25 Fla. L. Weekly Supp. 478a

Online Reference: FLWSUPP 2505SDIAInsurance — Personal injury protection — Coverage — Medical expenses — Statutory fee schedules — Clear and unambiguous election by insurer — Where definition of “reasonable charge” in PIP policy is hybrid of factors found in reasonable amount method of reimbursement and provisions from fee schedule method of reimbursement, policy is ambiguous as to reimbursement method and did not specifically elect fee schedule method of reimbursement — Approval of PIP policy by Office of Insurance Regulation does not authorize insurer to utilize permissive statutory fee schedules

PRECISION DIAGNOSTIC, INC., a/a/o SALOMON DIAZ, Plaintiff, vs. STATE FARM AUTOMOBILE INSURANCE COMPANY, Defendant. County Court, 11th Judicial Circuit in and for Miami-Dade County. Case No. 16-12640 SP 23 (04). July 10, 2017. Alexander S. Bokor, Judge. Counsel: Leandro Carvalho, Madalon Law, Ft. Lauderdale, for Plaintiff. Christopher W. Kellam, Green, Murphy, Murphy & Kellam, Ft. Lauderdale, for Defendant.

ORDER DENYING DEFENDANT’S MOTION FORSUMMARY JUDGMENT AND GRANTING PLAINTIFF’SCROSS MOTION FOR SUMMARY JUDGMENTRE: STATE FARM POLICY 9810A

THIS CAUSE came before the Court for hearing of the Defendant’s Motion for Summary Judgment and Plaintiff’s Cross Motion for Summary Judgment. The Court having reviewed the Cross Motions and attached exhibits, the entire Court file, applicable legal precedent, having heard argument of counsel, having made a thorough review of the matters filed of record; and having been sufficiently advised in the premises, hereby DENIES Defendant’s Motion and GRANTS Plaintiff’s Cross Motion for the reasons set forth below:¹

The legal issue for determination by this Court is whether State Farm’s new PIP policy, form 9810A, complies with the requirements of Florida law to entitle it to limit its payment of PIP claims to the rate of 200% of Medicare.

The Plaintiff has filed suit to recover PIP benefits claimed due from the Defendant. Pursuant to an assignment of benefits, the Plaintiff submitted bills to State Farm totaling $1,600.00 for medical services arising out of an automobile accident in which Salomon Diaz was injured. State Farm determined Plaintiff’s claim to be compensable under their applicable policy and paid $915.76 representing 80% of the total allowable medical expenses calculated pursuant to the schedule of maximum charges set forth in §627.736(5)(a)(1) Fla. Stat. (2013), i.e., 200% of the Medicare Part B fee schedule.

The Plaintiff now seeks to recover the difference between 80% of their billed amount less State Farm’s fee schedule payment, or $364.24. Plaintiff contends that Defendant did not properly elect the Medicare fee schedule methodology in its policy, and as a result, was prohibited from using the “fee schedule” to reimburse Plaintiff’s bills and was required to implement the “reasonableness” methodology set forth in §627.736(5)(a) Fla. Stat. (2013).

State Farm submitted its 48-page policy to the Office of Insurance Regulation (“OIR”) in an attempt to get approval for the Medicare methodology. Defendant contends that the OIR’s “approval” of the 9810A policy is conclusive that State Farm correctly elected the Medicare methodology. Defendant also contends that the Florida Legislature, in enacting §627.736(5)(a)(5), Fla. Stat. (2013), specifically delegated to the OIR the authority to review policy forms for legal sufficiency, thus divesting this Court of jurisdiction to review the policy for that purpose.

Legal Analysis

First, this Court finds that the Florida Supreme Court’s ruling in Geico General Insurance Company v. Virtual Imaging Services, Inc. 141 So.3d 147 (Fla. 2013) [38 Fla. L. Weekly S517a] (“Virtual III”) continues to be controlling law in this matter. In Virtual III, the Supreme Court concluded:

“that the [PIP] insurer was required to give notice to its insured by electing the permissive Medicare fee schedules in its policy before taking advantage of the Medicare fee schedule methodology to limit reimbursements” (emphasis added).

The Court specifically concluded that:

. . . notice to the insured, through an election in the policy, is necessary because the PIP statute, section 627.736, requires the insurer to pay for “reasonable expenses . . . for medically necessary. . . services,” §627.736(1)(a), Fla. Stat., but merely permits the insurer to use the Medicare fee schedules as a basis for limiting reimbursements. (emphasis original).

The Court found, consistent with Kingsway Amigo Ins. Co. v. Ocean Health, Inc., 63 So.3d 63 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a], that the PIP statute:

offered insurers a choice in dealing with their insureds as to whether to limit reimbursements based on the Medicare fee schedules or whether to continue to determine the reasonableness of provider charges for necessary medical services rendered to a PIP insurer based on the factors enumerated in section 627.736(5)(a)(1) (emphasis added).

