Superior Court of
New Jersey,
Appellate Division.
UNIVERSITY OF MASSACHUSETTS MEMORIAL MEDICAL CENTER,
INC., and
University of Massachusetts Group Practice, Plaintiffs‑Respondents,
v.
Mario S. CHRISTODOULOU (deceased) by his
representative Steve CHRISTODOULOU,
Auto Action Land, Inc., Granite State Insurance
Company, AIG Claim Services,
Inc., and Goldberger, Seligsohn and Shinrod, Esqs.,
Defendants‑Appellants,
The Travelers Insurance Co., Fitzpatrick, Reilly,
Supple and Gaul, Esqs.,
Defendants.
Argued March 25, 2003.
Decided April 16, 2003.
Hospital
and medical professional association brought action against deceased patient's
estate, his employer, and employer's workers' compensation insurer for payment
of medical bills. The Superior Court, Law Division, Hudson County, denied
defendants' motions for summary judgment, and they appealed. The Superior
Court, Appellate Division, Coburn, J.A.D., held that: (1) settlement barred
subsequent action at common law to collect medical bills; (2) employer's indemnity agreement did not provide the basis
for common‑law action; (3) employer was required to pay attorney fees;
and (4) dismissal of claims against providers' attorneys did not bar legal
malpractice action.
Affirmed
in part, reversed in part, and remanded.
West Headnotes
[1] Workers' Compensation 
986
413k986
A medical provider may not sue petitioners or respondents at
common law while a workers' compensation case is pending; however, they may
file a timely claim petition for the value of services rendered in the Division
of Workers' Compensation. N.J.S.A. 34:15‑15.
[2] Workers' Compensation 986
413k986
If the Division of Workers' Compensation rejects a petitioner's
claim, or the medical provider's claim, on the merits, the medical provider can
then sue the petitioner at common law.
[3] Workers' Compensation 986
413k986
The statute of limitations on a common‑law action for
payment of medical bills is tolled for a medical provider who has filed a claim
or intervened in workers' compensation action during its pendency.
[4] Workers' Compensation 1130
413k1130
Settlement between workers' compensation dependency benefits
claimant and medical providers barred subsequent action at common law to
collect medical bills, where providers did not intervene in workers'
compensation proceeding. N.J.S.A.
34:15‑20.
[5] Workers' Compensation 1130
413k1130
Employer's agreement to indemnify workers' compensation dependency
claimants against medical providers' claims did not provide the basis for
medical provider's common‑law action,
where that action itself was not viable.
[6] Indemnity 31(1)
208k31(1)
[6]
Indemnity 31(2)
208k31(2)
An appellate court construes a contract of indemnity by applying
the customary rules governing interpretation of contracts; thus, in searching
for the intent of the parties, it considers not only the language used, but
also the surrounding circumstances and the objects sought to be attained by
them under their agreement.
[7] Workers' Compensation 1002
413k1002
Under agreement by which employer indemnified workers'
compensation dependency claimants from claims by medical providers, employer
was required to pay claimant's attorney fees for defending against provider's
common‑law action to collect medical bills.
[8] Pretrial Procedure 517.1
307Ak517.1
Voluntary dismissal of medical providers' claim against attorneys,
filed for purposes of discovery, did not prevent subsequent filing of action
for legal malpractice, where second action was not based on same charges. R. 4:37‑ 1(b).
[9] Pretrial Procedure 501
307Ak501
[9]
Pretrial Procedure 515.1
307Ak515.1
The main object of voluntary dismissal rule allowing court to
impose appropriate terms and conditions is to protect a litigant, where a
termination of the proceedings without prejudice will place him in the probable
position of having to defend, at additional expense, another action based upon
similar charges at another time. R. 4:37‑1(b).
**52*315 Robert A. Vort, Hackensack, argued the cause for appellants
Estate of Mario S. Christodoulou (deceased), Steve Christodoulou and Goldberger,
Seligsohn and Shinrod (Pearce, Vort & Fleisig, attorneys; Mr. Vort, on the
brief).
John S.
