                        NOT FOR PUBLICATION WITHOUT THE
                      APPROVAL OF THE APPELLATE DIVISION
     This opinion shall not "constitute precedent or be binding upon any court."
      Although it is posted on the internet, this opinion is binding only on the
        parties in the case and its use in other cases is limited. R. 1:36-3.




                                       SUPERIOR COURT OF NEW JERSEY
                                       APPELLATE DIVISION
                                       DOCKET NO. A-2163-16T1

A.F.,

        Petitioner-Appellant,

v.

DIVISION OF MEDICAL ASSISTANCE AND
HEALTH SERVICES and MORRIS COUNTY
BOARD OF SOCIAL SERVICES,

     Respondents-Respondents.
_____________________________________

              Argued April 11, 2018 – Decided July 23, 2018

              Before Judges Fuentes and Manahan.

              On appeal from the Division                of   Medical
              Assistance and Health Services.

              Lawrence S. Berger argued the cause for
              appellant (Berger & Bornstein, LLC, attorneys;
              Lawrence S. Berger, on the brief).

              Caroline Gargione, Deputy Attorney General,
              argued the cause for respondent Division of
              Medical Assistance and Health Services (Gurbir
              S. Grewal, Attorney General, attorney; Melissa
              H. Raksa, Assistant Attorney General, of
              counsel; Caroline Gargione, on the brief).

              Johnson & Johnson, attorneys for respondent
              Morris County Board of Social Services, join
          in the brief of respondent Division of Medical
          Assistance and Health Services.

PER CURIAM

     A.F. suffered an accident twenty years ago that caused severe

injuries to her cervical spine.   As a result of this accident, she

is quadriplegic.    It is undisputed that A.F. is totally disabled

and needs personal assistance to perform the personal, social, and

biological functions of daily living.    She depends upon Medicaid

benefits to provide her with the assistance she needs. On December

9, 2016, the Director of the State Department of Human Services,

Division of Medical Assistance and Health Services, issued an

order upholding the termination of A.F.'s Medicaid benefits.    A.F.

now appeals from this order arguing that the Director's decision

was arbitrary, capricious, and unreasonable, and violated the

procedures established in our State's administrative code for

redetermining a Medicaid recipient's eligibility to continue to

receive benefits.

     The Director argues the Morris County Board of Social Services

(Board) properly terminated A.F.'s Medicaid benefits because she

failed to provide the Board with necessary information to verify

her continued eligibility to receive benefits.   The Director also

argues that A.F.'s argument based on the Board's failure to follow




                                  2                         A-2163-16T1
established regulatory procedures before terminating her benefits

is "outside the scope of this appeal."

     After reviewing the record developed by the parties and

mindful of prevailing legal standards, we reverse.             The Board's

failure to follow the procedures codified in N.J.A.C. 10:71-8.1

are not outside the scope of the issues before this court.           These

irregularities contributed to the misinformation undermining the

Board's decision to deny A.F.'s redetermination application and

ultimately formed the basis for the wrongful termination of A.F.'s

Medicaid   benefits.      The   Director's    decision   was    thereafter

materially tainted by the Board's threshold error.           Finally, the

Director failed to give due deference to the Administrative Law

Judge's (ALJ) findings.    Consequently, the Director's decision and

order terminating A.F.'s Medicaid benefits must be vacated as

arbitrary, capricious, and unreasonable.

                                    I

     The   Board   is   required    to     redetermine   a     recipient's

eligibility to receive Medicaid benefits "at least once every 12

months."   N.J.A.C. 10:71-8.1(a).       On January 12, 2016, the Board's

"Human Service Specialist" sent A.F. a form-letter that stated:

"In order to determine eligibility for the MEDICAID Program(s),

we require the following verification[.]"         The Form contained a

number of categories of information with boxes next to them. Three

                                    3                              A-2163-16T1
categories were checked with an "X," requiring A.F. to provide the

following: (1) Verification of Address – Utility Bill; (2) a

completed PA-1G-NJR2 forms for September 2014, and September 2015

redetermination; and (3) copies of September 2014, and September

2015 bank statements.

