STATE FARM MUTUAL AUTO INS. CO v. CARE WELLNESS CENTER, LLC, a/a/o VIRGINIA BARDON-DIAZ

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Appellant,

v.

CARE WELLNESS CENTER, LLC a/a/o VIRGINIA BARDON-DIAZ,
Appellee.

No. 4D16-2254

[March 14, 2018]

Appeal from the County Court for the Seventeenth Judicial Circuit,
Broward County; John D. Fry, Judge; L.T. Case No. CONO 14-7576 (70).

Nancy W. Gregoire of Birnbaum, Lippman & Gregoire, PLLC, Fort
Lauderdale, and Scott E. Danner of Kirwan, Spellacy & Danner, P.A., Fort
Lauderdale, for appellant.

Marlene S. Reiss of Law Offices of Marlene S. Reiss, Esq., P.A., Miami,
Thomas J. Wenzel of Cindy A. Goldstein, P.A., Coral Springs, and Stuart
L. Koenigsberg of A Able Advocates–Stuart L. Koenigsberg, P.A., Miami, for
appellee.

Peter J. Valeta of Cozen O’Connor, Chicago, Illinois, for Amicus Curiae,
Florida Justice Reform Institute.

Matthew C. Scarfone of Colodny Fass, P.A., Sunrise, for Amicus Curiae,
Property Casualty Insurers Association of America.

Mac S. Phillips of Phillips|Tadros, P.A., Fort Lauderdale, and David M.
Caldevilla of de laParte & Gilbert, P.A., Tampa, for Amicus Curiae,
Floridians For Fair Insurance, Inc.

KUNTZ, J.

Application of the deductible when an insured seeks benefits under a
personal injury protection (PIP) policy of vehicle insurance is an issue the
circuit and county courts have inconsistently resolved. In each case, the
healthcare provider argues the deductible must be applied to the total
billed charges, before reducing the charges under section 627.736(5)(a)1.,
Florida Statutes (2013), a statutory fee schedule the legislature has found
to be reasonable. On the other hand, the insurer argues the billed amount
must be reduced to the amount in the approved fee schedule before
applying the deductible and issuing payment.

Here, the county court agreed with the provider, granted the provider’s
motion for summary judgment, and certified the following question to be
of great public importance:

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 § 627.736(5)(A)(1), FLA. STAT. (2013)?

We previously exercised our discretionary jurisdiction under Florida Rule
of Appellate Procedure 9.030(b)(4)(A) to answer the certified question,
which we rephrase as follows: 1

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 these reasons, we answer the rephrased certified question in the
negative. In the context of PIP benefits, the legislature mandates a
provider that has treated an injured party charge the “insurer and injured
party only a reasonable amount.” § 627.736(5)(a), Fla. Stat. (2013). The
legislature also established two methods of determining reasonableness;
one being the fee schedule. To apply the fee schedule to the billed charges
only after applying the deductible, as the provider argues, would allow the
provider to recover different amounts depending on the amount of the
deductible. It would also allow the provider to recover more than the
amount found to be reasonable in the fee schedule. This would render
meaningless the portion of the statute precluding a provider from charging
more than a reasonable amount.

1We address the same issue in two other cases decided today. See also USAA
Gen. Indem. Co. v. Gogan, M.D. a/a/o Tara Ricks, No. 4D16-3313 (Fla. 4th DCA
Mar. 14, 2018); Progressive Select Ins. Co. v. Blum, M.D., P.A. a/a/o Vanesso
Moreno, No. 4D16-4311 (Fla. 4th DCA Mar. 14, 2018).

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 To ensure the statute is applied as written, we hold that an insurer
must reduce the provider’s charges to the statutorily-approved permissive
fee schedule before applying the deductible. As a result, we reverse the
decision of the county court and remand for further proceedings consistent
with this opinion. We also certify conflict with the Fifth District in
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). We
now turn to a more in-depth discussion of the case before us.