Fitzpatrick, New
Providence, argued the cause for appellants Auto Action Land, Inc., Granite
State Insurance Co. and AIG Claim Services (Fitzpatrick, Reilly, Supple &
Gaul, attorneys; Kathleen
A. Hart, of counsel;
Mr. Fitzpatrick, on the brief).
Richard Dingle, argued the cause for respondents (Doyle &
Brady, attorneys, Kearny; Mr. Ringle, on the brief).
Before Judges STERN, COBURN and COLLESTER.
The opinion of the court was delivered by
COBURN, J.A.D.
This is a common law action by medical providers for the
reasonable value of medical services that were at issue in a workers'
compensation case. It also includes a cross‑claim by the *316
compensation petitioner against the compensation respondent for indemnification
with respect to the medical bills and for counsel fees in defending against the
medical providers' action.
The primary issue is whether the petitioner in a workers'
compensation action, which was settled
without providing for the payment of medical bills, may be held accountable
thereafter at common law by medical providers who failed to intervene in the
workers' compensation action despite having received timely notice of its
pendency. The other substantive issues are: whether the respondent in that
compensation action may be held liable to the unpaid medical providers based on
respondent's agreement to hold petitioner harmless**53 from liability
for the medical bills; and whether the hold‑harmless agreement requires
the respondent to reimburse petitioner for his legal fees in defending against
the common law action. These issues were presented to the trial court on
defense motions for summary judgment. The trial court denied the motions, and
we granted the unsuccessful parties leave to appeal. We conclude that the
common law action against the workers' compensation petitioner is barred
because of the medical providers' failure to intervene, or file their own
claim, in a timely manner in the compensation action; that the hold‑harmless
agreement provides no basis for the medical provider's action against the
compensation respondent and its insurance representatives; and that the
petitioner is entitled to reimbursement from the compensation respondent for
his legal fees in defending this action.
I
Plaintiffs, University of Massachusetts Memorial Medical Center,
Inc., and University of Massachusetts Group Practice, provided over $700,000 in
medical services to Mario S. Christodoulou
("Mario") for injuries he sustained in a motor vehicle accident.
After Mario died as a result of those injuries, his father, defendant Steve
Christodoulou ("Steve") filed two petitions with the Division of
Workers' Compensation (the "Division"). One petition sought *317
benefits for Mario's estate, and the other sought benefits for Steve and his
wife, Despina, as Mario's dependents. Mario was an unmarried adult, had no
children or other possible dependents, and lived with his parents. Plaintiffs
received timely notice of the petitions, but failed to intervene in the
proceedings or file their own claim petition. The respondent in both cases was
Mario's employer, defendant Auto Auction Land, Inc. ("Auto Auction").
Defendant Granite State Insurance Company ("Granite State") was Auto
Auction's compensation insurer, and defendant AIG Claim Services, Inc.
("AIG"), was Granite State's claims administrator.
Faced with difficult issues respecting the viability of both
compensation claims, the parties resolved their dispute by a settlement that
made no provision for payment of plaintiffs' medical bills. Pursuant to the
agreement, which was approved by the judge of compensation under N.J.S.A. 34:15‑20, respondent agreed to pay $50,000 in a
lump sum payment and to indemnify petitioner with respect to any future claim
for the medical bills. The terms of the indemnity agreement were set out in
the following manner in the settlement proceeding. Petitioner's attorney asked
petitioner this question: "As part of the
settlement I've told you that should any doctor or hospital come against you or
as a result of any of the injuries sustained by your son, the insurance
company will protect you, do you understand that?" (Emphasis added).
He replied, "I understand." Respondent's attorney then engaged in
the following examination of Steve.
Q. Do you understand that by accepting
this settlement that the case is closed forever and neither you nor anyone else
from your family can come back into court to try to seek additional monies from
Auto Auction Land?
A. Yes, I understand.
Q. You also understand that in the event
that there is a claim against you for hospital bills, the insurance company
will protect you in this matter?
A. Yes I understand.
[Emphasis added.]
This agreement was reflected in the order approving the
settlement in the following manner: "Respondent will hold petitioner
harmless for any medical or hospital bill **54 arising out of the *318
accident...." Although Despina did not actively participate in the
compensation proceedings, it was obviously intended that she benefit from the
settlement to the same extent as Steve.
