24 Fla. L. Weekly Supp. 832b

Online Reference: FLWSUPP 2410LOSOInsurance — Personal injury protection — Coverage — Emergency services — Exhaustion of policy limits — Insurer waived right to argue that medical provider sued wrong entity by arguing at same time that it has properly exhausted all benefits under policy — Where insurer had no knowledge of basis/data to support reduction of provider’s bill, but instead relied on third-party vendor to process bill through utilization of undisclosed database supplied by another third-party vendor, insurer reduced payment without having reasonable basis for doing so and acted in bad faith when it subsequently exhausted benefits in payments to other providers — Once insurer reduced bill without reasonable proof, bill became overdue, provider obtained priority rights to benefits, and insurer’s payment of benefits to other providers violated plaintiff provider’s right to priority payment — Insurer also acted in bad faith by failing to reserve disputed portion of emergency service provider’s bill under section 627.736(4)(c) until statute of limitations period expired or suit was filed and concluded

EMERGENCY PHYSICIANS, INC. d/b/a EMERGENCY RESOURCES GROUP, as assignee of Thomas Losoncy, Plaintiff, v. AUTO-OWNERS INSURANCE COMPANY, Defendant. County Court, 7th Judicial Circuit in and for Volusia County. Case No. 2015 20889 CONS. December 6, 2016. Shirley A. Green, Judge. Counsel: William S. England, Bradford Cederberg, P.A., Orlando, for Plaintiff. Christopher J. Conoly, Orlando, for Defendant.

ORDER

THIS CAUSE having come before this Court on August 3, 2016, after due notice to the parties, on Plaintiff’s Motion for Summary Final Judgment, Defendant’s Motion for Summary Final Judgment (as to Entity) and Defendant’s Amended Motion for Summary Final Judgment as to Exhaustion of Benefits. Having heard arguments of counsel and being otherwise fully advised in the premises, this Court finds as follows:

FINDINGS OF FACT

On 9/12/2014, Thomas Losoncy (hereinafter “Insured”) was involved in a motor vehicle accident. On 9/12/2014, The Insured was covered by a policy of insurance issued by AUTO-OWNERS INSURANCE COMPANY (hereinafter “Defendant”) that was in full force and effect on the date of the accident. The insurance policy provided Personal Injury Protection (PIP) coverage in the amount of $10,000 and $5,000.00 of Medical Payments coverage. As a result of the 9/12/2014 accident, Mr. Losoncy presented to the Emergency Room Department at Flagler Hospital on 9/12/2014 due to injuries sustained in a covered motor vehicle accident, wherein Mr. Losoncy received emergency services and care from Plaintiff. After Plaintiff provided emergency services and care to the Insured, DEFENDANT received Plaintiff’s bill, for which Plaintiff billed DEFENDANT a total of $650.00.

Defendant, via the testimony of its Corporate Representative, Answer to Plaintiff’s Complaint and its responses to Plaintiff’s Request for Admissions, admitted that Defendant insured the Insured on the date of accident at issue; the services provided by the Plaintiff were related to the motor vehicle accident at issue and were medically necessary; the Plaintiff has standing to pursue this claim; the Plaintiff is a group of physicians licensed under chapters 458 or 459 who provide emergency services and care, as defined in s. 395.002(9); the Plaintiff’s bill was received within thirty days of the date the carrier was placed on notice of an accident potentially covered by PIP benefits; Defendant utilized the Schedule of Maximum Charges as a basis for the reduction taken, but had no information or documentation to support its reduction of Plaintiff’s charge to the amount allowed by Defendant; Plaintiff satisfied all conditions precedent to filing the instant action; and Defendant has no documentation or evidence to contradict the fact that $650.00 is the usual and customary charge in the community.

Defendant did not process Plaintiff’s bill as required under Florida Law, but instead forwarded Plaintiff’s bill to an independent company called CorVel Inc., whose business is to reduce bills for insurance companies. There is no indication that this independent company (Corvel) has licensed adjusters who are qualified to process bills. The only action taken and consideration made by Defendant relative to the amount actually paid to Plaintiff, was discern whether Corvel’s reduced amount (or, approved amount of $605.46) should be paid at 100% or further reduced by 20% based upon PIP coverage. The Insured’s policy elected to pay PIP benefits pursuant to the Schedule of Maximum Charges, therefore the “reasonableness” of Plaintiff’s charge is not at issue.

Defendant testified that Plaintiff was paid pursuant to subsection (c) of the Schedule, i.e., “the usual and customary charge in the community.” Importantly, however, Defendant testified that it had no knowledge of the basis of CorVel’s reduction, no knowledge as to what the “community” was, no knowledge of how CorVel came up with its number for the “usual and customary charge in the community”, and Defendant failed to perform any independent analysis of what would constitute the “usual and customary charge in the community.” It is undisputed that Defendant has no knowledge and no proof that it actually paid the true and correct “usual and customary charge in the community”, and there is absolutely no evidence in the record which would shed light on how CorVel determined the amount of the reduction. The only evidence as to the “usual and customary charge in the community”, is Plaintiff’s charge for the services at issue.

