Court Opinion

ID: 9904950
Source: CourtListenerOpinion
Date Created: 2023-11-28 15:08:36.556941+00
Date Added: 2024-06-11T09:22:00.941565
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0076-21

MICHELLE ROCHE,
IN HER INDIVIDUAL CAPACITY
AND AS CLASS REPRESENTATIVE,

          Plaintiff-Appellant,

v.

AETNA, INC., AETNA HEALTH INC.,
AETNA INSURANCE CO. and
AETNA LIFE INSURANCE CO.,

     Defendant-Respondent.
_________________________________

                   Submitted September 19, 2023 – Decided November 28, 2023

                   Before Judges Smith and Perez Friscia.

                   On appeal from the State Employees' Health Benefits
                   Commission.

                   Ryan Nicholson Boland (Offit Kurman, PC) and
                   Charles Kannebecker, attorneys for appellant (Ryan
                   Nicholson Boland and Charles Kannebecker, on the
                   briefs).

                   Anthony Michael Christina (Lowey Dannenberg, PC)
                   attorney for respondents Aetna Inc., Aetna Health Inc.,
            Aetna Insurance Co., and Aetna Life Insurance Co.
            (Anthony Michael Christina, on the brief).

            Matthew J. Platkin, Attorney General, attorney for
            respondent School Employees' Health and Benefits
            Commission (Melissa H. Raska, Assistant Attorney
            General, of counsel; Alison Keating, Deputy Attorney
            General, on the brief).

PER CURIAM

      Plaintiff Michelle Roche appeals the final decision of the School

Employees Health Benefits Commission (Commission) rejecting her appeal as

untimely filed.   Roche argues Aetna issued a defective adverse benefits

determination, which relieved her of the obligation to file an appeal within 180

days. For the reasons which follow, we affirm.

                                       I.

      In 2007 Roche sustained serious injuries in a motor vehicle accident. She

sued the tortfeasor and obtained a monetary recovery. At all relevant times,

Roche was enrolled in the School Employees Health Benefits Program (SEHBP)

through an HMO plan administered by defendant Aetna Life Insurance

Company (Aetna)1.     The SEHBP paid $86,601.72 in benefits for medical

1
  We refer to defendants, Aetna, Inc., Aetna Health Inc., Aetna Insurance Co.,
and Aetna Life Insurance Co., collectively as "Aetna" throughout this opinion.

                                                                          A-0076-21
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treatment Roche received in 2009 and 2010. From September 2010 through July

2012, Aetna, through its agent, the Rawlings Company, LLC (Rawlings), sent

Roche a series of letters, in which Aetna asserted its right to be reimbursed from

any proceeds she recovered in her personal injury lawsuit.

      SEHBP detailed its plan terms in a handbook titled, "Aetna Member

Handbook for Employee and Retirees Enrolled in the State Health Benefits

Program." The 2009 and 2010 Handbooks, at page 59, include a paragraph

entitled, "Reimbursement." It states in full:

            In addition, if a Covered Person receives any payment
            from any Responsible Party or Insurance Coverage as a
            result of an injury, illness, or condition, the Plan has the
            right to recover from, and be reimbursed by, the
            Covered Person for all amounts this Plan has paid and
            will pay as a result of that injury, illness, or condition,
            up to and including the full amount the Covered Person
            receives from any Responsible Party.

      Roche, through her counsel, reimbursed Aetna $88,075.29 on January 4,

2013. Shortly afterwards, Roche filed a class action complaint in the Superior

Court of New Jersey on May 28, 2013. Her complaint alleged, "Aetna engaged

in illegal subrogation, in violation of New Jersey Law, which prohibits insurers

from subrogating against personal injury insurers." Aetna removed her claim to

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                                         3
the United States District Court for the District of New Jersey (Roche I)2 and

filed a motion to dismiss. Aetna argued that their subrogation of Roche's

settlement was permissible, and that Roche failed to exhaust her administrative

remedies pursuant to the appeals requirements under her insurance policy as

detailed in the 2009-10 Aetna Handbooks. The Handbooks, at page 55, contain

a paragraph entitled, "Appeals of Adverse Benefits Determinations."        The

pertinent language states:

             Adverse benefit determinations [(ABD)] are decisions
             Aetna makes that result in denial, reduction, or
             termination of a benefit or the amount paid for it. It
             also means a decision not to provide a benefit or
             service.

                   ....

             Aetna will send you written notice of an adverse
             benefits determination. The notice will give the reason
             for the decision and will explain what steps you must
             take if you wish to appeal. The notice will also tell you
             about your rights to receive additional information that
             may be relevant to the appeal. Requests for appeal must
             be made in writing within 180 days from the receipt of
             the notice.

                   ....

