21 Fla. L. Weekly Supp. 925a
Online Reference: FLWSUPP 2109BROWInsurance — Personal injury protection — Coverage — Medical expenses — Policy that provides that insurer may reduce payments to lesser amounts that result from application of fee schedules does not clearly and unambiguously elect to limit reimbursement to permissive statutory fee schedule
ST. JOHNS MEDICAL CENTER A/A/O CHRISTINA BROWN, Plaintiff, v. DIRECT GENERAL INSURANCE COMPANY, Defendant. County Court, 4th Judicial Circuit in and for Duval County. Case No. 16-2012-SC-004876-XXXX-MA (CC-G). December 19, 2013. Honorable Scott Mitchell, Judge. Counsel: Adam Saben, Shuster & Saben, Jacksonville, for Plaintiff. Dorothy DiFiore, for Defendant.ORDER DENYING DEFENDANT’S MOTION FORFINAL SUMMARY JUDGMENT AS TO APPLICATIONOF THE MEDICARE PART B FEE SCHEDULE
THIS MATTER having come before the Court for hearing on November 6, 2013 on Defendant’s Motion for Final Summary Judgment, and the Court having reviewed the Court file, including all record evidence presented, the parties’ motions and supporting documents, and the Court having heard argument, rules as follows1:
ISSUE
The issue before the Court is whether the Defendant, DIRECT GENERAL INSURANCE COMPANY, (“DIRECT GENERAL”) properly amended its automobile insurance policy on February 25, 2011 to add endorsement FL028A and avail itself of the permissive payment option of Fla. Stat. 627.736(5)(a)(2) and base its reimbursement methodology on 200% of Medicare Part B for Personal Injury Protection (P.I.P.) benefits.
In forming its ruling, this Court is guided by the recent opinion by the Florida Supreme Court in Geico General Insurance Company v. Virtual Imaging Services, 2013 WL 3332385 (Fla. July 3, 2013) [38 Fla. L. Weekly S517a]. In Virtual, the Supreme Court ruled that the insurer was required to give notice to its insured before using Medicare fee schedules to limit reimbursement for medical services.
FACTS
The facts of this case are not in dispute. Claimant, Christina Brown, was involved in a motor vehicle accident on May 22, 2011 and sought treatment related to injuries sustained at St. John’s Medical Center (“St. John’s”) in Jacksonville, Florida. St. John’s submitted its bills to the Defendant insurance carrier, DIRECT GENERAL, which were paid under the permissive methodology of Fla. Stat. 627.736(5)(a)(2), which permits the insurer to use Medicare fee schedules as a basis for limiting reimbursements for medical services. The Plaintiff subsequently filed suit, alleging that the Defendant failed to properly amend its policy, and, therefore, the proper methodology to calculate reimbursement is found in Fla.Stat. 627.736(5)(a)(1), which caps payment at 80% of “reasonable expenses for medically necessary services.”
DEFENDANT’S POSITION
The Defendant’s position is that it gave proper notice to the insured (and to any medical provider of the insured) that it was going to reimburse submitted bills under the permissive payment methodology and, therefore, properly reimbursed the Plaintiff using the Medicare fee schedule.
PLAINTIFF’S POSITION
The Plaintiff’s position is that the Defendant did not properly elect the permissible payment methodology because the language of amendatory endorsement FL028A did not “clearly and unambiguously” place the insured on notice of the calculation methodology that would be employed by the Defendant.ANALYSIS
The analysis by this Court is guided by the holding in Geico General Insurance Company v. Virtual Imaging Services, 2013 WL 3332385 (Fla. July 3, 2013) [38 Fla. L. Weekly S517a]. In Virtual, the Florida Supreme Court ruled that automobile insurers were required to give notice to their insureds before using Medicare fee schedules to limit reimbursement for medical services. In this case, the Defendant amended its automobile insurance policy with respect to P.I.P. on February 25, 2011 by adding amendment FL028A, which states, in pertinent part:
INSURING AGREEMENT
Subject to the terms of this coverage and to the terms of your policy, we agree with you as follows:
(A) After the deductibles on your policy are met, we will pay, in accordance with the No Fault Law, PIP benefits to or for the benefits of an insured who sustained bodily injury. The insured’s bodily injury must be caused by an accident arising out of the ownership; maintenance; or use of a motor vehicle.
Subject to the limits shown on the Declarations Page, PIP benefits are:
1) 80% of all reasonable and necessary medical expenses;
2) 60% of work loss;
3) All replacement services expenses incurred as a result of bodily injury; and
4) The death benefits required under the No Fault Law.
(B) Unreasonable or Unnecessary Medical Expenses. If an insured incurs medical expenses which we deem to be unreasonable or unnecessary, we may refuse to pay for those medical expenses and contest them.
We may reduce any medical expense payment to a provider by any amount we deem to be unreasonable.