Despite the fact that Plaintiff’s charge of $650.00 is, and has been, the only evidence presented by either party as to the “usual and customary charge”; coupled with the fact that Defendant is not in possession of the allegedly reliable database, nor can Defendant produce the underlying data that was supposedly relied upon; Defendant had no reasonable basis to release the claimed amount of $35.63 from the $5,000 reserve as set forth in Florida Statute 627.736(4)(c). Defendant did not reserve the claimed amount of $35.63 at issue, but rather improperly exhausted the policy benefits through gratuitous payments to other providers for unrelated services, whom additionally, did not qualify for 627.736(4)(c) protection.

THE PARTIES ARGUMENTS ANDTHE COURT’S FINDINGS OF LAW

Defendant first argues that Plaintiff sued the wrong entity by suing Auto-Owners Insurance Company instead of Southern-Owners Insurance Company and therefore, Defendant, Auto-Owners Insurance Company in not liable for the amounts claimed to be due. Plaintiff argues that Defendant has waived its right to argue that Plaintiff sued the wrong entity by admitting that Auto-Owners Insurance Company issued a policy of insurance to the Insured in the Answer and Affirmative Defenses as well as in Defendant’s response to Plaintiff’s Request for Admissions. Plaintiff argues that Auto-Owners is identified on the Explanation of Review for Plaintiff’s Bill, not Southern-Owners. Additionally, Auto-Owners Insurance Company has filed a Motion for Final Summary Judgment arguing that Defendant, Auto-Owners Insurance Company has properly exhausted all benefits due under the policy at issue. This Court finds it disingenuous for Defendant to argue that it never issued a policy of insurance to the Insured, but at the same time, Defendant paid all benefits under the policy issued by Defendant to the Insured. After reviewing the pleadings and record evidence, this Court agrees with Plaintiff and finds that Defendant has waived its right to argue that Auto-Owners Insurance Company is the wrong entity. This Court will not permit Defendant to materially change its position at Summary Judgment in direct contradiction to the pleadings and evidence. Defendant’s Motion for Summary Judgment as to the wrong entity is hereby Denied.

Now, to address Defendant’s Motion for Summary Judgment as to Exhaustion of Benefits. Defendant cited three cases in support of its Motion for Summary Judgment based on Exhaustion of Benefits: (i) Simon v. Progressive Express Ins. Co., 904 So. 2d 449 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1156b]; (ii) Progressive American Ins. Co. v. Stand-Up MRI of Orlando, 990 So. 2d 3 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D1746a]; and (iii) Northwoods Sports Medicine and Physical Rehabilitation[ v. State Farm Mutual Automobile Ins. Co.], 2014 WL 837091 (Fla. 4th DCA, March 5, 2014) [39 Fla. L. Weekly D491a]. Defendant first contends that Simon and Stand-Up hold for the proposition that the insurer is not required to maintain a reserve for reduced bills, and that once an insurer pays up to the contractual limits, its potential liability is extinguished. Next, based on the Northwoods opinion, Defendant contends that it could properly exhaust benefits to other providers after thirty (30) days from the date that it received notice of the accident at issue in this matter because Defendant paid Plaintiff’s bill. Defendant further contends that it was not required to reserve any funds past the thirtieth day of Defendant receiving notice of the accident at issue. Defendant argues that it has not acted in “bad faith” and likewise has not issued “gratuitous payments”, both of which would qualify as exceptions to the Benefits Exhausted defense.

In opposition, Plaintiff contended that Defendant’s actions constituted bad faith in two separate ways and that Defendant issued gratuitous payments. First, Defendant acted in bad faith in the traditional sense by reducing reimbursement without having a reasonable basis for doing so. Specifically, an insurer is required to be in possession of evidence that would provide the insurer with a reasonable basis to reduce a charge or limit coverage before it reduces a charge or limits coverage. As addressed above, Defendant was never in possession, nor had knowledge of the underlying basis/data to support a reduction of Plaintiff’s bill. Instead, Defendant utilized a third party vendor to process the medical bills at issue, and that third party vendor (CorVel) utilized another third party vendor (FairHealth) to supply a database that utilizes allegedly reliable data, which has never been disclosed to Defendant, not produced in this litigation. Second, case law demonstrates that an insurer acts in bad faith when an insurer improperly infringes upon the provider’s right to priority payment. Specifically, Plaintiff contends that exhaustion of benefits is not a valid defense when the insurer acts improperly by failing to reserve the amounts, for which Defendant received notice of Plaintiff’s claim in accordance with the plain language of section 627.736(4)(c). In other words, Plaintiff contends that Defendant was required to reserve the difference between the amount billed by Plaintiff and the amount paid by Defendant. Since the Defendant used the amount that was supposed to be reserved for Plaintiff to pay non-protected providers, Plaintiff states that Defendant’s exhaustion of benefits defense must fail. Plaintiff argues that Defendant issued payment for bills that were not related to the accident at issue. Specifically, the Defendant’s Corporate Representative testified that bills that are indicated as not related to an auto accident in Box 10B of the CMS-1500 form, should not be paid under the policy at issue. Defendant’s Corporate Representative also testified that it issued payment for a bill that was indicated as not related to an auto accident in Box 10B of the CMS-1500 form. Therefore, that bill should not have been paid under the policy and would be considered “gratuitous”. By virtue of Defendant issuing gratuitous payments under the policy, Defendant’s Motion for Summary Judgment is Denied.

