DEPARTMENT OF BANKING AND INSURANCE
DIVISION OF INSURANCE
Unsatisfied Claim and Judgment Fund’s Reimbursement of Excess Medical Expense Benefits Paid by Insurers Adopted Amendments: N.J.A.C. 11:3-28.1 and 28.13
Adopted New Rule: N.J.A.C. 11:3-28 Appendix C
Proposed: October 16, 2000 at 32 N.J.R. 3714(a)
Adopted: April 16, 2001 by Karen L. Suter, Commissioner, Department of Banking and Insurance
Filed: April 16, 2001 as R.2001 d.151, with substantive and technical changes not requiring additional public notice and comment (see N.J.A.C. 1:30-4.3).
Authority: N.J.A.C. 17:1-8.1, 17:1-15e, 39:6-61 et seq. and 39:6A-9.1
Effective Date: May 7, 2001
Expiration Date: January 4, 2006.
Summary of Public Comments and Agency Responses:
The Department of Banking and Insurance ("Department") received four timely written comments from insurers and an insurer trade association as follows:
1. The Insurance Council of New Jersey;
2. State Farm Indemnity Company;
3. New Jersey Manufacturers Insurance Group; and
4. Allstate New Jersey Insurance Company
COMMENT: While appreciating the efforts of the Department to reduce confusion regarding actions constituting "diligent pursuit" of an insurer's right of recovery, one commenter believed that the proposed requirements set forth in N.J.A.C. 11:3-28.13(c) contain items that may or may not be relevant to the diligent pursuit of a tortfeasor. In addition, the commenter expressed concern that the rule may require retroactive application of the standard without consideration of the impact on cases that have already been filed for reimbursement. The commenter believed that the Department should adopt a definition of diligent pursuit based on "generally accepted industry claims handling practices." The commenter believed that this would provide that the standards and procedures an insurer uses for Unsatisfied Claims and Judgment Fund ("UCJF") recovery cases would be the same as those used in the recovery from tortfeasors in other similar actions where UCJF recovery is not involved. The commenter also believed that it is more important to address the recovery from tortfeasors as opposed to justifying a list of the action items that may or may not be relevant in the recovery in a case. The commenter believed that its proposed definition would create greater certainty while providing the insurer the flexibility needed to pursue an action based on all facts of the proceeding. The commenter stated that the Department, in its oversight and audit process, will have an opportunity to review the insurer's recovery efforts to assure that proper standards are applied in all cases whether a UCJF recovery is involved or not.
Accordingly, the commenter suggested that N.J.A.C. 11:3-28.2 be amended to include a definition of "diligent pursuit" to mean "the insurer has prosecuted an action against all potentially responsible tortfeasors, or has determined not to do so after examining various documents, in accordance with generally accepted industry practices." The commenter stated that the list of items in N.J.A.C. 11:3-28.13(c) should only be used as possible items to consider in determining to seek recovery.
RESPONSE: Upon review of the commenter's suggestion, the Department has determined not to change the provision. The Department believes that the commenter's proposed standard is vague and open to interpretation based on the particular insurer involved, and thus would not fulfill the express purpose of the rule. As noted in the proposal Summary, there has been confusion as to what actions constitute "diligently pursuing" an insurer's right of recovery. The Department believes that it is reasonable and appropriate to articulate those particular items an insurer should review as part of a diligent pursuit prior to seeking reimbursement from the UCJF. Indeed, the list of items is intended to incorporate the industry’s best practices by including areas of possible subrogation or recovery which may apply in any particular case. The purpose of these provisions is to contain costs for automobile insurance in this State. Adoption of the commenter's standard essentially would maintain the current situation, require a case-by-case review or audit, and could lead to additional confusion, and attendant delays in reimbursement, among insurers and the UCJF, as to whether the company has diligently pursued its right of recovery, and thus is entitled to recovery.
Moreover, as discussed in a response to a subsequent comment, the rules do not apply to claims already filed for which reimbursement has commenced, and for pending claims a company may utilize the certification as a method to demonstrate diligent pursuit. There is no retroactive application of the rule to claims already filed. It should be noted, however, that, for claims involving in-State accidents covered under N.J.S.A. 39:6A-9.1, these rules do not affect or alter the timeframes for taking action as set forth in that statute, nor do they affect the existing ability of the Fund to deny reimbursement for failure to comply with that statute.
COMMENT: Several commenters believed that it is unnecessary to require that the certification set forth in Appendix C be signed by an officer of the insurer. The commenters believed that it is more appropriate that the employee responsible for pursuing the action against the tortfeasor be the responsible person for certifying the document. In addition, one commenter submitted a UCJF recovery certification checklist which it would complete to demonstrate diligent pursuit in response to the proposed amendments. The commenter believed that this form should ensure expeditious reimbursement to the insurer from the UCJF and suggested that the Department incorporate this form or a similar form in the rules.
