Perreira v. Rediger
778 A.2d 429, 2001 N.J. LEXIS 780, 169 N.J. 399 (2001)
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Rule of Law:
N.J.S.A. 2A:15-97, New Jersey's collateral source rule, bars health insurers from recovering payments made on behalf of an insured through either subrogation or contractual reimbursement when the insured recovers a judgment or settlement from a tortfeasor, as the statute's legislative intent was to eliminate double recovery for plaintiffs and allocate the benefit of that elimination to liability carriers.
Facts:
- Takako Beninato, a professional dog groomer, was seriously injured during a grooming session involving a dog owned by Lenore and Leonard Achor.
- Beninato's health insurer, Oxford Health Plans, Inc. ("Oxford"), paid $7,357 for her medical expenses incurred from the injury.
- Maria Perreira fell on the premises of the Columbia Savings Bank.
- Perreira’s health insurer, Oxford Health Plans, Inc., paid about $18,000 for her medical expenses incurred from the fall.
- Beninato sued the Achors for her injuries.
- Perreira sued Columbia Savings Bank along with its liability carrier and the bank’s snow removal contractor, Michael Rediger, and his liability carrier for her injuries.
- Beninato's negligence action against the Achors settled for $95,000, with the release expressly stating that payment for medical bills and expenses incurred were not included in that amount.
- Perreira entered into a settlement with Columbia and Rediger after a trial court ruling in her favor on Oxford's recoupment claim.
Procedural Posture:
- Takako Beninato sued Lenore and Leonard Achor for negligence in state trial court.
- While Beninato's case was pending, the Achors and their homeowner's insurer, Preferred Mutual Insurance Company, filed a separate action against Oxford Health Plans, Inc., seeking a declaration that Oxford was barred from asserting subrogation or reimbursement under N.J.S.A. 2A:15-97.
- The declaratory action was consolidated with Beninato's negligence action in the state trial court.
- Oxford moved for summary judgment, arguing its right to reimbursement or subrogation.
- The trial court entered judgment for the Achors and Preferred, concluding Oxford's claim was barred by the collateral source statute.
- Maria Perreira sued Columbia Savings Bank, Michael Rediger (the bank’s snow removal contractor), and their respective liability carriers (Atlantic Mutual Insurance Company and Preserver Insurance Company) for negligence in state trial court.
- While Perreira's case was pending, the Perreiras filed a separate action against Oxford Health Plans, Inc., Columbia, Rediger, Atlantic, and Preserver, seeking a declaration that Oxford was barred from reimbursement or subrogation by the collateral source statute.
- This declaratory action was consolidated with Perreira's negligence action in the state trial court.
- The Perreiras moved for summary judgment, arguing Oxford could not assert a lien on their recovery.
- The trial court granted the Perreiras' motion.
- Oxford appealed the trial court judgments in both the Beninato and Perreira cases.
- The Appellate Division consolidated Oxford's appeals and reversed the trial court, holding that the collateral source rule does not bar health insurers from asserting reimbursement or subrogation claims in non-PIP personal injury negligence actions.
- The Achors (from the Beninato case) and Rediger (from the Perreira case) filed a petition for certification to the Supreme Court of New Jersey.
- The Supreme Court of New Jersey granted certification.
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Issue:
Does N.J.S.A. 2A:15-97, New Jersey's collateral source rule, permit health insurers to recoup medical payments made on an insured's behalf through subrogation or contract reimbursement when the insured recovers a judgment or settlement from a tortfeasor?
Opinions:
Majority - Long, J.
No, N.J.S.A. 2A:15-97, the collateral source rule, does not allow health insurers to recoup medical payments made on an insured's behalf through subrogation or contract reimbursement when the insured recovers a judgment or settlement from a tortfeasor. The purpose of N.J.S.A. 2A:15-97 is twofold: to eliminate double recovery for plaintiffs and to allocate the benefit of that change to liability carriers. Allowing health insurers to recover funds expended would contravene this legislative intent by reallocating the benefit away from liability carriers and back to health insurers. The legislative history unequivocally demonstrates that New Jersey's modification of the common-law collateral source rule was intended to reduce the cost of liability insurance by shifting the burden of covered medical expenses, at least to some extent, from liability carriers to health and disability third-party payers. The Court found no pre-existing common-law equitable right to subrogation for health insurers; such a right historically existed for property damage insurance, but not for personal insurance like health coverage, where exact loss is less ascertainable. Furthermore, while the Commissioner of Insurance later promulgated regulations permitting subrogation and reimbursement provisions in health insurance contracts, these administrative rules cannot override a clear legislative mandate. Therefore, the regulations must be interpreted narrowly to apply only to cases where N.J.S.A. 2A:15-97 does not apply, as in instances where the collateral source rule dictates that the medical expense amounts are subtracted from the judgment, meaning the insured has no entitlement to 'receive' them for reimbursement.
Analysis:
This case clarifies the allocation of risk and benefit under New Jersey's collateral source statute, firmly placing the burden of medical expenses paid by health insurers on the health insurance industry rather than allowing them to recoup from tortfeasors or their liability carriers. The decision prevents health insurers from essentially avoiding their contractual obligations to pay for medical care when a tortfeasor is also involved, ensuring that the benefit of legislative tort reform accrues to liability carriers. This precedent reinforces the primacy of legislative intent in statutory interpretation, especially when administrative regulations might appear to conflict with a statute's clear purpose. Future cases must respect this legislative allocation, thereby limiting health insurers' ability to recover from tort judgments in New Jersey.