Plaintiff distinguishes Simon, Stand-Up MRI of Orlando, and Northwoods by contrasting the insurer’s reasons for denying or reducing payment in those cases with the insurer’s decision in the instant matter. In Simon, the insurer reduced payment to the provider to an amount it determined to be reasonable. At the time of the insurer’s reduction, there was only one payment methodology under the PIP statute: the insurer would determine if the provider’s charge was reasonable, and if the insurer paid an amount below 80% of the charged amount and the provider brought suit, the issue would ultimately be determined by a jury at trial. Eventually, benefits became exhausted before the provider’s lawsuit went to trial. The Fourth District held that the insurer was not required to reserve benefits for the provider pending the outcome of the lawsuit because the provider did not have a priority claim to the benefits under the English Rule. In other words, since the insurer acted in accordance with then-existing law when it issued a reduced payment, it possessed “reasonable proof” to support the reduction and, thus, the bill never became overdue. If the bill never becomes overdue, the benefits do not accrue to the provider and the insurer can continue to pay other claims as they come in.

Similarly, in Stand-Up MRI of Orlando, the insurer denied payment for two CPT codes based upon an IME report received from an independent physician which stated that the CPT codes were not medically necessary. Notwithstanding the fact that the insurer possessed the IME report to support the denial, the lower court granted the provider summary judgment, holding that the insurer violated the provider’s right to priority payment over subsequent providers. The Fifth DCA reversed, holding that the provider never obtained the right to priority payment because benefits never became overdue. Importantly, the Court acknowledged that the English Rule is applicable to “compensable” PIP claims, i.e. when a bill becomes “overdue.” However, since the insurer had the IME reports to support the denial, it had the requisite “reasonable proof” under section 627.736(4)(b), Fla. Stat. As a result, benefits would only become overdue, if at all, after trial on the issue of medical necessity. Thus, the insurer could properly exhaust benefits by paying other providers.

In the pertinent portion of the Northwoods opinion, the Fourth DCA considered whether exhaustion of benefits could preclude a provider’s action when the insurance adjuster had an objectively reasonable belief under then-existing law to process the bill in the manner he/she did. In the Wellness Associates portion of the Northwoods opinion, the insurer paid the provider pursuant to the schedule of maximum charges (“fee schedule”) set forth under Section 627.736(5)(a)(2), Fla. Stat. (2008) when the fee schedule was not set forth in the policy of insurance. Importantly, however, at the time the adjuster processed the bills for payment in 2008, there was no binding precedentthat held for the proposition that the insurer could not pay at the fee schedule amount irrespective of what was set forth in the policy. Simply put, since Kingsway Amigo Ins. Co. v. Ocean Health, Inc., 63 So.3d 64 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a], had not yet been decided, the insurer reasonably believed that reasonableness was still a question of fact for a jury. As a result, the insurer had reasonable proof that the reduced amount was not overdue because the insurer reasonably believed that compensability would not be established until trial. Since the insurer possessed reasonable proof, the bill never became overdue, and exhaustion of benefits was a viable defense to plaintiff’s action.

The significance of Northwoods is that the Court adopted the holdings and rationale of several county and circuit court opinions, three of which are specifically referenced in the opinion: (i) Virtual Imaging Svcs., Inc. a/a/o Yudi Vigoreaux v. United Svcs. Auto. Ass’n, 18 Fla. L. Weekly Supp. 491a (Fla. 11th Jud. Cir., Miami-Dade County Court, February 2, 2011); (ii) Pembroke Pines MRI, Inc. a/a/o Brian Schoedinger v. USAA Casualty Ins. Co., 17 Fla. L. Weekly Supp. 479a (Fla. 17th Jud. Cir., Broward County Court, March 29, 2010); and (iii) Wellness Assoc. of Fla., Inc. a/a/o Daniel North v. USAA Casualty Ins. Co., 18 Fla. L. Weekly Supp. 1056a (Fla. 15th Jud. Cir., Palm Beach County Court, July 26, 2011). The foregoing opinions all stand for the proposition that an insurer does not act in bad faith when it processes the plaintiff’s bill in accordance with then-existing law. If an insurer has an objectively reasonable basis under Florida law for reducing or denying the provider’s charge(s) in the manner that it did, then it possesses the reasonable proof that is necessary under subsection (4)(b). Conversely, if the insurer does not have an objectively reasonable basis under then-existing law to support the denial or reduction, the insurer does not have reasonable proof to support the denial or reduction. In such instances, not only does the provider’s bill become overdue (and property rights to benefits vested), but the case law holds that the insurer acts improperly by denying payment without being in possession of evidence that would provide a reasonable basis and, thus, engages in a form of bad faith.¹ Importantly, Northwoods did not address Florida Statute 627.736(4)(c), which expressly requires an insurer to “reserve” the amounts for which it has received notice of a protected providers claim. This issue alone makes Northwoods distinguishable and inapplicable to the instant matter.

