To hold that an insured cannot bring an action until an insurer formally denies the claim for benefits would, as the district court noted, allow insurers to “prevent policy holders from suing by continuing in perpetuity to consider the claims open and the denial of benefits preliminary.” Curry, 2013 U.S. Dist. LEXIS 98791, 2013 WL 3716413, at *3 n.5. This cannot be so.
Therefore, we conclude that Curry’s cause of action for breach of contract arose–and the statute of limitations began to run–when Trustmark terminated Curry’s monthly benefit payments on June 30, 2008.n5 As a result, his suit, filed on July 27, 2011, falls outside the limitations period.n6
Curry v. Trustmark Ins. Co., 2015 U.S. App. LEXIS 1910 (4th Cir. Md. Feb. 6, 2015) (unpublished)
One of the frequently litigated issues in claims for benefit cases is the matter of when the case must be filed. The issue sounds simple enough but the case law suggests otherwise.
Take the opinion in Curry v. Trustmark for example.
Curry alleged that because his back injury rendered him disabled under his disability insurance policy, he was owed benefits under his disability policy. The carrier had required continuing proof of loss and after some period of controversy, which included a denial, resumption and another denial of benefits, the matter ultimately ended up in court.
The district court held that Trustmark “breached the contract each time [it] failed to pay benefits for a period during which [Curry] was disabled.” On this view, each failure to pay monthly benefits was a separate and independent breach so that part of Curry’s claim remained timely. (Nonetheless, on the portion of Curry’s action that fell within the limitations period, the district court ruled against Curry on the merits.)
The Fourth Circuit affirmed the judgment in an unpublished opinion. Contrary to the district court, however, the Court found the entire case time-barred.
The policy does not provide Curry an unconditional right to receive benefits in perpetuity; rather, his receipt of benefits is subject, to his providing adequate continuing proof of loss. Trustmark has maintained that it did not owe Curry additional benefits because he failed to provide this continuing proof of loss. Therefore, because the alleged breach arose from Trustmark’s denial that it owed Curry benefits at all, no installment contract exists, and the continuing breach theory is not applicable.
Note: The opinion collects some authorities which may be useful in other circuits.
10th & 11th Circuits - ”In the insurance context, both the Tenth and Eleventh Circuits have rejected the idea that disability policies are installment contracts giving rise to continuing breaches for each unpaid monthly benefit. See Lang v. Aetna Life Ins. Co., 196 F.3d 1102, 1105 (10th Cir. 1999) (borrowing Utah law to determine the statute of limitations under ERISA and holding that characterizing disability policies as installment contracts would “undermine the overriding purpose of a statute of limitation”); Dinerstein v. Paul Revere Life Ins. Co., 173 F.3d 826, 828 (11th Cir. 1999) (applying Florida law and holding that the cause of action at hand was not for a debt “payable by installments” but rather sought “to define the rights and obligations of the parties under the original insurance contract”).”
Contrary Authorities – “Some courts have reached the opposite conclusion, treating a disability insurer’s failure to pay benefits as a breach of an installment contract, and therefore concluding that the statute of limitations runs separately as to each missed payment. See, e.g., Pierce v. Met. Life Ins. Co., 307 F. Supp. 2d 325, 330 (D.N.H. 2004) (collecting cases).
However, the Ninth Circuit has distinguished between the “denial of a basic entitlement to benefits on the one hand, and the denial of an entitlement to recover a particular periodic installment on the other.” Wetzel v. Lou Ehlers Cadillac Grp. Long Term Disability Ins. Program, 222 F.3d 643, 650 (9th Cir. 2000) (applying California law). In the context of a pension plan’s refusal to pay benefits, Wetzel instructs that the right to receive periodic pension benefits is a “continuing one” that would give rise to an installment contract; however, such a duty does not exist where the right to receive the pension itself has not first been established. See id.”
Practice Pointer - Counsel should consider any cessation or notice of cessation of benefits as potentially constituting the accrual of a cause of action. Since the claimant must exhaust administrative remedies with rare exception, early analysis of the applicable law and relevant limitations period is always advisable.