Practical Guide: Understanding “PIP” and Winning Appeals in New Jersey

What is “PIP”?

“PIP” is short for “Personal Injury Injury Protection.” Personal Injury Protection is a mandatory coverage in New Jersey automobile insurance policies. that provides medical expense, income continuation, essential services, an funeral expense benefits for persons injured in automobile accidents. The coverage is available to the insured regardless of who was at fault in the accident. Personal Injury Protection is provided for “private passenger automobiles” as that term is defined in N.J.S.A. 39:6A-2. The definition covers both the type of vehicle and the ownership of the vehicle.

Disputes regarding medical care provided under the Personal Injury Protection coverage are resolved by way of Internal Appeal Procedure mandated by law or, where that fails to resolve the issue, by way of appeal to arbitration forum (Forthright, a provide company providing alternative dispute resolution services). This guide provides a background on PIP and a primer on resolving disputes for lawyers handling these cases.

Defining a Private Passenger Automobile.

N.J.S.A. 39:6A-3.2 requires that all automobile insurance policies include the covereages required by N.J.S.A. 39:6A-4, which includes PIP coverage. The term “automobile” is defined in N.J.S.A. 39:6A-2 as follows:
a. "Automobile" means a private passenger automobile of a private passenger or station wagon type that is owned or hired and is neither used as a public or livery conveyance for passengers nor rented to others with a driver; and a motor vehicle with a pickup body, a delivery sedan, a van, or a panel truck or a camper type vehicle used for recreational purposes owned by an individual or by husband and wife who are residents of the same household, not customarily used in the occupation, profession or business of the insured other than farming or ranching. An automobile owned by a farm family copartnership or corporation, which is principally garaged on a farm or ranch and otherwise meets the definitions contained in this section, shall be considered a private passenger automobile owned by two or more relatives resident in the same household.

Under this statute, three types of vehicles are “automobiles” required to have PIP:

  1. Private passenger automobiles including minivans and SUVs, as long as they are not used as a taxi or rented with a driver.
  2. Pickup trucks, vans (which means large vans used for cargo or large numbers of people and therefore typically used by business rather than families), etc., but only if they are used for recreational purposes and owned by an individual or husband an wife and are not generally used for the insured’s business (other than farm work).
  3. A vehicle owned by a farm that otherwise meets the definition of “automobile.”

In New Jersey Manufacturers Ins. Co. v. Hardy, 178 N.J. 327, 335, 840 A.2d 231 (2004), the New Jersey Supreme Court noted that the definition of “automobile”, “focuses first on the type of vehicle and then examines its use.”

The History of “Personal Injury Protection” in Jersey.

No Fault became part of New Jersey’s automobile laws in 1972. In 1988 legislation was passed which mandated that the Department of Banking an Insurance establish medical fee schedules on a regional basis, “for the reimbursement of health care providers providing services or medical equipment for medical expense benefits for which payment is required to be made under pIP coverage.” In 1990 the statute was amended to require that the fee schedules “incorporate the reasonable and prevailing fee of 75% of the practitioners within a region” and statewide for specialist practitioners. This statute also prohibited providers from demanding or requesting any payment in excess of those permitted by the fee schedules. The first medical fee schedules were adopted as an emergency rule sin 1990 and were base don actual billed fees, the only data available at that time.

In 1997 the fee schedule statute was amended again to permit the Commissioner of the Department of Banking and Insurance to contract with a proprietary purveyor of fee schedules to maintain the fee scheduled and perform the necessary biennial adjustment for inflation. The company “Genex” was the provider of fee schedules, superseded by FairHealth. The statute also provided for the use of a single fee for services commonly provided together and where multiple services are provided simultaneously the statute established the use of a standard fee with proportional reductions for additional services (the “daily maximum for services commonly provided together.”)

The Department of Banking and Insurance adopted new fee schedules in 2001, which were based on “allowed,” or paid fees. After litigation, the fee schedules were finally implemented in 2001. The Appellate Division upheld the Department Banking and Insurance’s decision to use paid fees, rather than billed fees, as the basis for setting the fee schedule. In 2007 the Department of Banking and Insurance adopted new medical fee schedules. They were once again challenged in court and the Appellate Division issued a stay on the implementation of the schedules. In 2009 the stay was lifted and the Department prevailed in the litigation (again).

In 2013 the Department of Banking and Insurance adopted new medical fee schedules which were, once again, the subject of legal challenge. The Appellate Division’s 2015 decision expressed weariness with the subject: “From the beginning, we have made it clear that it is not our role to second-guess the Department’s policy choices concerning the implementation of the legislative scheme aimed at reducing insurance costs while expediting medical treatment for accident victims . . . We find no basis to do so here, and we affirm the Department’s adoption of the challenged regulations.” The fee schedules were set to approximate 130% of Medicare payments (with adjustments). Some treatment was not subject to fee schedule, because there was not enough data to set a fee.