The law in Florida is clear that, upon receiving notice of a claim and medical bills, a PIP insurer has thirty days to make payment. See Section 627.736(4)(b), Florida Statutes (2014). Indeed, an insurer must either pay, or obtain reasonable proof that the bill is not owed, within thirty days of receipt of a bill. See Palmer v. Fortune Ins. Co., 776 So. 2d 1019, 1021-22 (Fla. 5th DCA 2001) [26 Fla. L. Weekly D278a] (“[a]lthough incomplete or erroneous information makes verification of a claim more difficult, the statutory burden remains with the insurer to make a decision on coverage within thirty days.”); see also Superior Insurance Co. v. Libert, 776 So. 2d 360, 363-64 (Fla. 5th DCA 2001) [26 Fla. L. Weekly D381a] (since the provider supplied the insurer with the insured’s contact information, it was the insurer’s responsibility to contact the insured to obtain any additional information it needed to process the provider’s claim.). The insurer has a non-delegable dutyto do what it deems necessary to investigate, authenticate, and pay a claim within the thirty day period set forth under section 627.736(4)(b), Fla. Stat. (2010). State Farm Mut. Auto. Ins. Co. v. McLean, 11 Fla. L. Weekly Supp. 290a (Fla. 9th Jud. Cir. (Appellate), November 17, 2003). The burden is on the insurer to authenticate a claim within thirty days under the PIP prompt payment statute. Palmer, supra.

Adjusters of Florida PIP claims must adhere to a Code of Ethics which requires the insurance adjuster to: (i) upon undertaking the handling of a claim, the adjuster shall act with dispatch and due diligence to achieve a proper disposition of the claim; and (ii) fully and thoroughly investigate a claim before making an adjustment decision. See Section 626.878, Florida Statutes; Fla. Admin. Code Rule 69B-220.201(3)(d) and (f). A breach of either of the foregoing Code of Ethics provisions, the insurer commits “an unfair claims settlement practice” violation — i.e. an act of bad faith. See Rule 69B-220.201(1)(b); see also Section 624.155, Fla. Stat. (the “Bad Faith Statute” provides that unfair trade settlement practices are one type of predicate for insurer bad faith); see also Sections 626.9541(1)(i)(3)(a)-(h), Fla. Stat. (other unfair claims settlement practices which constitute acts of bad faith include: (i) failing to adopt and implement standards for the proper investigation of claims; (ii) denying claims without conducting reasonable investigations based upon available information; (iii) failing to affirm or deny full or partial coverage of claims; and (iv) failing to promptly notify the insured of any additional information necessary for the processing of the claim.); see also Chalfonte Condominium Apartment Ass’n, Inc. v. QBE Ins. Corp., 695 F.3d 1215, 1224 [(2012), 23 Fla. L. Weekly Fed. C1581a](plaintiff’s allegations regarding an insurer’s failure to adjust, investigate, and pay claim are those of bad faith.). Two exceptions to the exhaustion of benefits defense are when: (i) the insurer commits an act of bad faith; and (ii) the insurer acts improperly. See Simon, M.D., P.A. a/a/o Eric Hon v. Progressive Exp. Ins. Co., 904 So.2d 449, 450 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1156b].

The Ninth Judicial Circuit Court, acting in its appellate capacity, considered facts remarkably similar to those in this action. See United Svcs. Auto. Ass’n v. Emergency Physicians of Central Fla., LLP a/a/o Barbara Maughan, Case No. 2012-AP-1 (Fla. 9th Jud. Cir. (Appellate) January 30, 2014) [23 Fla. L. Weekly Supp. 302b]. In Maughan, the medical provider submitted a bill to AIS which contained an incorrect claim number. There were still PIP benefits available under the insured’s policy at the time the provider issued its bill to AIS. Upon receiving the bill, AIS sent the provider a form letter to the provider which stated that AIS could not locate a PIP claim for the insured who was listed on the provider’s bill. The provider then re-sent a bill containing identical information. This time, the insurer was, in fact, able to locate the insured’s PIP claim. Rather than paying the provider, the insurer stated that insured’s benefits were exhausted.

The provider filed a lawsuit, contending that PIP benefits became overdue thirty days after the insurer received the provider’s initial bill and at a time in which PIP benefits were available. The insurer moved for summary judgment, contending that the exhaustion of benefits precluded plaintiff’s action. In opposing the motion, the medical provider contended that its bill sufficiently placed the insurer on notice of a claim and, as a result, the insurer possessed the burden of authenticating and investigating the claim.

The lower court considered whether a bill containing the incorrect claim number nevertheless placed the insurer on notice of a covered loss. See Emergency Physicians of Central Fla., LLP a/a/o Barbara Maughan v. United Svcs. Auto. Ass’n, 19 Fla. L. Weekly Supp. 746a (Fla. 9th Jud. Cir., Osceola County Court, March 20, 2012). Despite containing the incorrect claim number, the bill listed the insured’s name, address, phone number, and date of birth. Ultimately, the County Court, citing Palmer and Libert, held that the bill was sufficient to place AIS and the insurer on notice of a claim, and that it was the insurer’s burden to investigate and verify the provider’s claim. By failing to conduct any investigation relative to the provider’s bill, (a) the insurer breached its duty to investigate, (b) plaintiff’s bill became overdue, and (c) exhaustion of benefits was not a valid defense to the provider’s action. As a result the County Court granted Plaintiff summary final judgment.

In affirming the trial court’s ruling, the Circuit Court found it “disconcerting” that AIS could not locate the correct claim number after receiving the initial bill, but that the insurer was able to locate the claim number after obtaining identical information in the resubmitted bill. The Circuit Court found that bill was substantially complete notwithstanding the fact that it contained the incorrect claim number. See also State Farm Mutual Auto. Ins. Co. v. Emergency Physicians of Central Fla. a/a/o Frank Mercatante, Case No. 2012-CV-000017-A-O (Fla. 9th Jud. Cir. (Appellate), April 23, 2014) (Ninth Circuit Court, acting in its appellate capacity, affirmed trial court’s ruling that the insurer was placed on sufficient notice of a claim even when box for auto accident was marked “no,” and when there was no date of accident listed on the bill. As a result, the thirty day time period for payment of the bill began running when the insurer received the provider’s bill).