Further, an insurer’s obligation to provide, in its policy, unambiguous notice of an exclusive election to utilize the Medicare fee schedules remains a requirement. The fee schedule method was, and still is, permissive and is only available to insurers who unambiguously elected it to the exclusion of the reasonable amount method. See, e.g., Geico Gen. Ins. Co. v. Virtual Imaging Services, Inc., 141 So. 3d 147 (Fla. 2013) [38 Fla. L. Weekly S517a] (“Virtual”); Orthopedic Specialists v. Allstate Ins. Co., 177 So. 3d 19 (Fla. 4th DCA 2015) [40 Fla. L. Weekly D1918a], review granted, No. SC15-2298, 2016 WL 282060 (Fla. Jan. 20, 2016) (“Orthopedic Specialists”) [Fourth District decision quashed at 42 Fla. L. Weekly S38a]; Kingsway Amigo Insurance Company v. Ocean Health, Inc., 63 So. 3d 63 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a] (“Kingsway”).

After a review of State Farm’s 9810A, this Court finds that the policy incorporates both the “reasonableness” methodology and the “Medicare fee schedule” methodology. For example, on page 14 of the policy, under “Insuring Agreement,” State Farm notes that “we will pay in accordance with the No-Fault Act properly billed and documented reasonable charges for bodily injury to an insured” (emphasis in original). The phrase “reasonable charges” is defined on page 5 of the policy as follows:

Reasonable Charge, which includes reasonable expense, means an amount determined by us, to be reasonable in accordance with the No-Fault Act, considering one or more of the following:

1. Usual and customary charges;

2. Payments accepted by the provider;

3. Reimbursement levels in the community;

4. Various federal and state medial fee schedules applicable to motor vehicle and other insurance coverages;

5. The schedule of maximum charges in the No-Fault Act;

6. Other information relevant to the reasonableness of the charge for the service, treatment, or supply; or

7. Medicare coding policies and payment methodologies of the federal Centers for Medicare and Medicaid Services, including applicable modifiers, if the coding policy or payment methodology does not constitute a utilization limit.

(emphasis in original).

This definition of “reasonable charges” intermingles characteristics of both a “reasonableness” methodology and a “200% of Medicare” methodology. However, on pages 15-16 of the policy, under the “Limits” section, State Farm insists that it is limiting all reimbursements pursuant to 200% of Medicare. The policy states:

1. We will not pay any charge that the No-Fault Act does not require us to pay, or the amount of any charge that exceeds the amount the No-Fault Act allows to be charged.

2. The most wewill pay for each injured insured as a result of any one accident is $10,000 for all combined Medical Expenses, Income Loss, and Replacement Services Loss, described in the Insuring Agreement of this policy’s No-Fault Coverage.

***

We will limit payment of Medical Expenses described in the Insuring Agreement of this policy’s No-Fault Coverage to 80% of a properly billed and documented reasonable charge, but in no event will we pay more than 80% of the following No-Fault Act “schedule of maximum charges” including the use of Medicare coding policies and payment methodologies of the federal Centers for Medicare and Medicaid Services, including applicable modifiers:

***

f. For all other medical services, supplies and care, 200 percent of the allowable amount under:

(I) The participating physicians fee schedule of Medicare Part B . . . .

Reading the policy as a whole, it is simply unclear as to which methodology State Farm intends on using when determining reimbursement, as the “reasonable charge” is expressly referenced in both the payment and limitation clauses. Had State Farm excluded the language on page 5, the election to utilize the fee schedules would be unambiguous. Had State Farm excluded the language on pages 15-16, it would be clear that State Farm would employ a reasonableness analysis. However, the inclusion of both methodologies leaves the insured (and this Court) guessing. See, Orthopedic Specialists v. Allstate Insurance Company, 177 So.3d 19 (Fla. 4th DCA 2015) [40 Fla. L. Weekly D1918a]. (The policy must make it inescapably discernable that it will not pay the “basic” statutorily required coverage and will instead substitute the Medicare fee schedules as the exclusive form of reimbursement.)