             The Plan provides for two levels of appeal, plus an
             option to seek external review of the ABD. You must

2
    Roche v. Aetna, Inc., 165 F. Supp. 3d 180 (D.N.J. Feb 29, 2016).
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                                        4
              complete the two levels of appeal before bringing a
              lawsuit against the plan.

                    ....

              If the Plan's appeals process upholds the original
              adverse benefits determination, you may have the right
              to pursue a Health Benefits Commission review of your
              claim.

              [emphasis added].

       The district court found the Rawlings letters constituted an adverse

benefits determination, and that Roche was required "to seek administrative

review before filing suit" even though the letters lacked specific notice regarding

administrative appeal steps. Roche, 165 F. Supp. 3d at 187. The court noted

Roche possessed the SEHBP handbook and could read the appeals process on

her own. Id. at 188. The district court granted defendants' motion to dismiss

without prejudice and ordered Roche to exhaust her administrative remedies

prior to filing a class action complaint.

       Roche appealed to the Third Circuit (Roche II)3 on March 28, 2016, which

affirmed the exhaustion of remedies requirement. It also noted Roche was "in

possession of the appeal procedures" contained in the handbook. Roche, 681 F.

App'x at 124.

3
    Roche v. Aetna, Inc., 681 F. App'x 117 (3d Cir. Mar. 9, 2017).
                                                                             A-0076-21
                                            5
      Next, in 2017, Roche filed an appeal with the New Jersey Department of

Banking and Insurance (DOBI), citing "exemplar contracts produced by Aetna

in the district court litigation which expressly authorized a first level appeal to

[DOBI]". DOBI declined jurisdiction.

      Over a year later, Roche sought an appeal hearing through the New Jersey

Division of Pensions and Benefits (Division), to be heard before the State Health

Benefits Commission (SHBC), an entity that is separate and distinct from the

Commission. The Division declined jurisdiction as well.

      Finally, in 2019, six years after she sued Aetna in a class action lawsuit to

contest her adverse benefits determination, Roche filed her first and second level

internal appeals with Aetna. After some delay, Aetna denied both appeals.

Roche then filed her first SEHBC appeal on November 13, 2019.

      The SEHBC heard argument by the parties and found Roche's appeal

untimely in an initial decision dated June 19, 2020. The SEHBC issued its final

administrative decision on July 26, 2021, finding the Rawlings letters

constituted an adverse benefits determination pursuant to the terms of the

Handbook, and that the absence of an appeals notice within the letters was not

"fatal."

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      On appeal, Roche contends her appeal should not be barred on timeliness

grounds because: defendants failed to provide her with an adverse benefit

determination letter containing proper notice language; defendants breached

their duty of good faith and fair dealing and are equitably estopped from

asserting the timeliness defense; defendants waived their untimeliness defense;

and Roche was not required to exhaust administrative remedies.

                                      II.

      Appellate "review of administrative agency action is limited." Russo v.

Bd. of Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011) (citing In re

Herrmann, 192 N.J. 19, 27 (2007)). "A reviewing court 'may not substitute its

own judgment for the agency's, even though the court might have reached a

different result.'" In re Stallworth, 208 N.J. 182, 194 (2011) (quoting In re

Carter, 191 N.J. 474, 483 (2007)). The appellate court may reverse a decision

"if it is arbitrary, capricious, or unreasonable, or if it is not supported by

substantial credible evidence in the record as a whole." P.F. on Behalf of B.F.

v. New Jersey Div. of Dev. Disabilities, 139 N.J. 522, 529–30 (1995) (citing

Dennery v. Bd. of Educ., 131 N.J. 626, 641 (1993)). We defer to an agency's

"technical expertise, its superior knowledge of its subject matter area, and its

fact-finding role." Messick v. Bd. of Review, 420 N.J. Super. 321, 325 (App.

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Div. 2011). However, the appellate court applies "de novo review to an agency's

interpretation of a statute or case law." Russo, 206 N.J. at 27 (citing Toll Bros.,

Inc. v. Twp. of W. Windsor, 173 N.J. 502, 549 (2002)).

                                       III.

      Roche's main points on appeal are all premised upon the same contention:

her 180-day appeal deadline, clearly stated on page 55 of her 2009 and 2010

Handbooks, was not triggered because defendants never satisfied the condition

precedent of providing a proper adverse benefit determination to her. She

maintains the handbook unambiguously requires that an adverse benefit

determination must contain: a reason for the decision; an explanation of the

steps the insured must take to appeal; and an explanation of the insured's right

to receive additional information relevant to the appeal. She contends the

Rawlings letters do not meet these requirements. We are not persuaded.

      "The parties to a contract 'may make contractual liability dependent upon

the performance of a condition precedent.'" Liberty Mut. Ins. Co. v. President

Container, Inc., 297 N.J. Super. 24, 34 (App. Div. 1997) (quoting Duff v.