The settlement of the compensation case occurred on May 10,
1999. Over a year later, plaintiffs filed pleadings in the Division attempting
to vacate the settlement and obtain payment
of their bills. The judge of compensation denied them relief, and they
appealed. In an unreported opinion, we affirmed. Christodoulou v. Auto
Auction Land Inc., No. A‑2860‑00T2 (App. Div. April 10, 2002), certif.
denied, 174 N.J.
191, 803 A.2d 1163 (2002). Among other things, we held that these medical providers were
barred from obtaining payment in the Division because of their failure to file
a timely petition, and were not entitled to be relieved of the effect of that
failure under Rule 4:50‑1. [FN1] This common law action was filed while
that appeal was pending.
FN1. Citation of an unpublished opinion is
obviously appropriate in these circumstances. R. 1:36‑3; Mantilla v. NC Mall Assoc., 167 N.J. 262, 267‑68, 770 A.2d
1144 (2001); Gottlob v. Lopez, 205 N.J.Super. 417, 421, 501 A.2d
176 (App.Div.1985), certif.
denied, 104 N.J.
373, 517 A.2d 384 (1986).
II
We consider first the compensation parties' demand for dismissal
of this common law action on the ground that it violates the Workers'
Compensation Act, N.J.S.A. 34:15‑1 to ‑128 (the "Act"). As
a preliminary matter, we observe as a matter of law that there were actually
three petitioners in the compensation action: Steve, Despina, and, in essence,
Mario's estate. Although Steve signed the
dependency action, he clearly did so on behalf of his wife as well as himself,
an informality apparently permitted by the Division. See 3 Larson, Workers'
Compensation, §§ 124.03‑124.04 (Desk Ed.2000), discussing the
procedural informality in such matters with respect to the form and substance
of pleadings. Steve filed the employee's claim petition for his deceased son
in a representative capacity, namely as "such person as would be appointed
administrator of the estate of the decedent...." *319 N.J.S.A. 34:15‑21. We so conclude because there is no
evidence of the formal appointment of an administrator or executor of such
estate as Mario might have had.
[1][2][3] A medical provider may not sue petitioners or respondents at
common law while a compensation case is pending. Medical Diagnostic Assoc. v. Hawryluk, 317 N.J.Super. 338, 347, 722 A.2d
122 (App.Div.1998), certif.
denied, 160 N.J.
89, 733 A.2d 494 (1999). However, they may file a timely claim petition for the value of
services rendered in the Division. Id. at 348, 722 A.2d 122; N.J.S.A. 34:15‑15. If the Division rejects the petitioner's claim, or the medical
provider's claim, on the merits, the medical provider can then sue the
petitioner at common law. Id. at 346‑47, 722 A.2d 122; West Jersey Health System v. Croneberger, 275 N.J.Super. 303, 308‑09,
645 A.2d 1282 (App.Div.1994). The statute of limitations on the common law action is tolled
for a medical provider who has filed a claim or intervened in the compensation action during its
pendency. Medical
Diagnostic,
317 N.J.Super. at 350‑51, 722 A.2d 122.
[4] Had plaintiffs filed a timely petition in the Division, or
intervened in the petitioner's cases, they could have pursued recovery despite
the other parties' desire to settle their differences. Cf. **55Olivero by Olivero v. New Jersey Mfrs.
Ins. Co.,
199 N.J.Super. 191, 198‑200, 488 A.2d 1071 (App.Div.1985). Having failed to take that action, the
question becomes whether the settlement between respondent and the petitioners
prohibits the subsequent action at common law.
