New Jersey Law Journal
November 6, 2006
by Marci Hill Jordan
On July 13, 2004, The New Jersey Supreme Court decided a case important to all New Jersey workers’ compensation attorneys, University of Massachusetts Memorial Medical Center, Inc. et al v. Mario S. Christodoulou et al,180 N.J 334, 851 A.2d 636. This case addresses the responsibility for payment of medical bills not paid by the worker’s compensation carrier. The import of this decision had the immediate effect of adding to the growing list of issues to consider before settling New Jersey workers’ compensation cases. While Christodoulou does not radically change how we practice, it does overrule prior case law in one important area.
In Christodoulou, the petitioner, Mario Christodoulou was in a motor vehicle accident while driving a car owned by his employer. Mario was hospitalized for two months until his death. His father filed an Employee Claim Petition on behalf of Mario’s estate and a Dependency Claim Petition on behalf of himself and his wife. At issue were over $700,000 in outstanding hospital bills from the University of Massachusetts Memorial Medical Center (“medical providers”). The employer, through its worker’s compensation carrier, AIG, denied both claims disputing that the accident occurred in the course of employment, and that Mario’s parents were dependents under the Workers’ Compensation Statute. Throughout the pendency of the claim, correspondence between the attorney for the medical providers and the attorney for Mario’s parents led the medical providers to believe that the outstanding medical bills would be presented for payment in the workers’ compensation case.
The case ultimately settled on May 10, 1999 for $50,000 under Section 20 of the workers’ compensation statute. When the settlement was placed on the record, the father’s attorney assured him that as part of the settlement, AIG would “protect” him in the event of a lawsuit by a doctor or hospital seeking payment of his son’s medical bills. The medical providers did not receive notice of nor participate in the actual settlement.
On September 8, 1999, the father’s attorney advised the medical providers’ attorney of the settlement and the “hold harmless” agreement. The father’s attorney suggested that the medical providers’ counsel contact AIG to collect on the outstanding bills. AIG refused the medical providers’ demand for payment. AIG claimed that it had agreed to hold the father harmless — not his son’s estate. Since the parents were not responsible for Mario’s medical bills, AIG refused to reimburse the medical providers. The medical providers then filed motions in workers’ compensation court seeking to present their bills for payment there, and to vacate the Section 20 settlement. Because they were not timely filed, the motions were denied.
Thereafter the medical providers filed a complaint in the Law Division against Mario’s parents, their lawyer, Mario’s employer and AIG to recover the cost of the medical services provided to Mario. The parents cross-claimed against the employer and AIG for enforcement of the “hold harmless” provision in the settlement. The employer cross-claimed against the parents and their lawyer for contribution.
The claims against the law firm were dismissed. The court found that the medical providers were not bound by the settlement between the parents and AIG. The Law Division also denied the motion to dismiss sought by the parents and the employer. The parents and the employer appealed. The Appellate Division reversed. They held that the collection action was barred because the medical providers failed to intervene timely in the workers’ compensation case, and failed to timely file a claim petition before the Division of Workers’ Compensation.
The Supreme Court granted certification and held that the Division of Workers’ Compensation can only resolve issues between parties to an agreement. Because the medical providers were not joined in the matter, they were not bound by the lump sum settlement, and were not precluded from enforcing their contractual rights to payment for the services provided to Mario. The Supreme Court gave great weight to the fact that the father’s attorney “lulled” the medical providers into thinking that their bills would be presented for payment in the workers’ compensation proceeding. The court declared: “If the injured employee fails to submit those bills for payment in a compensation hearing or fails to account for them in a Section 20 settlement, principles of fairness would dictate that the medical provider not be precluded from filing a common law collection action against its patient despite the absence of a judgment of non-compensability.”
Prevailing law was that while an employee’s claim for work related injury is pending in the Division, a medical provider’s collection action must be transferred from the Law Division to the Division of Workers’ Compensation. The Christodoulou decision does not overrule that proposition. However the Supreme Court disapproved of the lower court decisions that a common law collection action by a medical provider can only be started after a judgment of non-compensability has been made in the workers’ compensation matter.
Why is this distinction by the Christodoulou Court important? The obvious answer is that in a Section 20 settlement there is never a finding of compensability one way or another. To allow collection actions only after a finding of compensability would disallow all collection actions in cases where the settlement was made under Section 20. This is where the decision in Christodoulou differs from the prior lower court decisions.