In determining whether charges for medical expenses under this Part are reasonable, we may reduce payments for amounts that are billed to any lesser amount that results from the application of any schedule of charges or alternative reimbursement method that is expressly referenced or authorized for use by the insurers under the No Fault Law. Any reductions we make will not affect the rights of an insured for coverage under this Part.
In no event will we be required to pay more than 80% of the medical expenses actually billed.2
Applying the Virtual analysis to this amendatory language, this Court finds that the Defendant fails to place its insured on proper notice that reimbursement will be made under the permissive option of the P.I.P. Statute. While the Court does find that the Defendant included language in its amendment that specifically references payment in accordance with “schedules of charges or alternative reimbursement method[s]”, the policy is not clear and unambiguous in notifying the insured of the Defendant’s election to use that reimbursement method. To the contrary, within the same section of its amendment, the insured is placed on notice that the Defendant will “not be required to pay more than 80% of the medical expenses actually billed”. This alternative method that may be chosen by the Defendant creates an ambiguity as to which methodology will be selected by the Defendant for a submitted charge. Also in the same subsection, the Defendant states that it “may reduce any medical expenses” that it deems to be unreasonable. Once again, this language, in and of itself, is incongruous with the mandate of Virtual that states that an election to pay under the permissive methodology must be made with “clear and unambiguous” language. When read in toto with the entire subsection of the amendment, it is inherently inconsistent and ambiguous because the insured (or the medical provider) does not know which methodology is going to be elected for a particular service.
The Virtual opinion states that the election for the “permissive methodology” must be made in “clear and unambiguous” language. While the opinion discusses the importance of putting the correct language into an insurance policy with respect to “fee schedules”, the opinion also discusses the importance of advising the insured of the election of a particular methodology. Specifically, the Supreme Court rephrased the certified question from the Third District Court of Appeals to ask:
WITH RESPECT TO PIP POLICIES ISSUED AFTER JANUARY 1, 2008, MAY AN INSURER LIMIT REIMBURSEMENT BASED ON THE MEDICARE FEE SCHEDULES IDENTIFIED IN SECTION 627.736(5)(a), FLORIDA STATUTES WITHOUT PROVIDING NOTICE IN ITS POLICY OF AN ELECTION TO USE THE MEDICARE FEE SCHEDULES AS THE BASIS FOR CALCULATING REIMBURSMENTS?
Virtual, at 3 (emphasis added).
From the very beginning of its analysis, the Supreme Court was focused on the clarity of the election and notice of same to its insured of the permissive payment methodology. The Court then goes on to give a history of the P.I.P. statute and amendments thereto, including the 2008 amendments wherein the legislature created a bifurcated payment paradigm, with the mandatory payment option being 80% of reasonable expenses for medically necessary services. “This provision is the heart of the PIP statute’s coverage requirement.” Virtual, at 5. This mandatory payment methodology is cited in Fla. Stat. 627.736(5)(a)l and “is a fact-dependent inquiry determined by consideration of various factors” Virtual at 7.
In discussing Subsection (5)(a)2, the Court goes on to discuss the permissive payment option and states:
This provision, adopted in the 2008 amendments, states that an insurer “ may limit reimbursement” for certain services rendered, such as MRIs, to “200 percent of the allowable amount under the participating physicians schedule of Medicare Part B.” § 627.736(5)(a) 2.f., Fla. Stat. (emphasis supplied). The dispute in this case centers around GEICO’s reliance on subsection (5)(a)2. to limit reimbursements without providing notice in its policy of its election to do so.
Virtual at 7. (emphasis in original)
The Defendant in our case focuses on the fact that Direct General included language in its amendatory endorsement FL028A that states that it will pay “in accordance with the fee schedule.” In fact, in reviewing the Defendant’s Motion for Summary Judgment filed October 9, 2013 (as well as in oral argument), the Defendant emphasizes the inclusion of language that complies with the requirements of Virtual and Kingsway Amigo Ins. Co. v. Ocean Health, 63 So.3d 63 (Fla 4th DCA 2011) [36 Fla. L. Weekly D1062a] throughout its argument. In the Defendant’s motion, it concludes,
“The only requirement for using the Medicare fee schedules as a basis for reasonableness is notice within the policy endorsement. It is undisputed that Direct fully complied with its policy and statutory requirements as required by 627.736(5(a)2.f, Florida Statutes (2009), Kingsway, and Virtual Imaging by including notice within the policy endorsement. Accordingly, by paying for the billed services in accordance with the fee schedule, Direct has complied with the policy and statutory prerequisites in making full payment of reasonable medical expenses. As such, there exists no genuine issue of material fact and Defendant is entitled to a judgment as a matter of law.”3
The issue this Court has with the Defendant’s position is that it fails to recognize the Supreme Court’s discussion of both the necessity for proper fee schedule language and the insurers’ “clear and unequivocal” election to use the permissive payment methodology. The various citations from Virtual in this Order as well as the holding mandate the inclusion of the election language that is missing from the Defendant’s endorsement and omitted from its summary judgment motion.