As noted, the settlement was entered into under N.J.S.A. 34:15‑20 ("Section 20"), which provides
as follows:
In case of a dispute over or failure to
agree upon a claim for compensation between employer and employee, or the
dependents of the employee, either party may submit the claim, both as to the
questions of fact, the nature and effect of the injuries, and the amount of
compensation therefor according to the schedule herein provided, to the
Division of Workers' Compensation, as prescribed in article 4 of this chapter
(section 34:15‑49 et seq.). After a petition for compensation or
dependency claims has been filed, seeking compensation by reason of accident,
injury or occupational disease of any employee, and when the petitioner is *320
represented by an attorney of the State of New Jersey, and when it shall appear
that the issue or issues involve the
question of jurisdiction, liability, causal relationship or dependency of the
petitioner under this chapter, and the petitioner and the respondent are
desirous of entering into a lump‑sum settlement of the controversy, a
judge of compensation may with the consent of the parties, after considering
the testimony of the petitioner and other witnesses, together with any
stipulation of the parties, and after such judge of compensation has determined
that such settlement is fair and just under all the circumstances, enter "an
order approving settlement." Such settlement, when so approved,
notwithstanding any other provisions of this chapter, shall have the force and
effect of a dismissal of the claim petition and shall be final and conclusive
upon the employee and the employee's dependents, and shall be a complete
surrender of any right to compensation or other benefits arising out of such
claim under the statute. Any payments made under this section shall be
recognized as payments of workers' compensation benefits for insurance rating
purposes only.
Plaintiffs argue, without supporting authority, that a Section 20
dismissal should be treated in the same manner as a judgment of non‑compensability,
thereby entitling them to pursue a common law action against petitioners. We
disagree. Section 20 provides a procedure for settlement of compensation
claims by a lump sum payment when the petitioner's right to recovery is in
doubt. This form of resolution implies nothing with respect to the viability
of the claim. However, it is designed to achieve a complete settlement of all issues for all of the parties concerned.
Permitting plaintiffs to pursue this common law action would render the
settlement illusory for the parties to the compensation action, an outcome that
would be entirely inconsistent with our strong public policy favoring
settlement of litigation. Nolan by Nolan v. Lee Ho, 120 N.J. 465, 472, 577 A.2d
143 (1990). In
short, plaintiffs' failure to pursue their administrative remedy in a timely
fashion does not entitle them to upset the administrative determination
approving the settlement by a subsequent common law action. Therefore the
trial court erred in refusing to dismiss the common law action.
III
[5] We turn next to the meaning and effect of the indemnity
agreement with respect to plaintiffs' claim. Without citing any authority,
plaintiffs argue that Auto Auction and its insurance *321
representatives are liable to them because **56 Mario's estate remains
responsible for the bills, and that the agreement, though it only mentioned
Steve, should be construed as providing indemnification for Mario's estate as
well as Steve. Auto Auction contends that the agreement did not cover Mario's
estate because it did not refer to that entity.
[6] We construe a contract of indemnity by applying the
customary rules governing interpretation of contracts. Bethlehem Steel Corp. v. K.L.O. Welding
Erectors, Inc., 132 N.J.Super. 496, 499, 334 A.2d 346
(App.Div.1975). Thus, in searching for the intent of the
parties, we consider "not only ... the language used, but also ... the
surrounding circumstances and the objects sought to be attained by them under
their agreement." Ibid.
Auto Auction emphasizes the wording of the order approving the settlement,
which only mentions Steve. But given the context and the questioning of Steve,
quoted above, with respect to the effect of the settlement, we have no doubt
that the indemnification covered both Despina and Mario's estate, both parties
in interest in the compensation action. The settlement resolved all claims.
Given the informality of compensation proceedings, we have no doubt that the
indemnity agreement should be construed as protecting all of the intended
beneficiaries of the settlement. But that does not advance plaintiffs'
position because their rights against Auto Auction and its insurance
representatives are derivative, depending entirely on the viability of their
claims against the petitioners. Since we have held that the common law action
against the compensation petitioners is not viable, the indemnity agreement
provides no basis for plaintiffs' action against the indemnitors.
IV
[7] The indemnity agreement also governs the cross‑claim
on behalf of Steve and Mario's estate for reimbursement of their attorney's
fees in defending this action. Relying on the wording of the order approving
the compensation settlement, Auto Auction and its insurance representatives
argue that the indemnity agreement *322
did not cover attorneys' fees. The pertinent language from the order is
"Respondent will hold petitioner[s] harmless for any medical or hospital
bill arising out of the accident...."