     The    form-letter   directed    A.F.   to   return   "the    necessary

information IMMEDIATELY" by regular mail or email to Ms. Garcia,

and provided Garcia's email address and fax number.                The form-

letter concluded with the following admonition:

            If you do not respond [by] 01/22/2016 we will
            have to assume that you are no longer in need
            of assistance and you will not receive
            benefits.   If you have any questions, or
            cannot provide necessary information, please
            contact your caseworker at the number listed
            above. We will be happy to help you in any
            way that we can.

The record shows that A.F. responded and provided the information

requested on February 10, 2016.

     In a second identically formatted letter dated March 11,

2016, the Board placed an "X" next to the boxes requesting the

following    information:   (1)      completed    PA-1G-NJR2      forms   for

September 2014 redetermination; and (2) "Life Insurances: Banner

Acct. # _______ and Transamerica Acc.# _______."1           The Board did



1
  We have not included the actual account numbers to protect
appellant's privacy.

                                      4                              A-2163-16T1
not    provide      any    additional      information      concerning       these    two

insurance       policies     or     explain       how   they   related     to     A.F.'s

redetermination for Medicaid eligibility.                      The March 11, 2016

form-letter gave A.F. until March 22, 2016 to respond and concluded

with the same admonition.             According to A.F., she did not receive

the Board's letter until March 15, 2016.

       For reasons not disclosed in this record, A.F. did not respond

to    the    Board's      request    nor     make    any   effort   to   contact      the

caseworker by phone, mail, or email to solicit more information

on the nature of the requested information or request an extension

of the deadline to provide the relevant documents.                       In a letter

dated       April   28,    2016,    the    Board     terminated     A.F.'s      Medicaid

assistance.         The form-letter stated: "This action was taken for

the    following       reason:      CLIENT    DID    NOT   SUPPLY   LIFE     INSURANCE

INFORMATION."        The form-letter apprised A.F. that she had twenty

days to request a fair hearing and again included the telephone

number of caseworker Garcia.

       In a letter also dated April 28, 2016, A.F.'s attorney advised

caseworker Garcia that he was "not clear as to what information

is being requested."              Counsel asserted that A.F. did not have

insurance policies on her life.                   However, counsel disclosed that

he had obtained two life insurance policies with Transamerica and

Banner on his life, naming A.F. as beneficiary on both policies.

                                              5                                  A-2163-16T1
Counsel also noted that the policy or account numbers listed in

the Board's March 11, 2016 letter "did not match up with any

policies that we are aware of."      The Board did not respond to

counsel's request for clarification.

     Unable to reach a suitable resolution, A.F. requested a fair

hearing.   The matter was thereafter assigned to the Office of

Administrative Law for a hearing before an ALJ.    A.F.'s Medicaid

benefits continued pending the outcome of the hearing.         After

conducting two hearings, the ALJ issued his Initial Decision on

October 4, 2016.   In his factual findings, the ALJ noted:

           The agency conceded at the first day of the
           hearing that the Banner Life Insurance policy
           is no longer in issue. The issue was solely
           whether the term insurance policy issued by
           Transamerica was in full force and effect and
           if it had any surrender or cash value.

                . . . .

           I permitted [A.F.'s] counsel an opportunity
           to produce confirmation of the expired term
           life insurance police previously issued by
           Transamerica. When we reconvened on September
           27, 2016, counsel presented a letter from
           Transamerica dated May 13, 2009, setting forth
           that the subject policy had lapsed.

After reviewing the relevant regulatory criteria for continued

Medicaid eligibility, the ALF concluded:

           Here, the agency made one attempt to obtain
           information on a term insurance policy that
           was no longer in effect.      The petitioner
           sought clarification but that request crossed

                                 6                           A-2163-16T1
          in the mail with the adverse action notice.
          Even though it is now clear that the insurance
          policy at issue was a term policy with no cash
          or surrender value and had lapsed many years
          ago, the agency refuses to waive a few weeks
          delay on a redetermination application for a
          handicapped individual. I have seen this same
          agency [take] years of back and forth
          communications with an applicant or client
          attempting to verify information before taking
          positive or adverse action. Its actions here
          can only be characterized as ungenerous.

