C.L. v. Div. of Med. Assistance & Health Servs.

• Decision Date: 17 October 2022
• Docket Number: DOCKET NO. A-4284-19
• Citation: 473 N.J.Super. 591,284 A.3d 860
• Parties: C.L., Petitioner-Appellant, v. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES, Respondents-Respondents, and Bergen County Board of Social Services, Respondent.
• Court: New Jersey Superior Court — Appellate Division

473 N.J.Super. 591

284 A.3d 860

C.L., Petitioner-Appellant,

v. DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES, Respondents-Respondents,andBergen County Board of Social Services, Respondent.

DOCKET NO. A-4284-19

Superior Court of New Jersey, Appellate Division.

Submitted September 28, 2022

Decided October 17, 2022

Fink Rosner Ershow-Levenberg Marinaro, LLC, attorneys for appellant (Linda S. Ershow-Levenberg, Clark, on the briefs).

Matthew J. Platkin, Acting Attorney General, attorney for respondent (Melissa H. Raksa, Assistant Attorney General, of counsel; Jacqueline R. D'Alessandro, Deputy Attorney General, on the brief).

Before Judges Whipple, Mawla, and Marczyk.

The opinion of the court was delivered by

MARCZYK, J.S.C., t/a

C.L. appeals from a Final Agency Decision (FAD) from the Division of Medical Assistance and Health Services (DMAHS) denying her request for Medicaid benefits due to excess resources. Specifically, DMAHS determined an annuity C.L. purchased, which she understood to be irrevocable, was revocable and counted as a resource, thereby disqualifying her from Medicaid benefits. Following our review of the record and applicable legal principles, we reverse.

I.

C.L. purchased an annuity contract with the Croatian Fraternal Union of America (CFUA) as part of a spend-down plan to qualify for Medicaid benefits. The annuity contract provides C.L. had a right to rescind the contract within ten days of receipt if she wanted to receive a complete refund of her money.¹ The contract also states after the ten-day rescission period, it: "(1) is irrevocable and immediate; (2) may not be transferred, assigned, surrendered, or commuted; and (3) has no cash or loan value" (Irrevocability Clause).

The dispute in this matter arises from DMAHS's interpretation of language contained in the annuity contract's application, which is incorporated by reference into the contract. The provision at issue states the parties "understand ... only the National President or the National Secretary/Treasurer of the [CFUA] may, in writing, make or change the contract or waive any of its rights or requirements" (Amendment Clause).

In June 2019, C.L. applied for Medicaid benefits through the Bergen County Board of Social Services (BCBSS). On September 23, 2019, BCBSS denied her application on the basis her resources exceeded the maximum required under Medicaid law because of the CFUA annuity. Thereafter, C.L. filed for a fair hearing before DMAHS, which transmitted the matter to the Office of Administrative Law (OAL) as a contested case.

The primary issue before the administrative law judge (ALJ) was whether BCBSS's decision to count the CFUA annuity as a resource was correct. A BCBSS representative testified that in reaching its conclusion, BCBSS focused on the similarities between C.L.'s application and a prior case from Ocean County involving M.M., in which the applicant also purchased an annuity from the CFUA.² Edward Pazo, CFUA's president, testified regarding M.M.'s case and the annuity contract at issue in this matter.

M.M.'s annuity contract had language identical to C.L.'s contract regarding irrevocability and the Amendment Clause. M.M. applied for a CFUA annuity, but later asked the CFUA to extend the payment by one month because there was a calculation error in the initial application. Pazo testified that because of the calculation error, he permitted the length of payment to be extended by one month, but the CFUA did not revoke the contract nor did the annuitant ever ask for the money back. He testified "for processing purposes, we assigned it a new contract number" to keep track of the annuity. He emphasized M.M.'s contract remained irrevocable without any cash surrender.³

On March 17, 2020, the ALJ affirmed BCBSS's decision based on the Amendment Clause and the CFUA amending the annuity contract in M.M.'s case. In short, the ALJ determined the contract was revocable. On March 25, 2020, C.L. filed timely exceptions primarily based on an injunction entered against DMAHS in federal court concerning another CFUA annuitant and involving the same Irrevocability and Amendment Clauses.⁴ On June 16, 2020, DMAHS entered a FAD, which affirmed the ALJ's decision. Specifically, the FAD noted the annuity contract at issue was a revocable contract thereby rendering it a resource. On July 28, 2020, C.L. also filed for a preliminary injunction in federal court and subsequently filed this appeal on July 29, 2020. On September 10, 2020, with the consent of the Attorney General, this appeal was stayed until December 2020. The federal court never addressed the request for the injunction and C.L. proceeded with this appeal.⁵

II.