Background

State Farm, the insurer, issued a PIP policy to Ms. Bardon-Diaz, the
insured, who elected a $1,000 policy deductible. Following an automobile
accident, the insured received medical treatment at Care Wellness Center,
the provider, for injuries related to the accident. At that time, the insured
executed an assignment of benefits, assigning “any rights or benefits
under my policy of insurance with State Farm, for any service and/or
charges provided by the above-named medical provider.” The assignment
also specifically referenced the “status of PIP payments that are due to”
the provider.

The insurer received bills for services from all providers totaling $1,812,
an amount reduced to $825.96 after the insurer applied the fee schedule.
The provider in this appeal submitted three bills to the insurer for the
insured’s treatment, but the deductible was applied to only two. The total
amount billed for the two bills was $385.00 and, after the insurer applied
the fee schedule, the two bills were reduced to $258.60. The policy
deductible consumed all $258.60. 2

The provider filed a complaint for breach of contract in county court,
alleging that the insured was covered by the vehicle insurance policy and
received treatment from the provider. The provider further alleged that the
insured “gave notice of covered losses and made demand for PIP benefits
from [insurer] for reasonable, necessary, and related medical,
rehabilitative and/or remedial treatment.” Later, the provider amended
its complaint and alleged that the insurer “reduced [the provider’s] bill and
subsequently applied the reduced amounts to the deductible.” The
provider’s amended complaint stated that the provider “does not dispute
that [the insurer’s] policy clearly and unambiguously puts its insured on
notice of its election to limit reimbursements to the ‘permissive’ fee

2The provider also submitted additional invoices for other treatment. State Farm
applied the fee schedule to those invoices and, because the deductible had been
satisfied, paid the invoices.

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schedule rate.” The provider also acknowledged the existence of the policy
deductible.

The provider challenged the insurer’s application of the deductible,
alleging “the reduction of [provider’s] bills prior to applying said bills to the
deductible resulted in an underpayment of [provider’s] bills.” More
specifically, the provider alleged that it “believe[s] that [the insurer] is
permitted to limit only reimbursed charges to the ‘permissive fee schedule’
rate pursuant to the subject policy of insurance” and that the provider
“believe[s] that bills that are applied to a deductible are not ‘reimbursed’
or ‘paid.’”

Both parties moved for summary judgment on applying the deductible.
After holding a hearing, the court granted the provider’s motion for
summary judgment. The court later amended the summary judgment
order, finding for the provider and certifying the issue as presenting an
issue of great public importance.

Analysis

At issue is the proper application of a PIP-claim deductible. Because
this involves the interpretation of both a statute and an insurance policy,
we have de novo review. See Geico Gen. Ins. Co. v. Virtual Imaging Servs.,
Inc., 141 So. 3d 147, 152 (Fla. 2013) (citations omitted).

First, we discuss the Florida Motor Vehicle No-Fault Law, see §§
627.730–.7405, Fla. Stat. (2013)—specifically, the PIP statute. Next, we
focus on the cornerstone of the PIP statute: reasonableness. Then, we
discuss the Fifth District’s recent opinion interpreting the same provisions
of the statute at issue in this case. Finally, we offer our interpretation of
the statute and apply it to this case.

a. The PIP Statute

Florida enacted the PIP statute in 1971. Since its inception, the statute
“has required insurers to provide coverage for reasonable expenses for
necessary medical services.” Virtual Imaging, 141 So. 3d at 153. The
legislature has amended the statute several times, and these amendments
“were designed to regulate the amount providers could charge PIP insurers
and policyholders for the medically necessary services PIP insurers are
required to reimburse.” Id.

One of these amendments added a provision that allowed an insurer to
limit reimbursements for medical services to a statutory fee schedule,

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which the legislature has found to be reasonable. Id. (citing §
627.736(5)(a)2., Fla. Stat. (2008) (stating that an “insurer may limit
reimbursement to 80 percent of the following schedule of maximum
charges,” and various categories of service follow with a designated
schedule)). 3 For example, the amendment included a provision allowing
the insurer to limit reimbursements to “200 percent of the allowable
amount under the participating physician’s schedule of Medicare Part B.”
Id. at 156 (citing § 627.736(5)(a)2.f., Fla. Stat. (2008)). To use this fee
schedule, the insurer must provide notice to the insured within the policy
of insurance. See id. (citing § 627.736(5)(a)5., Fla. Stat. (2008)).