     The ALJ recommended that the Director uphold A.F.'s appeal

and reverse the Board's April 28, 2016 denial of redetermination.

The Director rejected the ALJ's Initial Decision.      In a Final

Agency Action dated December 9, 2016, the Director made the

following findings:

          This is not a situation in which there was an
          ongoing exchange of information between
          Petitioner and [the Board].    Petitioner was
          asked to provide verifications with regard to
          two very specific requests. If Petitioner was
          still unsure about what was needed, she could
          have contacted [the Board] for clarification
          and an extension of time to provide the
          documentation. Instead, Petitioner received
          [the Board's] notice and then waited over a
          month to contact the County.     The credible
          evidence in the record demonstrates that
          Petitioner failed to provide the needed
          information prior to the April 28, 2016 denial
          of benefits. Without this information, [the
          Board] was unable to complete its eligibility
          determination and the denial was appropriate.

          [(Emphasis added).]




                                7                          A-2163-16T1
                                    II

     On appeal from a final State agency determination, we can

intervene    only    if   the   decision   is     arbitrary,      capricious,

unreasonable, Brady v. Bd. of Rev., 152 N.J. 197, 210 (1997), or

not supported by substantial credible evidence in the record. N.J.

Soc'y for the Prev. of Cruelty to Animals v. N.J. Dep't of Agric.,

196 N.J. 366, 384-85 (2008).        We have articulated this standard

of review as follows:

            Under    the   arbitrary,    capricious,    or
            unreasonable standard, our scope of review is
            guided by three major inquiries: (l) whether
            the agency's decision conforms with relevant
            law; (2) whether the decision is supported by
            substantial credible evidence in the record;
            and (3) whether, in applying the law to the
            facts, the administrative agency clearly erred
            in reaching its conclusion.

            [Twp. Pharmacy v. Div. of Med. Assistance &
            Health Servs., 432 N.J. Super. 273, 283-84
            (App. Div. 2013).]

     The Medicaid redetermination process is carefully regulated.

For purposes of redetermination, resources are defined "as any

real or personal property which is owned by the applicant (or by

those persons whose resources are deemed available to him or her,

as described in N.J.A.C. 10:71-4.6) . . . ."                  N.J.A.C. 10:71-

4.1(b).     Moreover, "[b]oth liquid and nonliquid resources shall

be considered in the determination of eligibility, unless such

resources   are     specifically   excluded     under   the    provisions    of

                                     8                                A-2163-16T1
N.J.A.C. 10:71-4.4(b)."    Ibid.    Here, it is undisputable that the

insurance policies which prompted the cryptic March 11, 2016

request did not have any bearing on A.F.'s continued eligibility

for Medicaid benefits.

       Under these undisputed facts, denying redetermination based

on A.F.'s failure to provide information which the agency conceded

would not have affected its determination of her eligibility to

receive benefits is facially an arbitrary and capricious decision.

The Director's unexplained statement concerning "the credibility

of the evidence" also failed to give proper deference to the ALJ.

As our colleague Judge King wrote sixteen years ago:             "An agency

head reviewing an ALJ's credibility findings relating to a lay

witness may not reject or modify these findings unless the agency

head explains why the ALJ's findings are arbitrary or not supported

by the record."   S.D. v. Div. of Med. Assistance & Health Servs.,

349 N.J. Super. 480, 485 (App. Div. 2002).

       The record shows A.F. was eligible to continue to receive

Medicaid benefits at all times relevant to the Board's March 11,

2016   inquiry.    The   Board   conceded   before   the   ALJ    that   the

information it requested, even if timely received, would not have

provided a valid basis to deny A.F. Medicaid benefits.            Distilled

to its essence, the Director's decision to deny Medicaid benefits

to a severely disabled person based only on her failure to timely

                                    9                               A-2163-16T1
provide   irrelevant   information    does   not     promote   the   Medicaid

program   salutary     policy.    Under      these     circumstances,      the

Director's decision was arbitrary and capricious.

    Reversed and remanded for the Board to reinstate A.F.'s

Medicaid benefits.     We do not retain jurisdiction.




                                 10                                   A-2163-16T1
