USAA GENERAL INDEMNITY COMPANY v. WILLIAM J. GOGAN, M.D.

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

USAA GENERAL INDEMNITY COMPANY,
Appellant,

v.

WILLIAM J. GOGAN, M.D., a/a/o TARA RICKS,
Appellee.

No. 4D16-3313

[March 14, 2018]

Appeal from the County Court for the Seventeenth Judicial Circuit,
Broward County; Daniel J. Kanner, Judge; L.T. Case No. COCE-10-
016026(55).

Douglas H. Stein of Association Law Group, P.L., Miami, for appellant.

Andrew A. Harris and Nichole Segal of Burlington & Rockenbach, P.A.,
West Palm Beach, and Barry Aronin of LaBovick Law Group, Palm Beach
Gardens, for appellee.

KUNTZ, J.

We are presented with the following question, certified by the county
court, to be of great public importance:

IN A PERSONAL INJURY PROTECTION MATTER, IS AN
INSURER REQUIRED TO APPLY THE DEDUCTIBLE TO THE
TOTAL BILLED AMOUNT, OR TO THE TOTAL BILL AFTER
SAID BILL IS REDUCED BY ANY APPLICABLE STATUTORY
REDUCTION(S) AS CONTAINED IN FLORIDA STATUTE
SECTION 627.736(5)(a)(1)?

We rephrase the certified question as follows:

PURSUANT TO SECTIONS 627.736 AND 627.739, FLORIDA
STATUTES (2013), IS AN INSURER REQUIRED TO APPLY A
POLICY DEDUCTIBLE TO THE TOTAL AMOUNT OF A
PROVIDER’S INVOICES TO AN INSURED PRIOR TO
 APPLYING ANY FEE SCHEDULE FOUND IN § 627.736, FLA.
STAT.?

For the reasons explained in our opinion in State Farm Mutual
Automobile Insurance Co. v. Care Wellness Center, LLC a/a/o Bardon-Diaz,
No. 4D16-2254 (Fla. 4th DCA Mar. 14, 2018), also issued today, we answer
the rephrased certified question in the negative, reverse the county court’s
summary judgment, and remand for further proceedings consistent with
our opinion. We also certify conflict with Progressive Select Insurance Co.
v. Florida Hospital Medical Center a/a/o Jonathan Parent, 43 Fla. L.
Weekly D318 (Fla. 5th DCA Feb. 9, 2018).

Reversed and remanded; conflict certified.

FORST, J., concurs.
GROSS, J., dissents with opinion.

GROSS, J., dissenting.

I agree with the result reached by the Fifth District in Progressive Select
Ins. Co. v. Florida Hospital Med. Ctr. a/a/o John Parent, No. 5D16-2333,
2018 WL 792012 (Fla. 5th DCA Feb. 9, 2018) (hereinafter Florida Hospital
a/a/o Parent). Applying the plain language of the PIP statute in light of
its history, leads to the conclusion that insurers cannot use the Medicare
fee schedule to reduce providers’ bills to the insured before the deductible
has been satisfied.

The issue in this case is whether section 627.739(2), Florida Statutes
(2010), which mandates that an insured’s deductible be applied to “100
percent of the expenses and losses described in section 627.736,” allows
an insurer to (1) reduce a provider’s claim to an amount allowed under a
fee schedule found at section 627.736(5)(a)2., Florida Statutes (i.e., “200
percent of the applicable Medicare Part B fee schedule”) and (2) apply the
insured’s unsatisfied deductible to that lower amount. 1

Under the PIP statute, medical claims following a motor vehicle accident
are processed by insurers in three distinct phases: The Deductible Phase;

1 In the 2010 version of the PIP Statute, the fee schedule was set forth at
subparagraph (5)(a)2. The statute was amended effective January 1, 2013, and
the fee schedule is now found at subparagraph (5)(a)1. Ch. 2012-197, § 10, at
20-21, Laws. of Fla. The 2010 version of the PIP Statute applies to this case.
Unless otherwise indicated, references to the Florida Motor Vehicle No-Fault Law
are to the 2010 version of the statute.

