A federal district court in New Jersey held that where a medical provider alleges that an insurance company underpaid a personal injury protection (PIP) claim and that the insurance company systematically underpays such claims, the medical provider is not entitled to class certification and must arbitrate each claim individually.

In Innovative Physical Therapy, Inc. v. Metlife Auto & Home, No. 07-5446 (JAP), 2008 WL 4067316 (D.N.J. Aug. 26, 2008), three medical service providers (Providers) sued Metlife Insurance, alleging that Metlife improperly used "computer-generated bill review reports" to arbitrarily discount PIP claims for first-party medical benefits below the amounts billed by the insured’s medical providers. For example, a Provider billed a Metlife-insured patient $63.44, but Metlife only paid $59.35 because its computer-generated bill review report determined that $59.35 was the "reasonable" cost of the treatment.

Metlife policies stated that it would pay PIP benefits for "reasonable medical expenses for necessary medical treatment, in the event of an automobile accident, in accordance with the Minnesota No-Fault Automobile Act." The Providers sought to represent a class of insureds whose bills had been underpaid by Metlife, while Metlife opposed any class-wide proceedings.

The Court, following the choice-of-law provisions in the insureds’ policies, first held that Minnesota law governed the insureds’ claims. Minnesota’s No-Fault Automobile Insurance Act requires arbitration of all PIP payment disputes of $10,000 or less. Minn. Stat. § 65B.525. Consequently, the Court held that the Providers’ claims were subject to mandatory arbitration under Minnesota’s no-fault statute, as the individual claims brought were for far less than the $10,000 limit.

The Court held that it was not appropriate to consider the entire amount that the Providers were seeking on behalf of the proposed class when determining if the claims exceeded the $10,000 limit because the only claims at issue were individually brought by the Providers.

The Court also refused to certify the Providers’ proposed class. The Court held that the Providers could not represent the class because they were required to submit their claims to arbitration, and each potential class member would be required by their policies and/or state law to submit their dispute to arbitration.

Furthermore, the Court held that maintenance of a class action was not possible because the Providers did not satisfy the requirements of Fed. R. Civ. P. 23. The Court held that the Providers did not meet Rule 23’s "adequacy" requirement because they were required to arbitrate their claims, and thus could not represent the class in court. Also, the Court found that the class action would be unmanageable because a court would be required to determine whether reimbursements were reasonable on a case-by-case basis in light of each state’s PIP statutes and each person’s medical treatment. Thus, the Court dismissed the lawsuit and held that the Providers were required to bring their claims in arbitration.