The parties agree that the insurer properly put the insured on notice of
its intent to apply the fee schedule. They also agree on the amount of the
applicable deductible. So our issue is narrow. We must determine the
proper application of a PIP policy deductible, governed by section 627.739,
Florida Statutes, and the PIP benefit statutory section, or section 627.736,
Florida Statutes.

To accomplish this task, we first look to the plain language of the PIP
deductible statute. The relevant subsection allows the insurer to provide
a deductible, and provides the terms of its application:

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). However, this subsection shall not
be applied to reduce the amount of any benefits received in
accordance with s. 627.736(1)(c).

§ 627.739(2), Fla. Stat. (2013). The dispositive issue in this appeal is to
determine what the following phrase means: “the deductible amount must
be applied to 100 percent of the expenses and losses described in s.
627.736.” To determine the meaning of the phrase “expenses and losses,”
section 627.739(2) must be read along with section 627.736.

Section 627.736 contains several references to “expenses,” and each
section includes, directly or indirectly, a requirement that the expenses be

3The relevant provisions cited by our supreme court in Virtual Imaging have since
been renumbered to section 627.736(5)(a)1. See Ch. 2012-197, § 10, Laws of Fla.

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reasonable. See, e.g., § 627.736(1)(a), (1)(b), (4), (4)(f), (6)(b), (6)(c), Fla.
Stat. To highlight two of those provisions, section 627.736(1)(a) references
“reasonable expenses for medical services,” and section 627.736(6)(b)
requires a provider to furnish a written report stating why the items
charged were medically necessary and why the amount charged is
reasonable.

b. Reasonableness

Reasonableness is the key throughout these provisions. Yet the
providers effectively argue that their charges need to be reasonable only to
the insurer, not the insured. We disagree. The requirement that charges
be reasonable applies to the totality of the charges. The statute states that
the provider “may charge the insurer and injured party only a reasonable
amount pursuant to this section for the services and supplies rendered.”
§ 627.736(5)(a), Fla. Stat. (2013). We think the plain language of the
statute is clear. The legislature unambiguously emphasized a requirement
that expenses be reasonable. We cannot minimize the importance of this
reasonableness requirement. Indeed, our supreme court found that “this
provision—the reasonable medical expense coverage mandate—is the
heart of the PIP statute’s coverage requirements.” Allstate Ins. Co. v.
Orthopedic Specialists, 212 So. 3d 973, 976 (Fla. 2017) (internal quotation
omitted).

With reasonableness in mind, courts have stated that a PIP insurer is
an “indemnitor against liability for reasonable and necessary medical
expenses incurred by persons the PIP or medpay provisions cover.”
Kaklamanos v. Allstate Ins. Co., 796 So. 2d 555, 561 (Fla. 1st DCA 2001),
approved, 843 So. 2d 885 (Fla. 2003). The court in Kaklamanos defined
expense as “the same as a debt,” and the expense “has been incurred when
liability for payment attaches.” Id. (citation omitted). So a “reasonable
expense” is the amount the insurer must pay, see, e.g., Tri-Cty. Diagnostic
& Imaging Ctrs., LLC v. Windhaven Ins. Co., 25 Fla. L. Weekly Supp. 114a
(Fla. Palm Beach Cty. Ct. Mar. 14, 2017), and it is the limit a medical
provider is entitled to charge, Northwoods Sports Med. & Physical Rehab.,
Inc. v. State Farm Mut. Auto. Ins. Co., 137 So. 3d 1049, 1057 (Fla. 4th DCA
2014).