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the Benefits Phase; and the Post-Benefits Phase. The following chart
demonstrates these phases:

Deductible Phase
$250, $500, or $1,000 Benefits Phase
Insured Pays until Post-Benefits Phase
$10,000
deductible reached Max. Policy Limits
Insurer Pays (80%)
Reached
Insurer applies Insured Pays co-pay
Insured pays 100%
deductible to: “100% of (20%)
expenses & losses
described in § 627.736”

The insurer seeks to use the fee schedule to reduce providers’ bills
during the Deductible Phase. The provider argues, and the lower court
agreed, that the insurer may use the fee schedule to reduce providers’ bills
only during the Benefits Phase, or when the insurer is actually paying the
provider.

1. RULES OF STATUTORY CONSTRUCTION

“The first principle of statutory construction is that legislative intent
must be determined primarily from the language of the statute.” Golf
Channel v. Jenkins, 752 So. 2d 561, 564 (Fla. 2000). If a statute is
unambiguous, it must be given its plain and obvious meaning. Kingsway
Amigo Ins. Co. v. Ocean Health, Inc., 63 So. 3d 63, 66 (Fla. 4th DCA 2011).
Where a statute is ambiguous and statutory construction is required, the
legislative intent “is the polestar that guides” a court’s inquiry. Blish v.
Atlanta Cas. Co., 736 So. 2d 1151, 1155 (Fla. 1999).

In matters requiring statutory construction, courts always
seek to effectuate legislative intent. Where the words selected
by the Legislature are clear and unambiguous, however,
judicial interpretation is not appropriate to displace the
expressed intent ... It is neither the function nor prerogative
of the courts to speculate on constructions more or less
reasonable, when the language itself conveys an unequivocal
meaning.

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Heredia v. Allstate Ins. Co., 358 So. 2d 1353, 1354-55 (Fla. 1978) (internal
case citations omitted).

“Where possible, it is the duty of the courts to adopt that construction
of a statutory provision which harmonizes and reconciles it with other
provisions of the same act.” Woodgate Dev. Corp. v. Hamilton Inv. Trust,
351 So. 2d 14, 16 (Fla. 1977). The Florida Motor Vehicle No-Fault Law
should be liberally construed with any ambiguity interpreted “to effectuate
the legislative purpose of providing broad PIP coverage for Florida
motorists.” Malu v. Security Nat. Ins. Co., 898 So. 2d 69, 74 (Fla. 2005);
see generally Derius v. Allstate Indem. Co., 723 So. 2d 271, 274 (Fla. 4th
DCA 1998). However, if the Act is not vague or ambiguous, it should not
be construed in such a way as to broaden coverage. Govan v. Int’l Bankers
Ins. Co., 521 So. 2d 1086, 1088 (Fla. 1988).

Two statutes are at issue here: section 627.739, Florida Statutes (the
“Deductible Statute”) and section 627.736, Florida Statutes (the “PIP
Statute”).

The Deductible Statute cross-references the PIP Statute. “[A] cross-
reference to a specific statute incorporates the language of the referenced
statute as it existed at the time the reference was enacted, unaffected by
any subsequent amendments to or repeal of the incorporated statute.”
Preface to Florida Statutes, at viii; see also Overstreet v. Blum, 227 So. 2d
197, 198 (Fla. 1969) (“the adoption of another statute by specific reference
takes the second statute as it then exists, unaffected by any subsequent
amendment or repeal unless a contrary intent clearly appears.”).

The Deductible Statute’s cross reference to the PIP Statute was inserted
in 2003 and revived and reenacted in 2007 (effective 2008). Ch. 2007-
324, § 15, Laws of Fla. Therefore, under Overstreet, this court should look
to the 2007 version of the PIP Statute to determine what the Legislature
intended when it directed that the deductible be applied to “expenses and
losses described in section 627.736.”

2. THE DEDUCTIBLE STATUTE (§ 627.739)

“A ‘deductible’ is ‘a clause in an insurance policy that relieves the
insurer of responsibility for an initial specified loss of the kind insured
against.’” General Star Indem. Co. v. West Florida Village Inn, Inc., 874 So.
2d 26, 33 (Fla. 2d DCA 2004) (quoting Merriam-Webster’s Collegiate
Dictionary 471 (deluxe ed. 1998)). “[T]he functional purpose of a
deductible, which is frequently referred to as self-insurance, is to alter the
point at which an insurance company’s obligation to pay will ripen.” Int’l

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Bankers Ins. Co. v. Arnone, 552 So. 2d 908, 911 (Fla. 1989). The
deductible amount is chosen by the insured and the insured is responsible
for payment of claims until the deductible is satisfied. Mercury Ins. Co. v.
Emergency Physicians of Cent., 182 So. 3d 661, 667 (Fla. 5th DCA 2015).
Once the deductible is met, the insured’s right to access PIP benefits is
“unlocked.” Id.

