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The Association of Trial Lawyers of America (ATLA) and the New Jersey Defense Association are taking the same position in an appeal to the New Jersey Supreme Court, a rare event caused by a reshuffling of players in personal injury law. The justices are reviewing Perreira v. Rediger, 330 N.J. Super. 455, which clears the way for personal injury claimants’ health insurers to seek reimbursement from the damages paid by tortfeasors. That, in effect, gives health insurers a prominent role in a theater traditionally reserved for claimants and liability carriers. At the court’s oral argument on Feb. 14, an unlikely duo of amici — Franklin Solomon for ATLA-New Jersey and Stephen Foley Jr. for the defense association — urged the justices to stick to the old ways. Their reasoning: Courts have begun applying the Appellate Division ruling under appeal and it’s hurting litigants. “ Perreira is impeding settlements,” Foley told the justices. Solomon added: “It puts us in the position of trying cases for medical carriers.” In an interview last week, Solomon amplified his view that health carriers have no need to collect from tortfeasors because they are made whole the same way liability carriers are: They calculate loss and collect premiums to offset the loss. “It blows me away that they can have that money paid back to them,” he said. Perreira started with a slip-and-fall claim by plaintiff Maria Perreira against a bank and its snow removal contractor, Michael Rediger. In the meantime, Oxford Health Plans (NJ), an aggressive health insurer when it comes to litigating for reimbursement, sought to recoup $13,000 that it paid for medical expenses, prompting a declaratory judgment action. Perreira and the tort defendants reached an undisclosed settlement and the trial judge dismissed Oxford’s claim on the grounds that it was barred by the collateral source rule, N.J.S.A. 2A:15-97, a 1987 statute designed to prevent double recoveries by injury victims. But the appeals court reversed. Judge Sylvia Pressler wrote that nothing in the collateral source rule prevents health insurers from recouping their costs from the tortfeasor. After all, Pressler noted, the right of subrogation is well-established and is provided for in most contracts between carriers and insureds. “As we see the issue, the question is essentially whether the medical costs incurred in the treatment of a plaintiff’s injuries that results from a tortfeasor’s actions should ultimately be borne by the plaintiff’s health insurer — meaning, of course, its rate-payers — or by the tortfeasor — meaning ordinarily, the premium payers of his liability carrier,” wrote Pressler, joined by Judges Irwin Kimmelman and Leonard Arnold. The judges grounded their decision in the longstanding philosophy of torts that the wrongdoer pays and those without fault are exonerated. But how did the judges see it working in the real world? If there’s a verdict, the health costs are deducted from the award. If there’s a settlement and the tortfeasor’s insurer and the health carrier can’t agree on the shares, the court can step in. In general, the mechanism would be similar to the lien system used in workers’ compensation cases. Finally, assuaging contingency lawyers’ fears, the appeals judges said fees would be calculated on the entire award. Two civil judges interviewed last week, who asked not to be identified, said they would be able to adjust to the principles and procedures required by Perreira and by Pressler’s modifying opinion a month later in Werner v. Latham, 332 N.J. Super. 76. “We deal with whatever the Supreme Court says; it’s a matter of implementation,” one judge said. “It’s the uncertainty in the meantime that’s a problem.” The problem, the judges said, is that plaintiffs and liability defense lawyers don’t want to settle cases until Perreira is ultimately decided because they know how the health insurance component will play out in either a deal or a trial. One judge says he thinks that up to 10 percent of the tort cases in his county are being affected. The other said it’s probably not that high where he sits because the vast majority of cases have to do with automobile crashes. In those cases, a system for separating pain and suffering and PIP claims is well-established. Scott Levinson, a Saddle Brook, N.J., sole practitioner who represents Oxford, says he doesn’t see what all the fuss is about. “I have successfully intervened in cases and I haven’t seen any havoc.” LIEN COULD WIPE OUT ENTIRE AWARD The argument before the justices on Feb. 14 opened with an attack on the appellate ruling by the lawyer for the tort defendants and their insurers in Perreira, Fredric Gallin, an associate at Edison, N.J.’s Methfessel & Werbel. He was warming up his argument that a rule allowing health insurers to intervene in personal injury cases would give them veto power over settlements when Justice James Zazzali mused that if the question is fairness, isn’t it better for the tortfeasor to pay the burden? Justice Gary Stein suggested that the issue is arising now because of the squeeze on medical costs. “There’s more pressure on health insurers than on liability carriers,” he said. One of the chief complaints against Perreira is the possibility it raises that a hefty lien by a health-care insurer could wipe out an entire tort award. Indeed, Pressler, Kimmelman and Judge James Ciancia recognized the problem when it arose after Perreira in Werner. In that case, Oxford sought to put a lien representing its $510,000 in payments to an injured motorcyclist involved in litigation with other motorists whose policy limits totaled $600,000. If Perreira had been applied to the case, the lien would, in effect, leave the claimant with no recovery or only a negligible amount. So the judges in Werner created a mechanism under which courts would avoid such outcomes by various stratagems including negotiation, arbitration and, if necessary, intervention by the trial or settling judge to leave the plaintiff with a fair sum after the medicals were deducted. Werner subsequently was settled, but the justices could use the mechanism to soften Perreira. Even with Werner, parsing the payments is not the simple mechanism the Appellate Division envisions, said defense bar amicus Foley, of Asbury Park, N.J.’s Campbell, Foley, Lee, Murphy & Cernigliaro. There are times when a plaintiff for various strategic reasons doesn’t want to put the medical bills before a jury; such information might tend to plant the notion in the jurors’ minds that an award of medical expenses alone will make the plaintiff whole, Foley argued. Giving health insurers the right to make a claim on tort recoveries also would impede settlements, particularly in cases where liability is weak. What incentive is there to settle for a low amount when it will be eaten up by the health insurer’s lien? Foley asked. Solomon, an associate in Cherry Hill, N.J.’s Weitz & Luxenberg argued that the rule would, in effect, require the plaintiff’s lawyer to try the case for the medical carrier. Oxford lawyer Levinson, in his Feb. 14 argument and in an interview last week, said there’s nothing incompatible with a health insurer’s subrogation rights under Perreira and the so-called “made whole” doctrine adopted by the New Jersey courts. And Justice James Coleman suggested in questions to Levinson that the court had the option of declaring that subrogation doesn’t kick in until the plaintiff is made whole. Levinson said dealing with the division of the recovery shouldn’t be too difficult and could be handled by submitting separate interrogatories to a jury, convening a separate trial or having a judge make the decision. The decision on Perreira still to come, lawyers for claimants and liability carriers are apparently reluctant to make deals for fear of hovering health carriers. And the validity of medical expense liens is affecting completed cases, too. In Bergen County, N.J., for example, $450,000 of a $2.25 million settlement for a brain-damaged motorcyclist has been deposited with the court pending the possibility that Perreira will require reimbursement to the medical insurer. Bernard Chazen, whose Englewood, N.J., firm Chazen & Chazen represents the plaintiff in the case Morales v. Maisano, says he faces several options if Perreira is affirmed. First, the health insurer could end up with all the money that has been set aside. The second, more complicated option could be more proceedings over the division of the recovery between the plaintiff and the insurer. And the ultimate question is whether the entire case might have to be relitigated with the health carrier taking part. “This is all new stuff and it’s not stuff that’s going to be routine,” Chazen says.

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