RESPONSE: Upon review of the commenters' suggestions regarding the signatory of the certification in Appendix C, the Department has revised N.J.A.C. 11:3-28.13(d) to provide that the certification shall be signed by an officer of the insurer or other authorized person.
With respect to the proposed "checklist," the Department does not believe that incorporation into the rules is necessary. The Department believes that the existing rule and certification are sufficient for the Department's purposes. Insurers, of course, may utilize any internal checklist or forms deemed necessary and appropriate to facilitate its compliance with the rules. However, insurers must file the certification as set forth in Appendix C in order to obtain reimbursement.
COMMENT: One commenter stated that N..J.A.C. 11:3-28.13(a)2 provides that the UCJF may discontinue reimbursements where the insurer has not diligently sought reimbursement after notice and opportunity for an administrative hearing pursuant to the Administrative Procedure Act. The commenter stated that the rule does not provide whether this notice and right to an administrative hearing applies to initial denials of reimbursement by the UCJF. The commenter believed that the most efficient way to handle disputes over initial denials of reimbursement is a declaratory judgment in Superior Court. The commenter thus suggested that N.J.A.C. 11:3-28.13(a)2 delete reference to notice and opportunity for a hearing in accordance with the Administrative Procedure Act and Uniform Administrative Procedure Rules.
RESPONSE: Upon review of the commenter's suggestion, the Department has determined not to change this provision. The rule provides that the UCJF may recover from the insurer any payments already made to the insurer on that claim if the UCJF finds that the insurer has failed to pursue any potentially responsible tortfeasor, after notice and opportunity for a hearing. It does not apply to initial denial, but rather, in cases where reimbursements have been made and recovery of amounts paid is sought by the Department. The Department believes that it is appropriate to provide for such a hearing to develop a factual record, and to ensure that insurers are afforded due process in any administrative determination to deny reimbursement. If an action were directly referred to the Appellate Division of the New Jersey Superior Court without development of an adequate factual record, the Court could remand the matter for further proceedings. This would result in additional delay. Moreover, the scope of any hearing, and thus the time frame involved, would relate to the factual matter at hand. The Department also notes that the insurer may choose not to avail itself of the right to the hearing, and accept the Fund's findings in the matter.
COMMENT: Several commenters stated that it is unclear whether N.J.A.C. 11:3-28.13(c) requires that prosecution of an action against all potentially responsible tortfeasors be ongoing for reimbursement, or that prosecution of the action be concluded, either by judgment or settlement, before reimbursement can be sought. The commenters stated that reimbursement should be allowed while the prosecution of the action is ongoing. One commenter stated that the rules require the insurer to obtain prior approval of the UCJF to settle any such actions so that the UCJF’s interests in an action are fully protected (see N.J.A.C. 11:3-28.13(a)3), and the current rules require that the insurer repay the UCJF from any subsequent recovery (see N.JA.C. 11:3-28.7(b)). The commenter stated that if an action must be concluded before an insurer can seek reimbursement, this would effectively deny insurers their right to reimbursement of excess medical expense benefits from the UCJF. The commenter stated that subrogation-type actions against tortfeasors in many cases can take years and will go beyond the statute of limitations for an insurer to file for reimbursement by the UCJF. Moreover, the commenter stated that there is no reason that reimbursement should be delayed while the subrogation-type action is being litigated, in light of the requirement that the UCJF be repaid by the insurer.
Accordingly, the commenter suggested that the first sentence of N.J.A.C. 11:3-28.13(c) be amended to read as follows: "For purposes of this section, ‘diligently pursue’ means that the insurer has either prosecuted or is prosecuting an action against all potentially responsible tortfeasors, or determined not to do so after …" (language added is underlined).
RESPONSE: The Department agrees. Accordingly, for the reasons expressed by the commenters, the rules have been revised upon adoption to reflect the suggested change. In addition, the Department has revised this subsection, and the corresponding language in Appendix C, upon adoption to clarify that "prosecuting an action" includes agreement or arbitration, for matters subject to N.J.S.A. 39:6A-9.1.
COMMENT: One commenter noted that N.J.A.C. 11:3-28.13(c)1 defines what documents an insurer should review "where applicable" as part of diligently pursuing potentially responsible tortfeasors. The commenter believed that the phrase "where applicable" is ambiguous. For example, in all cases where a PIP claimant is represented by counsel, the commenter questioned whether the insurer should perform a docket search to find relevant court records, such as possible dram shop actions. The commenter believed it would be more appropriate to require the review of all documents listed in the rule, where such documents exist and can be found with reasonable effort.