Section 627.739 provides:

(2) Insurers shall offer to each applicant and to each
policyholder, upon the renewal of an existing policy,
deductibles, in amounts of $250, $500, and $1,000. The
deductible amount must be applied to 100 percent of the
expenses and losses described in s. 627.736. After the
deductible is met, each insured is eligible to receive up to
$10,000 in total benefits described in s. 627.736(1).

The focus in this case is the second sentence:

The deductible amount must be applied to 100 percent of the
expenses and losses described in s. 627.736.

Particularly, what are the “expenses and losses described in section
627.736” and why did the Legislature specify that the deductible amount
must apply to “100 percent” of those expenses and losses.

A second consideration is the third sentence:

After the deductible is met, each insured is eligible to receive
up to $10,000 in total benefits described in s. 627.736(1).

The third sentence differentiates the “expenses and losses described in
section 626.736” from the “total benefits described in section 627.636(1).”
The term “benefits” refers to “the payment of medical bills” by the insurer.
U.S. Sec. Ins. Co. v. Silva, 693 So. 2d 593, 595 (Fla. 3d DCA 1997).

The second and third sentences were placed in the statute in 2003 after
the Florida Supreme Court found that the previous version of the statute
allowed insurers to reduce an insured’s benefits by the amount of the
deductible. Arnone, 552 So. 2d at 908. The following table compares the
pre-2003 and post-2003 versions of the Deductible Statute:

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 Deductible Statute (§ 627.739(2))

Pre-2003 Version Post-2003 Version

Insurers shall offer to each
applicant and to each
Insurers shall offer to each policyholder ... deductibles, in
applicant and to each amounts of $250, $500, and
policyholder ... deductibles, in $1,000. The deductible amount
amounts of $250, $500, $1,000 must be applied to 100 percent
and $2,000, such amount to be of the expenses and losses
deducted from the benefits described in s. 627.736. After
otherwise due each person the deductible is met, each
subject to the deduction. insured is eligible to receive up
to $10,000 in total benefits
described in s. 627.736(1).

Ch. 2003-411, § 9, at 31, Laws of Fla.

The Legislative History explains the change:

The bill changes the calculation of the PIP deductible to
require that it must be applied to 100 percent of medical
expenses, rather than to the current 80 percent of expenses that
PIP pays. It also changes the calculation of the PIP deductible
so that the full $10,000 in PIP benefits can be obtained. This
latter provision has the effect of requiring PIP to pay more than
it does currently if a deductible is elected.

Senate Staff Analysis and Economic Impact Statement, CS/SB 32-A, May
15, 2003 (emphasis added). The Legislature thus clarified the statute to
prevent an insurer from amplifying the effect of a deductible by injecting a
reimbursement limitation into the calculation, a tactic similar to what the
insurer urges in this case. As the Fifth District explained:

The obvious intent of the Legislature was to replace the term
“benefits otherwise due” with “expenses and losses” in
determining what the deductible would be applied to, moving
the term “benefits” to the next sentence, which discusses the
insurer’s liability after the deductible is satisfied. Thus, the
current version of the statute provides a clear distinction
between “expenses and losses” for purposes of applying the

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 deductible and “benefits” that are due to the insured after the
reimbursement limitations are applied.

Florida Hospital a/a/o Parent, 2018 WL 792012 at *5.

3. THE PIP STATUTE (§ 627.736)

Section 627.736 is entitled “Required personal injury protection
benefits; exclusions; priority; claims.” The statutory framework provides:

(1) REQUIRED BENEFITS. – Every insurance policy ... shall
provide personal injury protection to the named insured ... to
a limit of $10,000 for loss sustained by any such person as a
result of bodily injury, ... as follows:

(a) Medical benefits. – Eighty percent of all reasonable
expenses for medically necessary medical ... services. ...

(b) Disability benefits. ...

(c) Death benefits. ...