Trenton Beverage Co., 4 N.J. 595, 604 (1950)). A condition precedent is an

event that must happen before a contractual right accrues or a contractual duty

arises.   Restatement (Second) of Contracts § 224 (Am. L. Inst. 1981).

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"[G]enerally, 'no liability can arise on a promise subject to a condition precedent

until the condition is met.'" Duff, 4 N.J. at 604. And "because a promisor's duty

does not become absolute unless and until the condition precedent occurs, the

failure or non-performance of the condition is a defense to an action against the

promisor for breach of its promise." 4 Williston on Contracts § 38.7 (Lord ed.

2013).

      We quote the clear and succinct findings of the Commission:

            First, the Commission concludes the Rawlings Letters
            are an adverse benefit determination as defined by the
            Handbooks. In doing so, the Commission adopts the
            finding in Roche II that the exercise of the SEHBP’s
            right of recovery to request reimbursement for the
            amount paid to cover Roche’s medical expenses after
            her receipt of settlement proceeds is "unquestionably"
            an adverse benefit determination. 681 Fed. Appx. at
            122. The Commission also adopts the finding in Roche
            I that the Rawlings [l]etters give the reason for the
            decision, as they "very clearly state why" the SEHBP
            believes it can exercise its right of recovery. 165 F.
            Supp. 3d. at 188. Thus, the Rawlings letters serve as a
            written notice of an adverse benefit determination and
            give the reason for the decision. Second, the lack of
            notice regarding the Roche appeal procedures in the
            Rawlings [l]etters is not fatal. The Commission follows
            Roche II and concludes the "initial lack of notice of [the
            appeal] procedures d[oes] not extinguish the
            [SEHBP’s] exhaustion requirement." 681 Fed. Appx.
            at 124. As the Third Circuit reasoned, "Roche was in
            possession of the appeal procedures and offers no
            reason for why she could not have appealed other than
            her mistaken belief that no adverse benefit

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                                        9
            determination had been made." Ibid. The Commission
            also follows Roche I, 165 F. Supp. 3d at 188, and adopts
            the reasoning of the court in Neuner v. Horizon Blue
            Cross Blue Shield of N.J. (In re LymeCare, Inc.), 301
            B.R. 662, 667 (Bankr. D.N.J. 2003), which found
            members of the State Health Benefits Plan had "all of
            the information regarding the appeal procedures . . .
            available to them in the plan handbook" and were,
            therefore, required to exhaust administrative remedies,
            even though they did not get proper claims denial
            notices. As the court in Neuner reasoned, any
            unfairness to Roche occasioned by the initial lack of
            notice of the appeal procedures "is mitigated by the fact
            that the Plan Handbook, which has been readily
            available to [members], clearly reflects the
            administrative course for appeal[s]."

            [Ibid.]

      We defer to the Commission's findings, Messick, 420 N.J. Super. at 325

and discern no reason to disturb the Commission's adoption of the sound legal

reasoning expressed by the federal district court in Roche I and the Third Circuit

in Roche II. We find no error.

      Next, Roche argues defendants breached their duty of good faith and fair

dealing when they failed to produce a "compliant notice of adverse benefits

determination and/or Aetna's contract with the SEHBC." We disagree.

      The implied covenant of good faith and fair dealing requires parties to a

contract to "refrain from doing 'anything which will have the effect of destroying

or injuring the right of the other party to receive' the benefits of the contract."

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Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J.

210, 224-25 (2005) (quoting Palisades Props., Inc. v. Brunetti, 44 N.J. 117, 130

(1965)).

      Aetna contracted with the SEHBC to provide health benefits services to

SEHBC members. There was no contract between Aetna and Roche. "In the

absence of a contract, there can be no breach of an implied covenant of good

faith and fair dealing." Noye v. Hoffmann-La Roche, Inc., 238 N.J. Super. 430,

434 (App. Div. 1990). Even if we were to find privity between the parties, and

that Aetna owed Roche a duty of good faith and fair dealing, that duty was not

breached here, as the Commission properly found defendants provided an

adequate adverse benefits determination to Roche.

      We reject Roche's equitable estoppel and waiver arguments as without

merit. They represent variations on Roche's lack of notice argument, which we

have declined to adopt. On this record, we find that application of differing

legal theories to the same facts do not alter the outcome.

      Finally, the Employee Retirement Income Security Act of 1974 (ERISA)

is not applicable to the SEHBP. See 29 U.S.C. §§ 1002(32)1003(b)(1). Its

related jurisprudence is not persuasive.

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      To the extent we have not addressed any additional arguments by Roche,

it is because they lack sufficient merit discussion in a written opinion. R. 2:11-

3(e)(1)(E).

      Affirmed.

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