As PIP benefits are established only for reasonable charges, we must
next review how to determine reasonableness. Our supreme court has
explained that there are two different methods to calculate
reasonableness. Orthopedic Specialists, 212 So. 3d at 976. Under the first
method—found within section 627.736(5)(a)—reasonableness is a fact-
dependent inquiry determined by considering various factors. Orthopedic

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Specialists, 212 So. 3d at 976 (citing Virtual Imaging, 141 So. 3d at 155–
56). Under the second method—found within section 627.736(5)(a)1.—an
insurer may limit reimbursement to eighty percent of a schedule of
maximum charges set forth in the PIP statute. § 627.736(5)(a)2., Fla. Stat.
(2013). “Reimbursements made under section 627.736(5)(a)2. satisfy the
PIP statute’s reasonable medical expenses coverage mandate.” Orthopedic
Specialists, 212 So. 3d at 976 (citing Virtual Imaging, 141 So. 3d at 150,
156–57).

Now, returning to the PIP deductible statute, we first note our sister
district’s interpretation of this section. Then, we offer our interpretation.
Again, that section states “the deductible amount must be applied to 100
percent of the expenses and losses described in s. 627.736.” § 627.739(2),
Fla. Stat. (2013).

c. The Fifth District’s Interpretation of the PIP Deductible Statute

A divided panel of the Fifth District recently interpreted this same
provision of this statute. Parent, 43 Fla. L. Weekly at D318. 4 Judge
Sawaya’s majority opinion agreed with the circuit court’s conclusion that
“when calculating the amount of PIP benefits due to the insured, section
627.739(2) requires the deductible to be subtracted from the total medical
care charges before applying the statutory reimbursement limitations
provided in section 627.736(5)(a)1.b., Florida Statutes (2014).” Parent, 43
Fla. L. Weekly at D318. As the provider argues here, the majority opinion
explained that the current version of the statute distinguishes between
“expenses and losses” and “benefits,” stating:

4Prior to our issuance of this opinion, the Fifth District issued this February 9,
2018 opinion on a motion for rehearing and for certification to the Florida
Supreme Court. The opinion on rehearing certifies the following question to the
Florida Supreme Court:

WHEN CALCULATING THE AMOUNT OF PIP BENEFITS DUE AN
INSURED, DOES SECTION 627.739(2), FLORIDA STATUTES,
REQUIRE THAT THE DEDUCTIBLE BE SUBTRACTED FROM THE
TOTAL AMOUNT OF MEDICAL CHARGES BEFORE APPLYING THE
REIMBURSEMENT LIMITATION UNDER SECTION
627.736(5)(a)1.b., OR MUST THE REIMBURSEMENT LIMITATION
BE APPLIED FIRST AND THE DEDUCTIBLE SUBTRACTED FROM
THE REMAINING AMOUNT?

Parent, 43 Fla. L. Weekly at D322. On the same day it issued the opinion on
rehearing in Parent, the Fifth District also released an opinion on rehearing in a

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 [Section 627.739(2)] distinguishes between “expenses and
losses” and “benefits.” The second sentence states that the
deductible “must be applied to 100 percent of the expenses
and losses.” In the very next sentence, the statute provides
that “[a]fter the deductible is met, each insured is eligible to
receive up to $10,000 in total benefits.” Thus, the statute
indicates that the deductible applies to “100 percent of the
expenses and losses” whereas “benefits” refers to the
calculated amount after the deductible has been applied to
the total expenses and losses and after application of the
statutory reimbursement limitations found in section
627.736.

Id. at D319.