(2) AUTHORIZED EXCLUSIONS. ...

(3) INSURED’S RIGHTS TO RECOVERY OF SPECIAL
DAMAGES IN TORT CLAIMS. …

(4) BENEFITS: WHEN DUE. ...

(5) CHARGES FOR TREATMENT OF INJURED PERSONS. –
(a)1. Any physician, hospital, clinic, or other person or
institution lawfully rendering treatment to an injured
person for a bodily injury covered by personal injury
protection insurance may charge the insurer and
injured party only a reasonable amount pursuant to
this section for the services and supplies rendered ...

2. The insurer may limit reimbursement to 80 percent
of the following schedule of maximum charges:

***

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 f. For all other medical services, supplies, and care,
200 percent of the applicable Medicare Part B fee
schedule ....

***

5. If an insurer limits payment as authorized by
subparagraph 2., the person providing such services,
supplies, or care may not bill or attempt to collect from
the insured any amount in excess of such limits, except
for amounts that are not covered by the insured’s
personal injury protection coverage due to the co-
insurance amount or maximum policy limits ....

§ 627.736(1)–(5), Fla. Stat. (2007); Ch. 2007-324, §§ 13, 20, 23, Laws of
Fla. (effective Jan. 1, 2008).

Subsection 627.736(1) requires an insurer to provide a minimum of
$10,000 in “required benefits” to cover expenses and losses an insured
sustains as a result of bodily injury sustained in a car accident. §
627.736(1)(a)–(c).

Subsection 627.736(5) covers medical “charges.” Sub-paragraph
(5)(a)1. mandates that a medical provider charge an “insurer and injured
party” “only a reasonable amount” “for a bodily injury covered by personal
injury protection.” Subparagraph (5)(a)2. permits “the insurer” to “limit
reimbursement” to a provider to a “schedule of maximum charges.”

The provision in the PIP statute authorizing insurers to limit
reimbursements for medical services rendered pursuant to
the Medicare fee schedules, which is at issue in this case, has
its genesis in a series of changes the Legislature made to the
PIP statute, beginning in 2001, that were designed to regulate
the amount providers could charge PIP insurers and
policyholders for the medically necessary services PIP insurers
are required to reimburse.

Geico General Ins. Co. v. Virtual Imaging Srvs., Inc., 141 So. 3d 147, 153
(Fla. 2013).

Under section 627.736, Florida Statutes (2008), the PIP
statute, an insurer may elect to calculate medical
reimbursements in one of two ways: (a) it can pay a
reasonable amount consistent with subsection (5)(a)1. of the

8
 statute; or (b) it can elect to apply the Medicare fee schedules,
as set forth in Subsection (5)(a)2. of the statute.

Northwest Ctr. for Integrative Med. & Rehab., Inc. v. State Farm Mut. Auto.
Ins. Co., 214 So. 3d 679, 682 (Fla. 4th DCA 2017); see also Kingsway, 63
So. 3d at 67 (under section 627.736, an insurer may “choose between two
different payment calculation methodology options.”). “Reimbursements
made under section 627.736(5)(a)2. satisfy the PIP statute’s reasonable
medical expenses coverage mandate.” Allstate v. Orthopedic Specialists,
212 So. 3d 973, 976 (Fla. 2017). The PIP coverage “mandate” is that the
insurer “shall” reimburse eighty percent of reasonable expenses for
medically necessary services.” Id. (quoting Virtual Imaging, 141 So. 3d at
155).

Subparagraph 627.736(5)(a)5. prevents “balance billing,” prohibiting
the provider from billing or attempting to collect from the insured “any
amount exceeding the payment made from the insurer.” Green v. State
Farm Mutual Auto. Ins. Co., 225 So. 3d 229, 231 (Fla. 4th DCA 2017). If
the provider’s charge exceeds the statutory “maximum charge,” and the
insurer “limits payment” to the statutory “maximum charge” allowed by
the fee schedule, even if the provider’s charge is reasonable, the provider
“may not bill or attempt to collect from the insured any amount in excess
of such [fee schedule] limits.” § 627.736(5)(a)5.

4. READING THE PIP AND DEDUCTIBLE STATUTES TOGETHER

Under the Deductible Statute, the insurer must apply the deductible
“to 100 percent of the expenses and losses described in § 627.736.” After
the deductible is exhausted, the insured “is eligible to receive up to
$10,000 in total benefits described in § 627.736(1).”