There was simply no investigation of Plaintiff’s billed amount conducted by Defendant within the statutorily-prescribed time period. The evidence shows that Defendant blindly accepted the number produced by CorVel, which was provided by FairHealth without any good faith investigation or attempt to verify the accuracy/legitimacy of the “allowed amount” by Defendant. As a result, Defendant’s adjuster and/or the AIS representative committed a breach(es) of the Adjuster’s Code of Ethics by failing to conduct any investigation, whatsoever, related to Plaintiff s bill. Such a breach is per se an act/omission of bad faith pursuant to the Code. As a result, Defendant’s Motion for Summary Judgment based on Exhaustion of Benefits is hereby denied.

A. Defendant Violated Plaintiff’s Right to Priority Payment By Denying Plaintiff’s Bill Without Reasonable Proof to Support the Denial; When an insurer Does Not Possess Reasonable Proof at the Time it Denies the Bill, the Bill Becomes Overdue and Plaintiff Obtains Property Rights in the Benefits and as Such, the Insurer Cannot Use Plaintiff’s Benefits to Pay Other Providers

Furthermore, Plaintiff’s bill became “overdue,” under Fla. Stat. §627.736(4)(b), thirty days after Defendant received Plaintiff’s bill because Defendant never possessed “reasonable proof” to support a denial. When benefits became “overdue,” the benefits accrued to the Plaintiff as of the date the bill was originally submitted. See Progressive Express Insurance Co. v. So. Fla. Institute of Medicine, Inc. a/a/o Halil Hawkeye, 14 Fla. L. Weekly Supp. 520a (Fla. 11th Jud. Cir. (Appellate), April 11, 2007) (exhaustion of benefits is not a defense when benefits have accrued); see also State Farm Mut. Auto. Ins. Co. v. JRA Diagnostics, Inc., 14 Fla. L. Weekly Supp. 438b (Fla. 9th Jud. Cir. (Appellate), March 8, 2007) (since Florida follows the English Rule, and since the insurer did not have reasonable proof to support a denial of payment, the plaintiff had a right to priority payment over other providers who issued bills after plaintiff. Exhaustion of benefits was not a valid defense because plaintiff’s benefits accrued when benefits were available under the policy). In other words, once benefits became overdue and accrued to Plaintiff, Plaintiff obtained a vested property right to such benefits and, therefore, said benefits could not be used to pay subsequent bills from other providers. See Virtual Imaging Svcs., Inc. a/a/o Aurora Mitev v. USAA Casualty Ins. Co., 19 Fla. L. Weekly Supp. 588a (Fla. 11th Cir., Miami-Dade County Court, March 12, 2012). Indeed, under the Florida PIP statute, payment is first come-first served as long as the provider’s claim is deemed to be compensable. See Progressive American Ins. Co. v. Stand-Up MRI of Orlando, 990 So.2d 3, 6 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D1746a]. A claim is deemed to be compensable if the insurer does not have reasonable proof to support a denial or reduction within thirty days after receipt of the bill. See Fla. Stat. §627.736(4)(b).

Here, as noted above, Defendant did not have any reasonable proof to support a reduction to the innocuous amount within the statutory period because it failed to conduct any sort of investigation into the appropriate amount under the Fee Schedule. Therefore, as the Ninth Circuit Court held in Maughan, this Court similarly holds that the exhaustion of benefits cannot be used when: (i) the insurer fails to perform any sort of investigation into the provider’s bill; and (ii) benefits become overdue when benefits are remaining under the policy; in such cases, the provider obtains a vested property right to the benefits, and the provider’s benefits cannot be paid to other providers.

As a result, Defendant’s Motion for Summary Judgment is Denied. Further, this Court Grants Plaintiff judgment as a matter of law. See R & L Const., Inc. v. Cullen, 557 So. 2d 931, 932 (Fla. 5th DCA 1990) (a court may properly grant summary judgment to a non-movant if there is no genuine issue of material fact.) Plaintiff’s action became ripe after thirty days expired from the submission of its bill and when Defendant did not have reasonable proof to support the denial. As such, Defendant breached the contract of insurance as a matter of law, and Plaintiff is entitled to payment.

B. Florida Statute 627.736(4)(c) requires a PIP insurer to reserve the claimed amount by a protected provider and Defendant’s failure to comply with Florida Statute 627.736(4)(c) creates an exception to a Benefits Exhausted Defense

The Legislature is presumed to know existing law and judicial construction of statutes when it enacts a statute, amends a statute, or reenacts a statute. Holmes County Sch. Bd. v. Duffell, 651 So.2d 1176 (Fla. 1995) [20 Fla. L. Weekly S110a]; Prof’l Consulting Servs., Inc. v. Hartford Life and Accident Ins. Co., 849 So.2d 446 (Fla. 2d DCA 2003) [28 Fla. L. Weekly D1661a]; State Farm Fire & Cas. Co. v. Kambara, 667 So.2d 831, 833 (Fla. 4th DCA 1996) [21 Fla. L. Weekly D156c]; Collins Inv. Co. v. Metro. Dade County, 164 So.2d 806, 809 (Fla. 1964); and Essex Ins. Co. v. Zota, 985 So.2d 1036, 1043 (Fla. 2008) [33 Fla. L. Weekly S425b].