Accordingly, this Court finds that State Farm’s policy 9810A does not clearly, unambiguously, and exclusively “elect” the Fee Schedule payment methodology. Under the case law interpreting the “two methodology” provision of the PIP statute, the insurer must “elect” the “option” in a “clear and unambiguous” manner in its policy. State Farm did not do so. In this regard, the Court agrees with the well-reasoned decisions entered in the cases of Theramed, LLC v. State Farm Mutual Automobile Ins. Co., Order Denying Defendant’s Motion for Summary Judgment and Granting Plaintiff’s Motion for Summary Judgment, Case No. 16-2015-SC-4069MA (Duval Cty. Ct. Feb. 25, 2016) (Derke, J.) [23 Fla. L. Weekly Supp. 1038a]; and Florida Emergency Physicians Kang & Associates, M.D., P.A. v. State Farm Mutual Automobile Ins. Co., Order Granting Plaintiff’s Motion for Final Summary Judgment and Denying Defendant’s Amended Motion to Final Summary Judgment, Case No. 2014-SC-9502-O (Orange Cty. Ct. Feb. 10, 2016) [23 Fla. L. Weekly Supp. 1052a] (Jewett, J.).

The Court has also considered Defendant’s argument that the “approval” of the policy by the OIR entitles the Defendant to utilize the Medicare fee schedule. Essentially, Defendant argues that the legislature specifically delegated the duty to approve policies to the OIR and once the agency has stamped “Approved” on the policy, Defendant is entitled to utilize the Medicare fee schedule methodology set forth in §627.736(5)(a)(1) Fla. Stat. (2013). Such a suggestion violates the constitutional separation of powers doctrine. See, e.g., Askew v. Cross Key Waterways, 372 So. 2d 913, 924 (Fla. 1978); State v. Bender, 382 So. 2d 697, 700 (Fla. 1980). State Farm has offered no record evidence to support the inference that the OIR’s “APPROVED” stamp on the top of Defendant’s 9810A policy signifies agency’s formal determination authorizing State Farm to utilize the Medicare fee schedule payment method. To the contrary, Defendant’s Request for Judicial Notice of Policy Booklet 9810A includes a letter from State Farm to the Office of Insurance Regulation, consistent with §627.4145 Florida Statutes, certifying “that the proposed endorsements meet the Florida readability requirements.”

Even if this Court were to presume that the OIR’s “approval” of the policy authorized State Farm to utilize both the reasonableness and the Medicare fee schedule payment methodologies, this Court would still retain jurisdiction to review the policy to ensure that it “. . . does not conflict with the plain and ordinary intent of the law.” Florida Farm Bureau Casualty Ins. Co. v. State of Fla., Office of Insurance Regulation, 109 So.3d 860, 861 (Fla. 1st DCA 2013) [38 Fla. L. Weekly D597b]. (An agency’s construction of the statute receives judicial deference if it falls within the permissible range of interpretations, and does not conflict with the plain and ordinary intent of the law).

This exact argument, that OIR “approval” permitted an insurer to utilize a policy that contains provisions that are in conflict with the statutory requirements, has been rejected by the Third District Court of Appeal. In Gonzalez v. Associates Life Insurance Company, 641 So.2d 895, n.1 (Fla. 3d DCA 1994), the court made it clear that mere approval by the Department of Insurance (OIR’s predecessor agency) does not automatically validate the contents of an insurance policy:

Associates Life argues that because the Department of Insurance pre-approved the form of the policy issued here, we should affirm. Regardless of what deference we should accord the Department’s determination, we find as a matter of law, its approval of the policy form in this case was clearly erroneous, and that reversal is required.

See also, Kaufman v. Mutual of Omaha Ins. Co., 681 So.2d 747, n.4 (Fla. 3d DCA 1996) [21 Fla. L. Weekly D1716b]. (Department of Insurance approval of a policy form does not override the explicit terms of a statutory requirement).

Accordingly, it is hereby:

ORDERED AND ADJUDGED that the Defendant’ Motion for Summary Judgment is hereby DENIED and Plaintiff’s Cross Motion for Summary Judgment is hereby GRANTED.

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¹This Court adopts and recites in its entirety the relevant portions of an order in Preferred Health and Wellness Inc. a/a/o Wallace Lewis v. State Farm Auto. Ins. Co., case no 14-007260 CC 23 (July 22, 2016 order) (Multack, J.), which finds guidance in Pain and Injury Relief of Lake Worth v. State Farm Fire and Casualty Company, Order Denying Defendant’s Second Amended Motion for Summary Judgment, Case No. 2015-2819COCE(53) (Broward County, March 30, 2016) [23 Fla. L. Weekly Supp. 1087a]. Excerpts from that order will appear in this order. The Court also approves of the order denying defendant’s motion for reconsideration in Lewis in light of Allstate Ins. Co. v. Orthopedic Specialists, 212 So.3d 973 (Fla. 2017) [42 Fla. L. Weekly S38a]. See Preferred Health and Wellness Inc. a/a/o Wallace Lewis v. State Farm Auto. Ins. Co., (June 26, 2017 order) (Multack, J.) (finding that the Allstate decision did not alter the Court’s prior analysis of the State Farm 9810A policy and affirming the prior order of the Court).