Specifically, in Kinley Physical Therapy Services, Inc. v. Kramer, 256 N.J. Super. 355, (Law Div. 1992), the court held that the Law Division did not have jurisdiction to hear the dispute between the medical provider and the injured worker while the workers’ compensation claim was pending. The Kinley court stated that it was only after the Division of Workers’ Compensation found that the claim was not compensable that the Law Division could hear the collection matter on the merits.
After Kinley, in W. Jersey Health Systems v. Cronenberger, 275 N.J. Super. 303, (App. Div. 1994), the Appellate Division held that the Workers’ Compensation Act did not bar a medical provider from suing for unpaid medical bills for a work-related injury where the employer did not carry workers’ compensation insurance. However, the court held that public policy mandated that execution on the judgment should not commence until after the injured worker had presented the bill to the Uninsured Employers Fund (UEF) in the Division of Workers’ Compensation and the UEF had decided whether it was compensable. In Cronenberger, there was no action pending in the Division of Workers’ Compensation when the common law collection matter was adjudicated.
The Christodoulou court stated that it could find no support for these prior holdings that a collection action could only be started after a finding of non-compensability in either in the Workers’ Compensation Act, or the case law interpreting the Act. Since there was no finding of compensability one way or another in the Christodoulou case, to allow the Kinley or Cronenberger decisions to dictate the results of Christodoulou would he unfair. The Court declared: “Requiring a determination of non-compensability would not permit a common law collection action in the circumstances of this case.”
Finally, in Medical Diagnostic Associates v. Hawryluk, 317 N.J. Super 338 (App.Div. 1998), the Appellate Division held that the Law Division lacked jurisdiction over the medical providers’ common law action while the workers’ compensation matter was still pending in the Division of Workers’ Compensation and must be transferred to the Division under New Jersey Court Rule 1:13-4. In addition, the Appellate Division decided that once the medical provider’s action is transferred to the Division of Workers Compensation, the six-year statute of limitation on the provider’s common law collection claim would be tolled during the period that the injured worker’s claim is pending in the Division. This last significant medical provider collection case before Christodoulou followed the holdings of the previous cases, and simply tied up a few loose ends.
In practical terms, there are several things that attorneys can do to protect themselves and their clients from common law collection actions by medical providers in workers’ compensation cases. First and foremost, the petitioner’s attorney should make every effort to determine early in the case whether there was any unauthorized medical bills that remain unpaid. If the bills remain unpaid, the attorney should place the medical provider on notice to file a motion to intervene in the Division of Workers’ Compensation. Motions to intervene are addressed at N.J.A.C. 12:235-3.10(a)3. This rule allows the medical provider to intervene by motion in the pending workers’ compensation case to seek payment or assert a lien.
It is important to note that the Division of Workers’ Compensation is not the only forum where a medical provider can seek payment for medical treatment. Be aware that the medical provider’s contractual right to seek payment from the employee remains intact, irrespective of whether there is a finding of compensability in the underlying compensation matter. The petitioner’s attorney should make every effort to join the medical provider in the workers’ compensation action to address all of the outstanding issues in one action, and to prevent the medical provider from filing suit in the Law Division after the conclusion of the workers’ compensation matter. After Christodoulou it is also important to not only notify the medical providers during the pendency of the case, but to notify them of the settlement date as well. The Christodoulou Court gave great weight to the fact that the father’s attorney lulled the medical providers into believing that their bills would be presented at settlement.
While the petitioner’s attorney cannot force the medical provider to intervene in the workers’ compensation matter, if they try to file a collection matter during the pendency of the workers’ compensation claim their case will be transferred to the Workers’ Compensation Division. Petitioner’s attorney should notify the Law Division judge and the medical provider’s attorney that the collection action must be transferred to the Division of Workers’ Compensation. I have found that this is easily accomplished by sending a letter to the Law Division and the provider’s attorney, attaching the claim petition and copies of the applicable case law, if necessary.
In conclusion, the practical effect of Christodoulou is to put the burden on the petitioner and the petitioner’s attorney to address the issue of outstanding medical bills prior to the settlement of the case. If the respondent will not agree to pay the outstanding bills as a part of the settlement, the petitioner’s attorney should notify the provider of its right to intervene in the pending action. This is most important in a Section 20 settlement since there is no right to re-open. In addition, if the petitioner insists on a Section 20 settlement when the attorney knows that there are outstanding medical bills, it is important for the petitioner’s counsel, when placing the settlement on the record, to advise the client that he or she may be subject to a collection suit in the Law Division. Finally, attorneys are warned to be cautious with the use of “hold harmless” agreements, and to be sure that they are not used in death cases unless the appropriate parties are “held harmless.”