In 2008, the Florida legislature amended the PIP statute to add section 627.736(4)(c). Section (4)(c), for the first time, created a statutory priority that requires payment and a mandatory reserve for a small group of protected medical providers such as first responders. That protected class consists of providers licensed under chapters 458 or 459 who provide emergency services under F.S. 395.002(9), whose bills are received by a PIP insurer within thirty days of the insurer receiving notice of an accident potentially covered by PIP (these protected providers were otherwise not required by the PIP statute to submit their claim in any number of days).

This Court finds guidance from the Ninth Judicial Circuit in and for Orange County Florida in Auto-Owners Insurance Co. v. Florida Emergency Physicians, Kang & Associates M.D. P.A., a/a/o Nicole Lockeywerner, Appellate Case No: 2014-000067-A-O, (Fla. 9th Jud. Cir., Appellate Capacity, Orange County, 2016) [23 Fla. L. Weekly Supp. 513a], wherein the Ninth Circuit held that an insurer cannot release more from the reserve than what it has received notice of a “claim” for. The claim by Plaintiff was $650.00 and Defendant can only release $4,350.00 from the $5,000.00 reserve, however, Defendant unilaterally and improperly decided to release $4,394.54 from the $5,000.00 reserve. The Ninth Circuit stated in pertinent part:

Section 627.736(4)(c), in addition to requiring insurers to set aside $5000.00 to pay emergency service providers, states, “After the 30-day period, any amount of the reserve for which the insurer has not received notice of a claim from a physician or dentist who provided emergency services and care or who provided hospital inpatient care may then be used by the insurer to pay other claims (emphasis added). The emphasized language specifically instructs insurers that only the amount in the reserve that has not been claimed may be used to pya other claims after the thirty days has run. The corresponding action is that the amount in the reserve that has been “claimed” (not necessarily paid out), within the thirty days, may not be used to pay other claims. If the insurer were not required to hold the disputed portion of a claim submitted within the thirty days in reserve, then the emphasized language would be unnecessary. Using “claim indicates that it is the claimed amount that is held in reserve, not an undisputed amount or any amount that the insurer deems reasonable.

Lockeywerner, is not the only opinion that holds that Benefits Exhausted is not a defense to a protected providers bill. See United Services Automobile Association v. Emergency Physicians of Central Florida, LLP, as assignee of Barbara Maughan, Ninth Judicial Circuit Appellate Case No. 2012-AP-1 (January 30, 2014) [23 Fla. L. Weekly Supp. 302b]. This Court is aware of the opinions from Seminole County holding that benefits exhausted is a defense in light of Florida Statute 627.736(4)(c), but finds those opinions unpersuasive in light of the sound logic of the Honorable Judge Craner and the Ninth Circuit. Additionally, this Court is aware that the Appellate Order in Lockeywerner is final pursuant to the recent denial of the insurer’s Petition for Writ of Certiorari by the Fifth District Court of Appeals in Southern-Owners Insurance Co. v. Florida Emergency Physicians, Kang & Associates M.D. P.A., a/a/o Nicole Lockeywerner, Appellate Case No: 5D16-0453 (Fla. 5th DCA October 20, 2016).

Until the effective date of Florida Statute 627.736(4)(c) in 2008, insurers had no prior obligation to reserve benefits for any class of medical provider under the PIP statute. Simon v. Progressive Express Ins. Co., 904 So.2d 449 (Fla. 4th DCA 2005) [30 Fla. L. Weekly D1156b]; Progressive American Ins. Co. v. Stand-Up MRI of Orlando, 990 So.2d 3 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D1746a]. In 2005, Simon held:

We conclude that Simon did not have a priority claim against the funds remaining undisbursed. He accepted the partial payment, without notifying the insurance company that an amended claim was forthcoming. We decline to create a requirement that an insurance company set aside a “reserve” fund for claims that are reduced or denied. Simon does not contend that the denial or reduction of its claim was in bad faith, or that Progressive had manipulated, or acted improperly, in reducing it. If we were to accept Simon’s theory that a “reserve” or “hold” provision must be automatically applied to any available funds at the time a claim is submitted, it 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. Under such a theory, all potential payments to a service provider that were denied, or were subject to a reduction, would have to be held in reserve until the statute of limitations period expired or a suit was filed and concluded. This would delay and reduce availability of funds for the payment of claims to other providers and would be inconsistent with the PIP statute’s “prompt pay” provisions.

The Legislature, aware of the 2005 holding in Simon, drafted section (4)(c) in 2008 in an effort to carve out a small group of protected providers for which a priority claim would exist, for which a reserve would apply, and for which payment was required to be made by the insurer. Section (4)(c) created a statutory anomaly in the manner in which it treats unprotected providers relative to their unprotected counterparts. Because section (4)(c) fundamentally alters the accustomed norm, an analysis of the functional initiative of (4)(c), its effect on reimbursements and the processing of claims, and its pragmatic application requires an adept understanding of section (4)(c) and its interplay with other provisions of the PIP statute. Section (4)(c) is intended to protect against the financial constraints placed on emergency medical providers as a result of the Federal EMTALA law (42 U.S.C.A. §1395dd) and Florida’s Access to Emergency Services and Care Law (F.S. §395.1041), both of which require that emergency medical providers render services regardless of a patient’s ability to pay, or face severe consequences. Additionally, (4)(c) is intended to help compensate providers, who, for the most part, are unable to shift losses associated with significant amount of legislatively induced uncompensated care, to benefit the residents of Florida by alleviating reliance on state funding for uncompensated emergency room care, and insuring emergency room treatment is available and adequate to meet the needs of the residents of Florida. The legislature’s reliance on the Simon opinion for guidance in the creation and passage of section (4)(c) is not unique to PIP as the legislature has a history of relying on judicial interpretations of statutes when enacting, amending, and reenacting statutes. See Kambra at 833 and Zota at 1043.

