An insured claiming his auto insurer’s delay in approving treatment caused his injuries to worsen is entitled to prove his breach of contract claim despite New Jersey’s no-fault law. That law governing personal injury protection benefits provides an exclusive remedy in some personal injury claims situations but not all, a state appeals court has ruled.
A state superior court reversed a trial court’s order granting summary judgment to State Farm and remanded the case for further proceedings. State Farm was not entitled to dismissal of the claim before the plaintiff had a chance to prove his insurer acted in bad faith and breached his contract, according to the reversal opinion.
On September 10, 2016, Miguel Vera sustained injuries to his right shoulder when he was in a car accident while driving. Six days later, Veras saw an orthopedic surgeon who recommended a magnetic resonance imaging (MRI) of his right shoulder to assess the injuries. Initially State Farm denied that authorization. Thereafter, State Farm authorized the MRI, and the test was conducted on November 19– more than two months after he first saw the doctor.
On December 9, the surgeon informed Vera that the MRI showed he had significant injuries to his right shoulder and that he needed surgery. Approximately a month later, Vera met with the doctor again and he again recommended surgery. On January 20, 2017, Vera was examined by a doctor selected by State Farm to conduct a separate medical evaluation. State Farm then authorized the surgery, which was performed on February 23, 2017.
The doctor who performed the surgery said he found a complete tear of the bicep tendon of the right shoulder. He stated that the delay in approving the MRI and surgery prevented him from repairing the bicep tendon and left Vera with a significant “permanent injury to his right shoulder and permanent damage to the bicep tendon.”
In 2018, Vera sued State Farm, alleging that the insurer “arbitrarily and capriciously breached its contractual obligations” by delaying the approval of his MRI and surgery. He asserted that the delay caused the injury to be permanent and more serious than would have been the case if the testing and surgery had been approved “in a timely manner.” As damages, Vera sought compensatory and punitive damages, as well as attorneys’ fees and costs.
In granting summary judgment the trial court had reasoned that Vera’s claims were for the wrongful denial of PIP benefits and that the state’s no-fault law limited the remedies on a successful claim for a denial of, or delay in approval of, benefits to recovery of interest and attorneys’ fees. Vera was not seeking interest or attorneys’ fees as provided for in the statute and his claims for compensatory and punitive damages were statutorily barred, according to the trail court.
On appeal, Vera argued that his claims do not involve a denial of coverage; rather, his claims are for a delay in authorizing testing and treatment and, therefore, his claims are not barred by the statute governing PIP benefits.
State Farm argued that the no-fault law (N.J.S.A. 39:6A-5) sets forth the exclusive remedy available if an insurer fails to issue payments in a timely manner.
But the appeals court noted that the statutory scheme provides an exclusive remedy “for some, but not all,” automobile insurance claims. For one, the text of the no-fault law addresses the payment of PIP benefits but not authorization or precertification. “In short, the text of the statute relates to payment of benefits after treatment has commenced and notice to the insurer,” the opinion states, adding that by its “plain language” the no-fault law “does not expressly preclude plaintiff’s claim.”
At the same time, New Jersey law does permit claims for damage caused by delayed authorization where a plaintiff can prove a breach of contract, the court added. In the case of a processing delay, bad faith is established by showing that no valid reasons existed to delay processing the claim and the insurance company knew or recklessly disregarded the fact that no valid reasons supported the delay.
Vera has not yet established those facts. For example, he has not provided the court with a copy of his policy. Nor has he shown that his doctor needed preauthorization to conduct the MRI. He has also not shown that State Farm acted unreasonably in having its own doctor examine him before he had surgery.
Even though Vera has not established the elements of a bad-faith claim, the court said the record also does not show that he cannot prove the claim. Consequently, State Farm was not entitled to summary judgment. Instead, the court remanded the case for further proceedings.
Topics Lawsuits Carriers New Jersey
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