The majority opinion also cited as persuasive authority a proposed
amendment to the statute the legislature did not approve in 2016. Id. at
320-21. The majority opinion asserted the proposed amendment would
have changed the statute to reflect the view of the insurer. Id. We find it
unnecessary to consider whether the Fifth District majority or dissent
correctly interpreted the language of the proposed amendment. Legislative
inaction on a proposed bill “lacks ‘persuasive significance’ because ‘several
equally tenable inferences’ may be drawn from such inaction, ‘including
the inference that the existing legislation already incorporated the offered
change.’” Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 650 (1990)
(quoting United States v. Wise, 370 U.S. 405, 411 (1962)). Similarly, the
Seventh Circuit explained the insignificance of proposed legislation:

[p]roposed legislation can fail for many reasons. Some
Members of Congress may oppose the proposal on the merits;
others may think it unnecessary and therefore not worth the
political capital needed to write the ‘clarification’ into the
statute over opposition; still others may be indifferent, or seek
to use the bill as a vehicle for some unrelated change.
Congress may run out of time, as a noncontroversial bill sits
in a queue while a contentious proposal is debated. No
surprise, therefore, that the Supreme Court repeatedly
reminds us that unsuccessful proposals to amend a law, in
the years following its passage, carry no significance.

second case and certified the same question of great public importance. See
Progressive Select Ins. Co. v. Fla. Hosp. Med. Ctr. a/a/o Louis Pena, 43 Fla. L.
Weekly D322a (Fla. 5th DCA Feb. 9, 2018).

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N.A.A.C.P. v. Am. Family Mut. Ins. Co., 978 F.2d 287, 299 (7th Cir. 1992)
(internal citations omitted). Whatever the reason the legislature declined
to enact the proposed amendment to the statute has no bearing on our
interpretation of the statute that it did enact.

Ultimately, the Fifth District concluded “that Section 627.739(2)
currently requires that the deductible be applied to 100% of the expenses
and losses” and only then may an insurer reduce the billed amount to the
amount the legislature has found reasonable. Id. at 321.

Judge Palmer dissented, finding the majority incorrectly concluded that
“medical expenses” are different than “medical benefits” under the PIP
statute. Id. at 322 (Palmer, J., dissenting). He found the majority’s
conclusion that the deductible must be first applied to the billed charge,
no matter if the PIP policy covers the charge, “fundamentally
unreasonable.” Id. We find Judge Palmer’s position to be more persuasive.

d. Our Interpretation of the PIP Deductible Statute and its
Application to This Case

Reading section 627.739(2) along with section 627.736, as the statute
expressly requires, the deductible must be applied to 100% of the
reasonable and necessary expenses. Consistent with this conclusion, in
Northwoods Sports, we explained that “in order to activate the right to
claim PIP payments . . . the provider’s bills must be compensable under
the statute in that they have been determined to be reasonable and
necessary” and “[u]ntil the necessity of the services and reasonableness of
the charges is settled, their compensability under PIP is not established.”
137 So. 3d at 1057. In other words, there is no PIP claim until the
provider’s bill is reduced, if necessary, to the amount set forth in section
627.736(5)(a)1. If there is no PIP claim until the amount is reduced to the
amount found to be reasonable by the legislature, then there is nothing to
apply the deductible to until the amount is reduced. Because the
deductible applies to expenses as described in section 627.736, the
deductible is applied to the amounts after the reduction.

This interpretation is also consistent with a general understanding of
insurance deductibles. Logically, “the deductible only applies to losses
covered under the policy of insurance, not simply the total bills
submitted.” Better Chiropractic & Rehab Ctr. LLC v. Geico Indem. Co., 22
Fla. L. Weekly Supp. 378b (Fla. Miami-Dade Cty. Ct. Sept. 25, 2014) (citing
Gen. Star Indem. Co. v. W. Fla. Vill. Inn, Inc., 874 So. 2d 26, 33–34 (Fla. 2d
DCA 2004)). As the Second District held in West Florida Villages, “[t]he

9
notion that a deductible could be applied to loss that is not covered by the
policy is fundamentally unreasonable.” 874 So. 2d at 33.