An examination of (4)(c), reveals that upon notice of an accident potentially covered by PIP, an insurer must create a mandatory reserve which may only be used to pay certain protected providers. In order to qualify for (4)(c) protection, have a priority claim for payment without application of any deductible, and take advantage of the mandatory reserve, a (4)(c) provider’s claim must be received by the PIP insurer within thirty days of the insurer receiving notice of the accident. Subsection (4)(c) reveals that the mandatory reserve is required to be created immediately upon the insurer receiving notice that an accident occurred and funded at an initial uniform amount ($5,000) and then, after the expiration of thirty days, it has to be maintained at a claim specific amount. The third sentence of Section (4)(c) clearly states that, after the thirty day period, an insurer may use a portion of the (4)(c) reserve — not including amounts for which the insurer has received “notice of a claim” from a physician rendering emergency services and care — to pay the claims of non-protected providers. A “claim” in a PIP case is the amount to which the provider believes it is entitled to be paid by the insurer as evidenced on the CMS-1500 form. See section 627.736(5)(d), Fla. Stat. (2014); see also Utica Mut. Ins. Co. v. Pennsylvania Nat. Mut. Cas. Ins. Co., 639 So.2d 41, 46-47 (Fla. 5th DCA 1994) citing Webster’s Ninth New Collegiate Dictionary (A “claim” is defined as “a demand for something due or believed to be due (insurance).”).

This Court is provided guidance from Simon, in the opinion, the Fourth District Court of Appeals held that if a reserve is required under the statute, then the disputed amount must be held in reserve until the statute of limitations period expired or a suit was filed and concluded. Therefore, after the thirty day period, the insurer must continue to reserve the difference between (a) $5000 and (b) the amount billed by all providers who qualify for protection under (4)(c). Thus, for the first thirty days, all claims are treated the same and require the $5,000 to be held in reserve, thereafter the amount of the mandatory reserve becomes claim specific and must be maintained in the amount equal to those claims submitted by qualifying (4)(c) providers within the thirty day period. After the thirtieth day, only the portion of the $5,000 reserve not spoken for as a result of the timely submitted claim may be released back into the general PIP fund and be used to pay other providers.

The Defendant’s argument that the $5,000 reserve is for thirty days only, and that if it makes a partial payment based upon its determination of what constitutes a reimbursable or usual and customary amount, then there is no requirement to maintain the disputed amount in reserve is not well taken in light of the clear language of (4)(c). Additionally, a thirty day reserve would be illusory and render (4)(c) meaningless because the (4)(c) reserve would expire before the insurer was required to make payment to a (4)(c) provider. Pursuant to 627.736(4)(b), payment of a claim doesn’t become “overdue” until thirty days after the insurer received a medical providers bill. Section (10) of the Florida No-Fault statute requires a pre-suit demand letter as a condition precedent to a lawsuit that pursues payment of a claim. The same section prohibits a claimant from sending the required demand letter until the claim is “overdue” (which as (4)(b) explains, is thirty days after receipt of the bill by the insurer). Therefore, an insurer has thirty days from receipt of a PIP claim/bill to pay the claim. It is improbable, if not impossible, that an insurer would receive a claim by a (4)(c) provider on or before the day that it received notice of the accident potentially covered under PIP. As such, a reserve limit to only thirty days would never secure available benefits to pay a (4)(c) provider as it would expire prior to the time that the claim became “overdue”. The legislature, cognizant of this dilemma, added a provision that tolled the thirty days payment requirement under (4)(b) as it relates to claims from unprotected providers. The tolling provision is invoked when the only benefits remaining available, are in the reserved $5,000 partition. In such a situation, unprotected claims are tolled and do not become overdue while the insurer is required to reserve the $5,000. After the expiration of the thirty day reserve under (4)(c), the insurer then has thirty days to process claims under (4)(b) without suffering a penalty.

In reaching its decision, this Court has also been guided by the January 30, 2014, Ninth Judicial Circuit Appellate opinion which affirmed the trial court in the case of Emergency Physicians of Central Florida, LLC a/a/o Barbara Maughan v. USAA, Appellate Case Number 2012 AP-1, Lower Court Case Number 2011-SC-140. In Maughan, the trial court entered final summary judgment in favor of an emergency room provider that qualified for protection and the mandatory reserve under section (4)(c) and also found that a PIP insurer does not have a valid exhaustion of benefits defense when faced with a timely submitted bill by a (4)(c) provider. The Ninth Judicial Circuit Appellate Court held that the trial court did not err and it affirmed the trial court’s final summary judgment in its entirety. This Court agrees, as any payments made to unprotected providers, when the only benefits remaining under the PIP policy are required to be held in the (4)(c) reserve fund are gratuitous in nature, based upon the mandatory reserve of the claimed amount.