The dichotomy between the payment methodologies is also addressed by Virtual when the Supreme Court stated:
“This alternative calculation mechanism is the same mechanism that was in place before the Legislature amended the PIP statute to incorporate the Medicare fee schedules: in the event of a dispute, a fact-finder must determine whether the amount billed was reasonable. The permissive language of the 2008 amendments, therefore, plainly demonstrates that there are two different methodologies for calculating reimbursements to satisfy the PIP statute’s reasonable medical expenses coverage mandate.” Virtual, citing Kingsway, 63 So.2d at 67 (emphasis added).
The Supreme Court’s emphasis on the dichotomy between payment methodologies is important for two reasons: First, it distinguishes that the methodology under F.S. 627.736(5)(a)1 is a fact-dependent, and the permissive methodology is not. Therefore, the various factors that a finder of fact could consider in a determination of a reasonable expense for a necessary medical service is not relevant in a Fla.Stat. 627.736(5)(a)2 determination. The Supreme Court states, “Accordingly, we conclude that the 2008 amendments were clearly permissive and 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 insured based on the factors enumerated in section 627.736(5)(a). 1. In other words, we do not conclude that payment under section 627.736(5)(a) 2. could never satisfy the PIP statute’s basic “reasonable expenses” coverage mandate, set forth in section 627.736(1). Instead, what we conclude is that the fee schedule payment calculation methodology in section 627.736(5)(a) 2. was permissive.” Virtual, at 10.
Second, the dichotomy cuts against the Defendant’s argument because in its motion and oral argument before this Court, Direct General attempts to “straddle” both sections of Fla. Stat. 627.736(5). That is, Defendant argues that it can avail itself of the Medicare fee schedule as provided in (5)(a)2 because of the inclusion of “fee schedule” in its amendment and it also states that it can pay “80% of the medical expenses actually billed”. In short, Virtual says an insurer must “clearly and unambiguously” opt for one methodology. Direct General’s endorsement opts for two.
Perhaps the strongest mandate from the Supreme Court on the issue of “clear and unambiguous” election language is noted in Virtual when the Court stated:
“We conclude that because the policy did not reference the permissive Medicare fee schedule method of calculating reasonable medical expenses, GEICO was not permitted to limit reimbursements in accordance with the Medicare fee schedules. As the Kingsway Court explained, when the plain language of the PIP statute affords insurers two different mechanisms for calculating reimbursements, the insurer must clearly and unambiguously elect the permissive payment methodology in order to rely on it. See Kingsway, 63 So.3d at 67-68.
This is because a policy election gives notice to the insured — and to the provider who renders service based on an assignment of benefits in the insured’s policy — regarding the amount of PIP coverage the insurer will provide.”
Virtual, at 9.
Again, this Court recognizes the strong emphasis that the Supreme Court places on the “clear and unambiguous” language needed to address the election of the payment methodology and the omission of that language in the Defendant’s amendatory endorsement.
Finally, the Supreme Court discusses the importance of electing the specific payment methodology in Virtual and references the language from Kingsway from the Fourth District in affirming that decision when it states:
“As the Fourth District explained in Kingsway, 63 So.3d at 67, the language in section 627.736(5)(a) 5. “anticipates that an insurer will make a choice.” Accordingly, even if the Medicare fee schedules are incorporated into the insured’s policy, neither the insured nor the provider knows, without the policy providing notice by electing the Medicare fee schedules, that the insurer will limit reimbursements.”
Virtual, at 10 (emphasis added).
So, this Court can reference back to numerous points in Virtual that fortify the position that without a “clear and unambiguous” reference to the election of the permissive payment methodology of Fla. Stat. 627.736(5)(a)2, the Defendant cannot avail itself of payments limited by the Medicare fee schedule. See also, New Smyrna Beach Imaging, LLC a/a/o Maurissa Ross v. Direct General Insurance Company, (Order of Volusia County Court Judge Robert A. Sanders, Jr. of October 16, 2013, case number 2011 21372 Cons Division:71) finding that Direct General Insurance Company Amendatory Endorsement FL028A (04-10) does not comply with the mandate of Virtual.CONCLUSION
The Defendant’s Amendatory Endorsement FL028A does not “clearly and unambiguously” place its insureds on notice of the election to reimbursement for necessary medical services under the permissive methodology of Fla. Stat. 627.736(5)(a)2. Therefore, the Defendant’s Motion for Final Summary Judgment is DENIED.
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1Prior to the hearing, the Plaintiff filed its cross-motion for summary judgment on the same issue. However, the Plaintiff withdrew its motion during this hearing and both sides agreed to proceed only on the Defendant’s Motion for Final Summary Judgment. Therefore, this Court’s ruling is on the Defendant’s motion, which is the only one before it during oral argument of November 6, 2013.
2Direct General’s Amendatory Endorsement FL028A (04-10) was attached to the Defendant’s Motion for Final Summary Judgment as “Exhibit B” for reference and admitted for review to this Court without objection.
3See, paragraph 19 of the Defendant’s Motion for Summary Final Judgment filed on October 9, 2013.
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