Accordingly, the commenter suggested that N.J.A.C. 11:3-28.13(c)1 be revised to read: "Examining or reviewing the following documents, if they exist and can be found with reasonable effort [where applicable] …." (language added is underlined, bracketed language is deleted).
RESPONSE: Upon the review of the commenter's suggestion, the Department has determined not to change this provision. The Department believes that the proposed change could lead to confusion and ambiguity as to what would constitute "reasonable effort." The Department believes that insurers should be in a position to determine whether particular documents are applicable, based on the facts of the matter. For example, if the claim resulted from an accident where there is no allegation or indication that the party was intoxicated, it appears that a search for "dram shop actions" would not be required. The rules provide the insurer with sufficient flexibility to determine what documents are applicable based on the facts of the case. The Department believes, however, that the insurer should be in a position to know most, if not all, of the relevant facts giving rise to a particular claim to determine what documents would apply in the diligent pursuit of potentially responsible tortfeasors.
COMMENT: One commenter stated that N.J.A.C. 11:3-28.13(d) requires insurers to file a certification stating that it has diligently pursued reimbursement from any possible tortfeasor with all claims for excess medical expenses submitted to the UCJF. Failure to file the certification results in a denial of reimbursement. The commenter stated that the rule should state that filing the certification creates a rebuttable presumption that the insurer has diligently pursued reimbursement and that the UCJF can begin paying the insurer excess medical expenses.
Accordingly, the commenter suggested that N.J.A.C. 11:3-28.13(d) be amended to add a new sentence at the end of the subsection as follows: "The filing of a certification letter creates a rebuttable presumption that the insurer has diligently pursued all potentially responsible tortfeasors within the time period prescribed at N.J.S.A. 39:6A-9.1 or any other applicable limitation. The Fund shall reimburse the insurer for excess medical expense benefits paid by the insurer if all other requirements for reimbursement are met and the Fund has no evidence to rebut the presumption."
RESPONSE: Upon review of the comment, the Department has determined that no change is required. The rule establishes a process by which an insurer can demonstrate that it has diligently pursued all potentially responsible tortfeasors for purposes of obtaining reimbursement for excess medical expense benefits paid by the insurer. The commenter's suggested language addresses burden of proof issues that the Department does not believe are appropriate in these rules. However, as set forth in response to a subsequent comment, reimbursement of excess medical expense benefits shall commence upon filing the certification, assuming all other requirements of law with respect to reimbursement are satisfied. The Department believes that this addresses the commenter's concerns.
COMMENT: One commenter noted that the last sentence in the last paragraph of Appendix C certification states that the UCJF shall be entitled to discontinue reimbursements and recover any reimbursements already made to the insurer pursuant to N.J.A.C. 11:3-28.13(a)2 if the certification is false. The commenter also noted that N.J.A.C. 11:3-28.13(a)2 gives the UCJF the right to discontinue reimbursements "on that claim" and recover reimbursements already made "on that claim." The commenter stated that the sentence in the certification should be clarified to conform to N.J.A.C. 11:3-28.13(a)2 and provide that it applies to reimbursements made "on that claim." Accordingly, the commenter suggested that the proposed certification in Appendix C should be amended to read "I am also aware that if any of the forgoing statements made by me are false, the UCJF shall be entitled to discontinue reimbursements on that claim and recover any reimbursements already made to the insurer on that claim pursuant to N.J.A.C. 11:3-28.13(a)2 (language to be added is underlined).
RESPONSE: The Department agrees. For the reasons expressed by the commenter, Appendix C has been revised upon adoption to reflect this clarification, except that the phrase use is "on this claim" as a matter of form.
COMMENT: One commenter requested confirmation of its belief that once the certification that it has diligently pursued responsible tortfeasors has been filed, reimbursement from the UCJF will automatically commence.
RESPONSE: Assuming all other requirements of law regarding reimbursement are satisfied, the process for reimbursement will commence upon the filing of the certification.
COMMENT: One commenter stated that it believed that the original intent of the rule was to address out-of-State subrogated matters. The commenter stated that the UCJF had taken the position that each request for reimbursement should be accompanied by a legal opinion of local counsel that subrogation was prohibited by state law. The commenter stated that it believed this was costly and repetitious because accidents took place in Pennsylvania and New York. The commenter stated that it is therefore confusing that the proposed rule may also include in-State accidents. As N.J.A.C. 11:3-28.1(c) appears to indicate that it applies only to accidents occurring out-of-State, the commenter requested clarification of this issue.