To apply the deductible to the billed charge irrespective of whether the
charge was reasonable—or even covered—would effectively render the
deductible meaningless. The insurer offers the PIP coverage at different
premiums depending on the amount of the deductible selected by the
insured. If the policy coverage were not relevant to the deductible, then
the insurer would have no reason to offer reduced premiums in exchange
for a higher deductible. Such a system cannot be what the legislature
intended when it enacted a law that requires a provider charge the “insurer
and injured party only a reasonable amount.” § 627.736(5)(a), Fla. Stat.
(2013). The legislature established what is reasonable through the
adoption of predetermined fee schedule limitations. 5

To take the fee schedule out of the abstract, we apply it to the
hypothetical scenario shown below:

In this example, applying the deductible to the billed charge, before
reducing the charge to the amount on the fee schedule, allows a provider
to charge the insurer and injured party an amount more than a
“reasonable fee.” This, as we know, would be contrary to the plain
language of the statute. The insurer’s proposed method, however, results

5 In further support, section 627.736(9), Florida Statutes (2013) presents another
example of the legislature recognizing the limits on the amount the insurer and
insured may pay a provider. This subsection allows an insurer to waive the
deductible and pay more than otherwise allowed by the statute if the insured
elects to use the insurer’s preferred provider. To apply the deductible in the
manner sought by the providers would allow for payment beyond the maximum
amounts, but not in the specific situation authorized by the legislature in this
subsection.

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in the provider being paid the amount the legislature has determined to be
reasonable.

Shown below is the same example, but without a deductible:

In this example, the provider receives the same payment regardless of
which method is used. This is consistent with the plain language of the
statute, which establishes a maximum payment to be paid by the insurer
and insured. The legislature did not indicate that maximum payment
could be exceeded if the insured elected a policy deductible, and we cannot
write such an exception into the statute.

The fact that in some circumstances, such as in this case, the insurer
is not required to pay the provider because the deductible is unmet does
not change the analysis. The chart below represents the dollar figures at
issue in the present case:

Collectively, the providers billed $1,812. After applying the fee schedule,
the insurer reduced the amount to $825.96. Incidentally, the insured’s
deductible was $1,000 so the insurer was not required to pay the provider.
Nevertheless, the providers were still entitled to collect the $825.96 in the
form of the deductible from the insured. This, as the legislature has found,
is reasonable for the specific charges at issue. Because the legislature has
established reasonableness as the maximum charge, the provider is

11
simply receiving what the legislature has permitted. Nothing more,
nothing less.

For these reasons, the county court erred when it entered summary
judgment in favor of the provider. As noted, the parties agree that the
insurer elected to use the second methodology, which allows for
application of the statutory fee schedule. The insurer was thus entitled to
reduce the billed charges to those considered reasonable by the legislature
and under the insurance policy. Here, the insurer reduced the billed
charges in a manner consistent with section 627.736(5)(a)(1). That
amount represents the maximum the provider can charge the insurer and
injured party, and is the limit the insurer and injured party must pay. It
is also the amount to which the policy deductible logically applies.

Conclusion

The PIP statute allows insurers to offer policies with varying
deductibles. § 627.739(2), Fla. Stat. The statute instructs that the
deductible is to be applied to 100% of the expenses and losses described
in section 627.736, Florida Statutes. The expenses and losses described
in section 627.736 require that all expenses be reasonable, and the statute
provides that the amount charged to both the “insurer and injured party”
must be reasonable. The statute also determines what is reasonable—a
predetermined fee schedule. To apply the deductible to the total amount
billed, even if the amount exceeds the statutory fee schedule, would render
portions of the legislation meaningless.

Instead, we must apply the statute in the manner that the legislature
intended. A provider may not bill the insurer and injured party more than
is reasonable. The insurer may reduce the amount of the provider’s bill to
a reasonable amount, as provided on the fee schedule. Then, after
determining the reasonable amount, the insurer may apply the deductible.

We answer the rephrased certified question in the negative, reverse the
judgment in favor of the provider, and remand for further proceedings not
inconsistent with this opinion.

Reversed and remanded; conflict certified.

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

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GROSS, J., dissenting.

I dissent for the reasons set forth in my dissent to the Court’s opinion
in USAA Gen. Indem. Co. v. Gogan a/a/o Tara Ricks, No. 4D16-3313 (Mar.
14, 2018).

* * *

Not final until disposition of timely filed motion for rehearing.

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