circ., App. Div., October 16, 2014); and Emergency Med. Assocs. of Fla., LLC, a/a/o Recy Cochran v. Allstate Indem. Co., Case No. 13-04-AP (Fla. 18th Jud. Circ., App. Div., December 29, 2014) [22 Fla. L. Weekly Supp. 535a].
4Although GEICO v. Gables Insurance Recovery had not been decided at the time the current case was before the trial court, “disposition of a case on appeal should be made in accord with the law in effect at the time of the appellate court’s decision rather than the law in effect at the time the judgment appealed was rendered.” See Hendeles v. Sanford Auto Auction, Inc., 364 So.2d 467, 468 (Fla. 1978).
5In its Answer Brief, FEP states that the trial court relied on Coral Imaging Services v. Geico Indemnity Insurance Company, 955 So. 2d 11 (Fla. 3d DCA 2006) [31 Fla. L. Weekly D2478a] in holding that the payments by Auto Owners to other providers were gratuitous and therefore exhaustion of benefits was not an available defense. However, no reference was made to the payments being gratuitous or to Coral Imaging in the court’s decision. Further, Coral Imaging created a very specific exception to Simon which is not applicable here. See generally id. In Coral Imaging, the insurer had exhausted PIP benefits by making payments to providers whose bills were untimely submitted, and subsequently denied payment on a timely bill submitted by plaintiff. Id. at 12. The Third District Court held that these payments were improper, as medical providers are not authorized to submit untimely bills under the PIP statute and subsequently be paid on those bills. Id. at 14-15. As such, the payments by the insurer were gratuitous and could not be considered payments under the policy. Id. at 16. Because they were not payments under the policy, the insurer could not claim exhaustion of policy benefits against the timely submitted bill of plaintiff. Id.
In the case at hand, all claims paid by Auto Owners were timely submitted, and the payments made on those claims could not, therefore, be considered gratuitous in the sense intended by Coral Imaging. The Coral Imaging narrow exception does not apply here to preclude the use of an exhaustion of benefits defense.
6See e.g. Emergency Physicians of Central Florida, LLP a/a/o Barbara Maughan v. USAA, 19 Fla. L. Weekly Supp. 746a (Fla. 9th Jud. Circ. 2012); Orthopaedic Clinic of Daytona Beach, P.A. a/a/o Charles Murray v. State Farm Mutual Auto. Ins. Co., 17 Fla. L. Weekly Supp. 1145a (Fla. 7th Jud. Circ. 2010); Turtle Run Emergency Physicians, LLC a/a/o Angel Rivera v. Safeco Ins. Co. of Illinois, Case No. 14-4488 CONO 73 (Fla. 17th Jud. Cir. 2014).