RESPONSE: The rule by its terms applies to any reimbursement, regardless of whether the accident occurred in-State or out-of-State. N.J.S.A. 39:6A-9.1 provides that insurers have a right to recover the amount of medical expense payments from a tortfeasor with respect to in-State accidents. Consistent with the goal of containing costs for automobile insurance in this State, and N.J.S.A. 39:6A-9.1, which authorizes recovery against responsible tortfeasors with respect to in-State accidents, the rule similarly provides that insurers are expected to assert appropriate legal remedies to pursue recovery actions against potentially responsible tortfeasors in all accidents, including out-of-State accidents.
The Department notes that N.J.S.A. 39:6A-9.1 is clear that for in-State accidents involving an insured tortfeasor not required to maintain personal injury protection benefits, the insurer is required to make a demand for reimbursement through agreement or arbitration within two years from the date of the accident. These rules do not affect these requirements.
Summary of Agency Initiated Change:
The reference to "N.J.S.A. 39:6A-73.1" in N..J.A.C. 11:3-28.1(b) has been revised to read "N.J.S.A. 39:6-73.1" to reflect the proper reference and correct a typographical error in the original proposed document.
Federal Standards Statement
A Federal standards analysis is not required because these adopted amendments and new rule relate to the reimbursement by the UCJF to insurers for excess medical expense benefit payments pursuant to N.J.S.A. 39:6-61 et seq., and are not subject to any Federal requirements or standards.
Full text of the adoption follows (additions to proposal indicated in boldface with asterisks *thus*; deletions from proposal indicated in brackets with asterisks *[thus]*):
11:3-28.1 Purpose and scope
(a) (No change.)
(b) This subchapter applies to all insurers authorized in this State to write the kinds of insurance specified in paragrapghs d and e of N.J.S.A. 17:17-1. In accordance with N.J.S.A. *[39:6A-73.1]* *39:6-73.1*, reimbursement for medical expense benefits may be sought from the Fund on account of personal injury to any one person in any one accident ocurring on or after February 19, 1978.
(c) (No change from proposal.)
11:3-28.13 Insurer's obligation to obtain recovery of payments for paid medical expense benefit claims
(a)-(b) (No change from proposal.)
(c) For purposes of this section, "diligently pursue" means that the insurer has either prosecuted *or is prosecuting* an action *, including by agreement or arbitration, in matters subject to N.J.S.A. 39:6A-9.1,* against all potentially responsible tortfeasors, or determined not to do so after:
1.-2. (No change from proposal.)
(d) Insurers shall file a certification, in the form of Appendix C incorporated herein by reference, that they have diligently pursued recovery of medical expense benefits, and that the insurer has not received from any source reimbursement, contribution, or indemnification of the excess medical benefits paid by the insurer for which reimbursement from the Fund is sought. This certification shall be signed by an officer of the insurer *or other person authorized to sign the certification on behalf of the insurer*, and shall be filed no later than two years from the date of the accident, prior to expiration of any applicable statute of limitations, or at the time filing for reimbursement is made, whichever occurs first. Failure to file the certification shall result in denial of reimbursement to the insurer by the Fund.
UNSATISFIED CLAIM AND JUDGMENT FUND
Date of Loss:
Carrier Claim Number:
EMB File Number:
Amount Requested: $
I, , am the of seeking reimbursement
(Name of Affiant) (Title *[of Officer]*) (Name of Insurer)
for Personal Injury Protection excess medical benefits paid by the Insurer on behalf of the above listed injured party. I hereby certify that I am authorized to file this certification on behalf of the insurer.
I further certify that this Insurer has not received, from any source, reimbursement, contribution, or indemnification of the PIP excess medical benefits paid by the Insurer on behalf of the above listed injured party and for which reimbursement is sought from the UCJF.
I further certify that this Insurer has either (i) prosecuted *or is prosecuting* an action *, including by agreement or arbitration in matters subject to N.J.S.A. 39:6A-9.1,* against all potentially responsible tortfeasors, or (ii) examined the documents and considered the factors set forth at N.J.A.C. 11:3-28.13(c), and determined not to prosecute an action.
I further certify that the foregoing statements are true and correct to the best of my information, knowledge and belief, and that the UCJF may rely on this Certification in determining to provide reimbursement of PIP excess medical expense benefit payments. I am also aware that if any of the foregoing statements made by me are false, the UCJF shall be entitled to discontinue reimbursements *on this claim* and recover any reimbursements already made to the insurer *on this claim* pursuant to N.J.A.C. 11:3-28.13(a)2.
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