Current Fee Schedules.

The full text of the current Fee Schedule rule can be found in MS Word and Acrobat file form and its seven exhibits can be found in both MS Excel and Acrobat file form on the Department’s web site at: www.state.nj.us/dobi/pipinfo/aicrapg.htm#medfeesched. Also on this web page are any recent proposals, adoptions or information about the rules. Older material can be found located by clicking on the link entitled “Reference/Superceded Material.”

The History of PIP Arbitration in New Jersey.

The original 1972 Personal Injury Protection statute provided for dispute resolution process for PIP claims. Originally the American Arbitration Association (“AAA”) was named as the administrator of the program in the statute and the Department of Banking and Insurance had very little involvement with the program. In 1998, the statute was amended to have the administrator be designated by the Commissioner and for the Department to promulgate rules with respect to the conduct of arbitrations. In 2013 the Department of Banking and Insurance adopted amendments to N.J.A.C. 11:3-5 that permitted “on the papers” procedure for claims of less then $1,000 which dod not deal with medical necessity. The goal was to have the “on the papers” procedure apply to 20% of the arbitrations. The organization that now arbitrates disputes is Forthright (no longer AAA). The Department of Banking and Insurance has signaled an intention to raise the “on the papers’ threshold to $2,000 in an effort to have approximately 40% of all claim disputes resolved “on the papers.”

Internal appeals – background.

The initial PIP Medical Protocols rule adopted in 1998 did not require that insurers have an internal appeal procedure. A Bulletin issued in 1999 required that insurers include a “second look” or internal review procedure in their decision point review plan filings. This provision was incorporated into the rule in amendment to the rule adopted in 2004.

Ion response to requests for industry the Department of Banking and Insurance proposed a uniform internal appeal process in 2011. In 2012 the Department of Banking and Insurance adopted the proposed rule but delayed its operative date so that a new proposal could made in response to comments made on the original proposal. In 2015 the Department of Banking and Insurance proposed a revised version of the Internal Appeal rule, which was adopted in October 2016 with a delayed operative date of April 17, 2017.

In February 2017 the Department of Banking and Insurance issued the forms to be used for all internal appeals. The rule took effect on April 17, 2017.

The Internal Appeal Rule (IAP).

Every insurer providing Personal Injury Protection must have a “Decision Point Review Plan (DPR Plan”) which meets the requirements of N.J.A.C. 11:3-4.7B.
§ 11:3-4.7B Requirements for insurer internal appeals procedures
(a) The internal appeal procedure in an insurer's Decision Point Review Plan (DPR Plan) shall meet the requirements in this section.
(b) Insurers shall only require a one-level appeal procedure for each appealed issue before making a request for alternate dispute resolution in accordance with N.J.A.C. 11:3-5. That is, each issue shall only be required to receive one internal appeal review by the insurer prior to making a request for alternate dispute resolution. An appeal of the denial of a medical procedure, treatment, diagnostic test, other service, and/or durable medical equipment on the grounds of medical necessity is a different issue than an appeal of what the insurer should reimburse the provider for that same service.
(c) All appeals shall be initiated using the forms established by the Department by Order in accordance with N.J.A.C. 11:3-4.7(d) and posted on the Department's website.
(d) The appeal forms and any supporting documentation shall be submitted by the provider to the address and/or fax number designated for appeals in the insurer's DPR Plan. Pursuant to N.J.A.C. 11:1-47, insurers may permit electronic filing of appeals by providing the process for electronic filing in its DPR Plan.
(e) There shall be two types of internal appeals:
1. Pre-service: Appeals of decision point review and/or precertification denials or modifications prior to the performance or issuance of the requested medical procedure, treatment, diagnostic test, other service and/or durable medical equipment (collectively known as "services"); and
2. Post-service: Appeals subsequent to the performance or issuance of the services.
(f) A pre-service appeal shall be submitted no later than 30 days after receipt of a written denial or modification of requested services.
(g) A post-service appeal shall be submitted at least 45 days prior to initiating alternate dispute resolution pursuant to N.J.A.C. 11:3-5 or filing an action in Superior Court.
(h) Decisions on pre-service appeals shall be issued by the insurer to the provider who submitted the appeal no later than 14 days after receipt of the pre-service appeal form and any supporting documentation.
(i) Decisions on post-service appeals shall be issued by the insurer to the provider who submitted the appeal no later than 30 days after receipt of the appeal form and any supporting documention.
(j) Nothing in this section shall be construed so as to require reimbursement of services that are not medically necessary or to prevent the application of the penalty co-payments in N.J.A.C. 11:3-4.4(e), (f), and (g).