This Court finds that the record evidence shows that Plaintiff’s bill qualified for protection under section (4)(c) because Plaintiff rendered emergency services and care in the Hospital, and Defendant received Plaintiff’s bill within thirty days from the time it received notice of the accident at issue in this matter. Therefore, after the thirty-day period, the insurer must continue to reserve the difference between (a) $5000 and (b) the amount billed by all providers who qualify for protection under (4)(c). Defendant failed to reserve the disputed amount ($35.63) under (4)(c) until the time expired as prescribed in Simon. As such, the policy cannot be exhausted with regards to a timely filed first responder’s bill protected under 627.736(4)(e). This Court finds that a “reserve” is just that, a “reserve”, which means that the amounts cannot be spent by the insurer. By failing to comply with the law, Defendant acted in bad faith.

WHEREFORE, Defendant’s Motions for Summary Judgment are DENIED. Plaintiff’s Motion for Final Summary Judgment is hereby GRANTED.

Final Judgment is hereby render in favor of Plaintiff in the amount of $35.63, plus prejudgment interest in the amount of $3.46. Post-judgment interest shall continue to accrue at a rate of 4.75% until paid, for which sum let execution issue. Plaintiff is entitled to attorney’s fees and costs and this Court reserves jurisdiction to determine the amount of attorneys’ fees and costs due to Plaintiff.

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¹If an insurer has a reasonable belief under then-existing precedent to support the denial or reduction, the insurer has the requisite reasonable proof necessary to support the denial/reduction. However, when an insurer acts improperly by processing a bill in contravention of then existing Florida precedent, the insurer acts in bad faith and cannot shield itself with an exhaustion of benefits defense. See Progressive Express Ins. Co. v. So. Fla. Institute of Medicine, Inc. a/a/o Halil Hawkeye, 14 Fla. L. Weekly Supp. 520a (11th Jud. Cir. (Appellate), April 11, 2007); Geico Indemnity Co. v. Gables Ins. Recovery, Inc. a/a/o Rita Lauzan, 20 Fla. L. Weekly Supp. 862a (1lth Jud. Cir. (Appellate), June 25, 2013); USAA Cas. Ins. Co. v. Oakland Park MRI, Inc. a/a/o Antonia Gale, 19 Fla. L. Weekly Supp. 22b (Fla. 17th Jud. Cir. (Appellate), August 31, 2011); Oakland Park MRI, Inc. a/a/o Antonia Gale v. USAA Casualty Ins. Co., 17 Fla. L. Weekly Supp. 477a (Fla. 17th Jud. Cir., Broward County Court, February 22, 2010); Pembroke Pines MRI, Inc. a/a/o Brian Schoedinger v. USAA Casualty Ins. Co., 17 Fla. L. Weekly Supp. 479a (Fla. 17th Jud. Cir., Broward County Court, March 29, 2010); DPI of North Broward, LLC a/a/o John Shutowick v. USAA Casualty Ins. Co., 18 Fla. L. Weekly Supp. 492a (Fla. 17th Jud. Cir., Broward County Court, February 1, 2011); Virtual Imaging Svcs., Inc. a/a/o Yudi Vigoreaux v. United Svcs. Auto. Ass’n, 18 Fla. L. Weekly Supp. 491a (Fla. 11th Jud. Cir., Miami-Dade County Court, February 2, 2011); Pembroke Pines MRI, Inc. a/a/o Gabriel Garcia v. Garrison Prop. & Cas. Ins. Co., 18 Fla. L. Weekly Supp. 558a (Fla. 17th Jud. Cir., Broward County Court, March 22, 2011); Oakland Park MRI, Inc. a/a/o Daniel Wilson v. USAA Casualty Ins. Co., 18 Fla. L. Weekly Supp. 884a (Fla. 17th Jud. Cir., Broward County Court, May 10, 2011); Pembroke Pines MRI, Inc. a/a/o Colleen Carcelli v. USAA, 18 Fla. L. Weekly Supp. 1175a (Fla. 17th Jud. Cir., Broward County Court, June 1, 2011); Wellness Assoc. of Fla., Inc. a/a/o Daniel North v. USAA Casualty Ins. Co., 18 Fla. L. Weekly Supp. 1056a (Fla. 15th Jud. Cir., Palm Beach County Court, July 26, 2011); Pembroke Pines MRI, Inc. a/a/o Nomi Bogrow v. USAA Cas. Ins. Co., 19 Fla. L. Weekly Supp. 413a (Fla. 17th Jud. Cir., Broward County Court, Feb. 16, 2012); Virtual Imaging Svcs., Inc. a/a/o Aurora Mitev v. USAA Cas. Ins. Co., 19 Fla. L. Weekly Supp. 588a (Fla. 11th Jud. Cir., Miami-Dade County, March 12, 2012); Advanced Diagnostic Resources a/a/o Patricia Flynn v. USAA Cas. Ins. Co., 20 Fla. L. Weekly Supp. 934a (Fla. 15th Jud. Cir., Palm Beach County Court, July 1, 2013); Virtual Imaging Svcs. a/a/o Miguel Rodriguez v. United Automobile Ins. Co., 21 Fla. L. Weekly Supp. 428b (Fla. 11th Jud. Cir., Miami-Dade County Court, January 31, 2014). .