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Appellate Division Allows Medical Reimbursement Claim To Proceed In Civil Court While Comp Case Is Pending

By on August 11, 2011 in Controlling Costs with 0 Comments

Legal actions for reimbursement by medical providers have become very common in the New Jersey Division of Workers’ Compensation.  Now they are even more complex following the decision in The Valley Hospital v. LQ Management LLC, A-0831-10T1 (App. Div. August 8, 2011).

The facts are straightforward.  An employee of LQ Management, LLC, was treated for work-related back injuries at Valley Hospital.  The hospital billed $65,549 for its services and submitted the bill to Zurich American Insurance Company, which was the workers’ compensation carrier for LQ Management.  Zurich utilized a claim administrator to review the bill, and the claim administrator issued an explanation of benefits stating that Zurich was paying the bill under the hospital’s contract with FOCUS – Aetna Workers’ Comp Access, LLC.  Zurich paid $24,743, less than half the bill.

Valley Hospital sued in civil court alleging breach of contract.  It said that under the terms of the Aetna contract, the hospital was entitled to 80% of its billed charges based on preferred provider rates.  That would have been $52,456.  LQ moved to dismiss the complaint, contending that this was a workers’ compensation issue and belonged in workers’ compensation court.  Further, LQ noted that there was a pending workers’ compensation claim and argued that the question of payment of this bill must be transferred to workers’ compensation court.

On the face of it, LQ’s argument had appeal because of the decision in Univ. of Mass. Mem’l Med. Ctr., Inc. v. Christodoulou, 180 N.J. 334 (2004).  In that case the New Jersey Supreme Court held that “while an employee’s claim for a work-related injury is pending in the Division, a medical provider’s action for unpaid services must be transferred from the Law Division to the Division of Workers’ Compensation.”  Obviously it would be better for LQ to defend only one action and to have that action vested in the Division of Workers’ Compensation.

In this case, however, the Appellate Division found a reason to distinguish the rule in Christodoulou.  It said that the Christodoulou case involved a claim against a patient/employee for payment or against the workers’ compensation carrier.  In this case the “complaint states a common law contract claim against the insurance carrier under the alleged Aetna contract, as well as a common law claim of unjust enrichment related to that contract and its discounted rates.”  As such, the court held, “Plaintiff’s claim under such a contract, however, is not a matter pertaining to compensable benefits under the Workers’ Compensation Act.”

This distinction is an unusual one and contrasts with most workers’ compensation medical provider claims where the only issue is whether the medical services were reasonable and necessary.  Those cases are claims against employees or against the appropriate workers’ compensation carrier for reimbursement.  This case involved more issues of contract law and as such the court was emphatic that the Division of Workers’ Compensation was not empowered to resolve contractual disputes.  For this reason, the civil action was permitted to continue even while the petitioner pursued the workers’ compensation matter.  The decision illustrates an important exception to the general rule that medical reimbursement claims should be transferred to pending workers’ compensation claims in the Division.  When the issue is interpretation of a contract, that issue belongs in civil court according to this decision.

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About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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