As per Section (b), insurers may only require a one-level appeal procedure for each disputed issue before making a request for alternative dispute resolution (arbitration). The Department of Banking and Insurance has promulgated forms which must be used by the party seeking an appeal of a denial of care or dispute involving a medical bill. There are rules for “Pre-Service Appeals” (N.J.A.C. 11.3-4.7B[e], [f], and [h]) and “Post Service Appeals” (N.J.A.C. 11.3-4.7B[g] and [i]). Disputes which are not resolved at this level can be appealed to Forthright for alternative dispute resolution.

Winning Appeals.

Dismissal Applications via No Fault PIP Arbitration Rule 35.

If any party contends that the requirements set forth in the applicable insurance policy have not been met (with regards to the internal appeal procedure) or there is no coverage or where the arbitrator (Forthright) lacks subject matter jurisdiction, the party may move to dismiss the case prior to the hearing (Rule 35).

In Person hearings Via Party Submissions Rule 39.

All filings and submissions must be sent to the arbitrator (Forthright) for transmittal to the Dispute Resolution Professional (DRP) and must be simultaneously served upon all other parties to the arbitration. The Dispute Resolution Professional (DRP) considers all of there supporting documentation filed by the parties. Essentially, everything that was relied upon in the internal appeal (the first level appeal of the either the denial of treatment [pre-service] or dispute regarding the bill for the treatment [post-service]). The carriers’ attorney should object to additional information and documentation being produced at the time of arbitration. Essentially, the argument should be made that the IAP (Internal Appeal Procedure) is the primary venue for resolving these disputes and that the arbitration forum (Forthright) should not be hearing or reviewing “new” documentation or “evidence” that was not presented to the career at the time of the IAP. The Dispute Resolution Professional should specifically address whether such documentation or information should be considered in his or her decision. For example, where the provider changes codes or moves money between codes on a medical billing statement after the first level appeal and before arbitration. The argument should be made that the medical professional should not be allowed to do that and the appeal is invalid. The Dispute Resolution Professional’s determination in this matter should be made in accordance with the existing No-Fault Arbitration Rules.

What Happens at the Arbitration>

An arbitration has a number of potential outcomes. First, the Dispute Resolution Professional (DRP) can grant to deny the appeal. In approximately 32% of all filed case, the DRP makes or denies the appeal (a decision on the merits). In about 68% of cases, the matter is either withdrawn or resolved (settled) at or prior to the decision by the DRP. In less than 1% of cases, the matter is dismissed prehearing. Remember that the Respondents are granted a conciliation period of 45 days from case initiation in which to settle claims without incurring the respondent administration fee.

Appeal of DRP Decisions.

An appeal to a panel of three DRPs is allowed under the Forthright arbitration rules. This is rarely invoked. An appeal may also be made to New Jersey Superior Court, as per N.J.S.A. 2A:23A–13 (“Section 13”), which the Commissioner has adopted for PIP arbitrations. Section 13 states, in relevant part:


Application to court for review of award[.]

a.  A party to an alternative resolution proceeding shall commence a summary application in the Superior Court for its vacation, modification or correction within 45 days after the award is delivered to the applicant, or within 30 days after receipt of an award modified pursuant to subsection d. of [s]ection 12 of this act, unless the parties shall extend the time in writing.   The award of the umpire shall become final unless the action is commenced as required by this subsection.

b. In considering an application for vacation, modification or correction, a decision of the umpire on the facts shall be final if there is substantial evidence to support that decision;  provided, however, that when the application to the court is to vacate the award pursuant to paragraph (1), (2), (3), or (4) of subsection c., the court shall make an independent determination of any facts relevant thereto de novo, upon such record as may exist or as it may determine in a summary expedited proceeding as provided for by rules adopted by the Supreme Court for the purpose of acting on such applications.

c. The award shall be vacated on the application of a party who either participated in the alternative resolution proceeding or was served with a notice of intention to have alternative resolution if the court finds that the rights of that party were prejudiced by:

(1) Corruption, fraud or misconduct in procuring the award;

(2) Partiality of an umpire appointed as a neutral;

(3) In making the award, the umpire's exceeding their [sic] power or so imperfectly executing that power that a final and definite award was not made;

(4) Failure to follow the procedures set forth in this act, unless the party applying to vacate the award continued with the proceeding with notice of the defect and without objection;  or

(5) The umpire's committing prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution.

f. Whenever it appears to the court to which application is made, pursuant to this section, either to vacate or modify the award because the umpire committed prejudicial error in applying applicable law to the issues and facts presented for alternative resolution, the court shall, after vacating or modifying the erroneous determination of the umpire, appropriately set forth the applicable law and arrive at an appropriate determination under the applicable facts determined by the umpire.   The court shall then confirm the award as modified.

The decision of there Superior Court can be appealed further, to the New Jersey Appellate Division, where a three judge panel considers the issue.

Greg Lois is the managing partner of LOIS LLC and dedicates his practice to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016-2019 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@loisllc.com