County With A Self-Insured Benefits Plan Is Not Entitled To Pursue Subrogation Under The New Jersey Collateral Source Rule, N.J.S.A 2A:15-97
April, 2010
Bergen County established the County of Bergen Employee Benefits Plan ("the Plan") for its employees and their dependents' healthcare. Bergen County then entered into an Administrative Services Agreement with Horizon Blue Cross Blue Shield ("Horizon") in which Horizon was named the Plan's administrator. As the Plan's administrator, Horizon provided claims processing, adjudication and other services. However, Horizon subcontracted subrogation issues to two other entities, ACS and Primax. Under the Plan's insuring agreement, it was permitted to recover amounts paid to its insureds as a result of third-party negligence.
In the underlying litigation, Bergen County sought reimbursement of approximately $575,701.91 for medical expenses it paid out under the Plan on behalf of an employee. The employee separately filed a medical malpractice lawsuit in connection with the medical treatment arising out of those benefits which settled, post-judgment, for $18,000,000. Prior to the settlement, ACS and Primax advised the employee's counsel that they would not seek subrogation against any recovery obtained in the medical malpractice litigation. However, Bergen County claims that it was never advised that Horizon, ACS and Primax did not intend to seek subrogation or reimbursement on its behalf.
Bergen County then sued Horizon, ACS and Primax for breach of contract, breach of fiduciary duty and negligence based on their failure to pursue a subrogation action to recover the medical expenses paid to its insured. County of Bergen Employee Benefit Plan and the County of Bergen v. Horizon Blue Cross Blue Shield of New Jersey, et al., 2010 N.J. Super. Lexis 32 (App. Div. 2010). At issue was whether the Collateral Source Rule bars Bergen County from recovering its expenses through subrogation or contract reimbursement where the insured recovers against a tortfeasor in a post-verdict settlement. Both parties filed motions to dismiss, which were denied by the trial court. The Appellate Division then granted leave to appeal to determine whether Bergen County's claims are barred by the Collateral Source Rule delineated in N.J.S.A. 2A:15-97.
N.J.S.A. 2A:15-97 provides as follows:
In any civil action brought for personal injury or death . . . if a plaintiff receives or is entitled to receive benefits for the injuries allegedly incurred from any other source other than a joint tortfeasor, the benefits, other than workers' compensation benefits or the proceeds from a life insurance policy, shall be disclosed to the court and the amount thereof which duplicates any benefit contained in the award shall be deducted from any award recovered by the plaintiff, less any premium paid to an insurer directly by the plaintiff or by any member of the plaintiff's family on behalf of the plaintiff for the policy period during which the benefits are payable. Any party to the action shall be permitted to introduce evidence regarding any of the matters described in this act.
N.J.S.A. 2A:15-97.
In County of Bergen Employee Benefit Plan, the Court observed that the purpose of the Collateral Source Rule was twofold: "to eliminate the double recovery to plaintiffs . . . and to allocate the benefit of that change to liability carriers." County of Bergen Employee Benefit Plan, 2010 N.J. Super. Lexis 9-10 quoting Perreira v. Rediger, 106 N.J. 399 (2001). The purpose of the second goal is to limit increasing liability insurance costs. By reducing a plaintiff's tort judgment by the amount of benefits already received, the statute reduces the burden to liability carriers, while keeping health insurers in the same position.
Here, since the insured employee cannot recover in the personal injury action for the amounts paid by collateral sources for medical benefits, the County of Bergen, despite having paid those medical benefits, has no right of recovery or subrogation from the insured's personal injury settlement. Id. at 11-12.
While the County of Bergen argued for an exception because it is a self-insured municipality, the Appellate Division found no distinction between a publicly-funded payment source and a private, for-profit health insurer. Moreover, the Appellate Division held that "the plain language of Section 97 states that it applies to 'benefits' received by a tort plaintiff from 'any' source, and unlike workers' compensation benefits and the proceeds from a life insurance policy, amounts received from public sources, such as a self-funded County health plan, are not excepted from Section 97." Id. at 19. Thus, the Appellate Division ruled that the County of Bergen's claims should be dismissed as New Jersey's Collateral Source Rule, N.J.S.A. 2A:15-97, bars subrogation or reimbursement.
Learning Point
In reaching its decision to prohibit a county with a self-insured benefits plan to pursue subrogation, the Appellate Division in County of Bergen Employee Benefit Plan adhered to traditional rules of statutory interpretation and gave the statute's words and phrases their usual and ordinary meaning. Additionally, the Appellate Division construed the statutory language in light of the statute as a whole, the overall statutory scheme and other legislation on the subject to determine the Legislature’s probable intent.
Back to New York CM Report of Recent Decisions (2010v1) 2010 Volume 1 Table of Contents
