New Jersey’s Appellative Division rules on dispute between automobile insurer and health insurer

On July 27, 2021, the Appellate Division issued an opinion clarifying an automobile insurance carrier’s rights and obligations when its named insured selects the ‘health insurance primary’ option of their automobile insurance policy.

In Palisades Insurance Company v. Horizon Blue Cross Blue Shield of New Jersey, Docket A-2830-19 (approved for publication, 7/27/21), Palisades, the plaintiff automobile insurance carrier, received medical bills for Personal Injury Protection (“PIP”) benefits on behalf of their insureds who elected the ‘health insurance primary’ option in their automobile insurance policy. Palisades notified their insureds’ health insurance carrier, defendant Horizon, of these bills.  Palisades specifically requested confirmation from Horizon that it would process the medical bills and act as the primary payor of medical benefits pursuant to the insured’s selection of the ‘health insurance primary’ option. Horizon did not respond, and Palisades processed the bills for payment. Thereafter, Palisades filed suit against Horizon seeking subrogation for the medical bills they paid.  

In affirming the trial court’s entry of summary judgment against Palisades, the Appellate Division held that there is no right of subrogation between automobile insurance carriers and health carriers as to PIP benefits. The New Jersey Automobile Reparations Reform Act, N.J.S.A. 39:6A-1, et seq., does not expressly permit inter-company reimbursement. There is also no subrogation provision in the medical regulations concerning coordination of benefits for the healthcare primary option in PIP.  See N.J.A.C. 11:3-37.1, et seq. Horizon was not obliged to process PIP payments because Horizon’s duty to issue payment is triggered only when a claim is made by an insured or a healthcare provider. See N.J.A.C. 11:22-1.5(a). Palisades is neither a Horizon insured nor a healthcare provider. Thus, Horizon’s obligation to issue payment was not triggered. Similarly, Palisades was not obligated to process PIP payments as a secondary PIP provider where there was no denial from the primary payor, as per N.J.A.C.  11:37.11(b). Therefore, Palisades made payments “voluntarily.” The Appellate Division further held that because Palisades issued payment voluntarily, the coordination of benefits scheme broke down.  The healthcare providers were unaware they were submitting their claims improperly since their bills were being paid. These medical providers had no incentive to submit their claims to Horizon, as they should have, or to pursue the health carrier’s appeals process.

Take away

Auto insurers may find themselves between a rock and a hard place when their named insured elects the ‘health insurance primary’ option of their automobile insurance policy and the health insurance carrier is silent as to coverage. Palisades v. Horizon makes it clear that direct subrogation is not an option. Instead, the auto insurer may deny the claim and request that the insured (injured party) submit all bills to the health carrier. If the health carrier also denies coverage, the auto insurer may:

1. convert the policy to PIP primary and apply an additional deductible;
2. request the insured patient exhaust the health carrier’s appeal process; or
3. obtain an assignment of benefits from the insured to pursue the appeal or to litigate on the insured’s behalf.

While obtaining an assignment of benefits would give the auto insurer the ability to pursue the health carrier directly as Palisades attempted, the auto insurer would then be forced to submit the patient’s billing and medical records, which it may not have access to, and to pursue appeals within the healthcare insurance carrier’s guidelines. This may ultimately prove to be an onerous undertaking. In our opinion, the preferred approach for an automobile insurance company is to initially deny any bills submitted per a policy where the ‘health insurance primary’ option was selected, unless and until there is an explicit denial from the insured’s health insurer and until the health insurer’s appeals processes have been met.