In Thermoid
Co. v. Consol. Prod. Co., Inc., 7 N.J. 283, 81 A.2d 473 (1951), the Court considered the effect and
meaning of an almost identical indemnity agreement in a case that had the same
essential ingredients as the instant matter, namely a settlement with knowledge
that a third party was likely to sue the indemnitee. The indemnitor had agreed
that "we will hold you harmless from any such claim...." Id. at 289, 81 A.2d 473. The Court had no difficulty in finding
that language of that nature in those circumstances "contemplated the
expenses of defending such a suit...." Id. at 290, 81 A.2d 473. And in Bethlehem Steel Corp., we approved the general rule that an
indemnitee is entitled to recover reasonable attorneys' fees unless the
indemnity contract provides otherwise. 132 N.J.Super. at 500, 334 A.2d 346. Moreover, given the informality of
compensation proceedings, the real meaning of this indemnity agreement is
better gleaned from the questions put to Steve during the settlement
proceeding. He was told that the insurance company would "protect"
him. We have no doubt that that broader language, used by counsel for both
sides, clearly contemplated that Steve, and those he represented, would be
entitled to attorneys' fees if sued. Therefore, we reverse that portion of the
order denying summary judgment on this claim, and remand for entry of judgment on liability and for further proceedings **57
establishing the reasonable value of the fees incurred by Steve and the estate
in defending this action. [FN2]
FN2. At argument, we raised the question of
whether the cross‑claim for indemnity provided timely and sufficient
notice of the demand for counsel fees, and permitted the parties to file
supplemental briefs. Since the demand was made at the commencement of the
action, and since Auto Auction filed an answer disclaiming any responsibility
to provide a defense, we are satisfied that the notice was both timely and
sufficient. Cf. U.S. Wire & Cable Corp. v. Ascher Corp., 34 N.J. 121, 126‑27, 167 A.2d
633 (1961).
*323 V
Having disposed of the substantive issues, we turn our attention
to a procedural matter that only involves plaintiffs and defendant Goldberger,
Seligsohn & Shinrod ("Goldberger"), the law firm that represented
petitioners in the compensation action.
[8] Pursuant to R. 4:18‑1(c), plaintiffs named
Goldberger as a party in this action solely for the purposes of obtaining
discovery. Shortly before a scheduled trial date, plaintiffs moved for
permission to file a substantive claim against
Goldberger, apparently for malpractice. Essentially, or so it would appear,
plaintiffs wanted to pursue Goldberger on the ground that it had either misled
them or had otherwise failed to protect their claim in the compensation
proceedings. Their motion was denied because of the then impending trial date,
and no appeal has been taken from that ruling. During the argument on the
motions for summary judgment, plaintiffs asked for permission to dismiss their
complaint against Goldberger without prejudice. Goldberger argued that the
complaint should be dismissed with prejudice. The trial court agreed with
plaintiffs, and Goldberger now seeks to reverse the "without
prejudice" aspect of the order. Goldberger claims it should not have to
face a substantive action because plaintiffs knew all the facts bearing on that
claim when they filed their initial suit. Plaintiffs respond that they should
not be foreclosed from pursuing their malpractice claim. Neither side has
supported their positions with the citation of authority.
[9] The dismissal without prejudice was entered pursuant to Rule 4:37‑ 1(b). Under that rule, the court may impose
"such terms and conditions as the court deems appropriate." R.
4:37‑1(b). The main object of this rule is "to protect a litigant
where a termination of the proceedings without prejudice will place him in the
probable position of having to defend, at additional expense, another action
based upon similar charges at another time." Union Carbide Corp. v. Litton Precision
Prods., Inc.,
94 N.J.Super. 315, 317, 228 A.2d 99 (Ch.Div.1967). Since Goldberger was *324 only
sued for purposes of discovery, it did not defend against a malpractice claim.
Therefore, the dismissal without prejudice would not expose it to another
action on similar charges. Consequently, the trial court's ruling was not an
abuse of discretion.
Affirmed in part; reversed in part; and remanded for further
proceedings consistent with this opinion.
823 A.2d 51, 360 N.J.Super. 313