As used in the statute, the term “expenses and losses” is something
different from “benefits” required by law. Where it is applicable, the
Medicare Fee Schedule is a limitation on benefits, not on a provider’s
charge—an “expense” or “loss” that the insured becomes obligated to pay
before the deductible is satisfied.

While the phrase “expenses and losses” is not defined in the PIP
Statute, the statute uses the terms to describe actual losses realized by
the insured. Subsection 627.736(1) requires insurers to cover insureds
for “loss sustained by [the insured] as a result of bodily injury.” Sub-parts
(a) and (b) to subsection (1) discuss medical expenses; loss of income and
earning capacity; and “expenses reasonably incurred” in obtaining

9
household services for chores the insured would ordinarily have
performed. § 627.736(1)(a)-(b).

The PIP Statute includes three types of “benefits” – Medical Benefits;
Disability Benefits; and Death Benefits. Medical Benefits payable by the
insurer are a percentage of reasonable medical expenses. § 627.736(1)(a)
(requiring medical benefits to be paid at 80% of expenses). Disability
Benefits payable by the insurer are a percentage of loss of income and
earning capacity and expenses incurred to reimburse the insured for
necessary services. § 627.736(1)(b) (requiring disability benefits to be paid
at 60% of loss and expenses). “[T]he 80% and 60% methodologies in
section 627.736(1) are intended to limit reimbursements in order to
establish benefits. They are not intended to describe the application of the
deductible under the 100% methodology provided in section 627.739(2).”
Florida Hospital a/a/o Parent, 2018 WL 792012 at *3.

The insurer argues that the fee schedules found in section
627.736(5)(a)2. should be applied to lower the medical providers’ bills
during the Deductible Phase, and that those lower bills should be applied
to satisfy the deductible. This interpretation of the statutes will result in
the insurer paying less because the providers’ charges will be reduced and
more of the providers’ bills would be applied to satisfy the insured’s
deductible (which the insurer does not pay).

The insurer’s interpretation of the statutes is not supported by the plain
language of § 627.736(5)(a)1. and 2. which permit a provider to charge the
insurer and the insured a reasonable amount for services while allowing
the insurer to “limit reimbursement” to the provider based on a fee
schedule. During the Deductible Phase, however, the insurer is not
reimbursing the medical provider; it is the insured who is paying the
provider. Section 627.736(5)(a)2. and its schedule of “maximum charges”
is triggered only after the deductible has been satisfied and the insurer is
reimbursing the provider – i.e., during the Benefits Phase.

As the Fifth District observed:

We do not believe that the Legislature intended the statutory
reimbursement limitations to be applied to expenses and
losses that fall within the insured’s deductible, which the
insured alone is obligated to pay and which are not
recoverable as benefits under the policy.

Florida Hospital, a/a/o Parent, 2018 WL 792012 at *8.

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 I also agree with the Fifth District that the plain language of the
Deductible Statute negates the insurer’s argument. Section 627.739(2)
mandates that the deductible “must be applied to 100 percent” of the
insured’s expenses and losses. 100 percent means, well, 100 percent. All.
Everything. Total. It does not mean 80% of “200 percent of the applicable
Medicare Part B fee schedule,” which is a reimbursement limitation. As
the Fifth District wrote:

We believe that application of the optional reimbursement
limitations to establish a reduced amount of expenses and
losses from which the deductible amount is subtracted would
render meaningless the requirement in section 627.739(2)
that “[t]he deductible amount must be applied to 100 percent
of the expenses and losses.”

Florida Hospital a/a/o Parent, 2018 WL 792012 at *4.

For these reasons, I would rephrase the question certified by the county
court as follows:

PURSUANT TO FLA. STAT. § 627.739, IS AN INSURER
REQUIRED TO APPLY THE DEDUCTIBLE TO 100% OF AN
INSURED’S EXPENSES AND LOSSES PRIOR TO APPLYING
ANY PERMISSIVE FEE SCHEDULE PAYMENT LIMITATION
FOUND IN FLORIDA STATUTE SECTION 627.736(5)(a)1.
(2013)?

I would then answer the question in the affirmative.

* * *

Not final until disposition of timely filed motion for rehearing.

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