C.L. argues when an annuitant cannot liquidate an annuity, it cannot be treated as a resource. 20 C.F.R. 416.1201(a). Further, after the ten-day "free look" period, she did not have the unilateral right to revoke the annuity contract or demand a return of the premium. C.L. asserts there was nothing in the Amendment Clause or any other part of the contract that gives C.L. the right to revoke the annuity. Although the application indicates the president or treasurer has the power to amend the contract, that does not confer any legal rights upon C.L. She contends, "at most [the clause is] merely a notice ... for [regulatory] compliance purposes."

C.L. argues the CFUA issued the annuity contract, including the Amendment Clause, with the approval of the State Division of Banking and Insurance (DOBI) and sold it as an "irrevocable annuity contract." DMAHS ignored this fact and mistakenly treated the contract as if it were revocable. Finally, C.L. contends DMAHS's reliance on M.M.'s case is wholly inapposite, because the annuitant there did not receive her money back and instead received a modified annuity.⁶

III.

We begin by addressing our standard of review and general governing legal principles. This court's review of DMAHS's determination is ordinarily limited. Barone v. Dep't of Human Servs., Div. of Med. Assistance & Health Servs., 210 N.J. Super. 276, 285, 509 A.2d 786 (App. Div. 1986) ("We must give due deference to the views and regulations of an administrative agency charged with the responsibility of implementing legislative determinations."); see also Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56, 766 A.2d 312 (App. Div. 2001) ("It is settled that [a]n administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference.") (alteration in original) (citations and internal quotation marks omitted). "Where [an] action of an administrative agency is challenged, a presumption of reasonableness attaches to the action of an administrative agency[,] and the party who challenges the validity of that action has the burden of showing that it was arbitrary, unreasonable or capricious." Barone, 210 N.J. Super. at 285, 509 A.2d 786 (citation and internal quotation marks omitted). "Delegation of authority to an administrative agency is construed liberally when the agency is concerned with the protection of the health and welfare of the public." Ibid. Thus, ordinarily our task is limited to deciding:

(1) whether the agency's decision offends the State or Federal Constitution; (2) whether the agency's action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

[ A.B. v. Div. of Med. Assistance & Health Servs., 407 N.J. Super. 330, 339, 971 A.2d 403 (App. Div. 2009) (citation omitted).]

Nevertheless, we are "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." R.S. v. Div. of Med. Assistance & Health Servs., 434 N.J. Super. 250, 261, 83 A.3d 868 (App. Div. 2014) (quoting Mayflower Sec. Co. v. Bureau of Sec. in Div. of Consumer Affs. of Dep't of L. & Pub. Safety, 64 N.J. 85, 93, 312 A.2d 497 (1973) ). "[If] an agency's determination ... is a legal determination, our review is de novo." L.A. v. Bd. of Educ. of Trenton, Mercer Cty., 221 N.J. 192, 204, 110 A.3d 914 (2015) (citation omitted).

"We do not ... simply rubber stamp the agency's decision." Paff v. N.J. Dep't of Lab., 392 N.J. Super. 334, 340, 920 A.2d 731 (App. Div. 2007) (citing Henry v. Rahway State Prison, 81 N.J. 571, 579-80, 410 A.2d 686 (1980) ). Instead, we will "intervene ... in those ... circumstances in which an agency action is clearly inconsistent with its statutory mission or other state policy." In re Musick, 143 N.J. 206, 216, 670 A.2d 11 (1996). Since the issue before us presents a legal question involving an interpretation of an annuity contract, we are not bound by DMAHS's decision, and our review is de novo.

IV.

The issue presented is whether, despite the express language in the annuity contract concerning irrevocability, the Amendment Clause renders the annuity revocable and, therefore, a resource⁷ under New Jersey's Medicaid provisions.

In interpreting a contract, we are guided by well-established principles. "A basic principle of contract interpretation is to read the document as a whole in a fair and common sense manner." Hardy ex rel. Dowdell v. Abdul–Matin, 198 N.J. 95, 103, 965 A.2d 1165 (2009). If we find the terms "are clear and unambiguous, there is no room for construction and the court must enforce those terms as written," in addition to giving them "their plain, ordinary meaning." Watson v. City of E. Orange, 175 N.J. 442, 447, 815 A.2d 956 (2003) (Long J., dissenting); Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 270, 952 A.2d 1077 (2008) (quoting Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595, 775 A.2d 1262 (2001) ).

Importantly, "[a] contract ‘should not be interpreted to render...