In Vishva Dev, M.D., Inc. v. Blue Shield of Cal. (No. B270094, filed 8/31/16), a California appeals court confirmed that the unequivocal denial of a claim, in whole or in part, commences the running of the statute of limitations for suit on the claim, notwithstanding the insurer’s offer to reconsider on new or additional evidence.
In Vishva Dev, the plaintiff was a physician who had provided treatment to several patients insured by Blue Shield. For one patient, Dev’s corporation billed $24,610 for services and Blue Shield responded that the allowed amount was $1,775.90, which was applied to the patient’s deductible with no remainder left to be paid to Dev. Dev appealed and Blue Shield sent a form letter acknowledging receipt of the appeal, and stating “[w]e will research your appeal and issue a written determination, including the pertinent facts and an explanation of the determination, within 45 working days of the date the appeal was received.” Blue Shield then denied the appeal on the ground that it had been submitted after the 365-day filing limit set forth in Blue Shield’s appeal guidelines. Dev submitted a second appeal and Blue Shield sent Dev an amended Explanation of Benefits (EOB) letter approving payment of $4,892.79.
For another patient Blue Shield sent Dev a written EOB in response to a $44,000 bill explaining that the allowed amount was $5,207 of which $1,648.78 would be applied to the deductible, the patient’s co-pay was $1,245.38, and Blue Shield would only pay the remaining amount, $2,312.04. Dev submitted an appeal , which was denied on the ground that the appropriate amount had been paid. Dev filed a second appeal that was denied as untimely and then a third appeal, but Blue Shield upheld the denial.
For a third patient, Dev billed $18,000 and Blue Shield sent an EOB which reflected that its allowed amount was $2,034, and that the entire amount would be applied to the patient’s deductible with no remainder left to pay Dev. He appealed twice, but those were denied.
Dev sued alleging a claim for quantum meruit, a common count or common law cause of action available to a plaintiff who rendered services to another with some expectation or understanding that he or she would be compensated for doing so. It is based on the quasi-contract principle that the law will imply a promise to pay for services performed under circumstances indicating that the services were not performed gratuitously. (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 458.)
The statute of limitations on a claim for quantum meruit is two years (Code Civ. Proc., § 339), and in each case the original EOB explaining the benefits allowed had been issued more than two years prior to Dev’s suit. Consequently, Blue Shield argued that the two-year statute began to run when it formally denied Dev’s claims in writing in the original EOBs.
In response, Dev argued that the limitations period began to run at the end of the insurers’ optional appeals process, but the appeals court disagreed, finding the lawsuit time-barred. Citing Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, the Dev court confirmed that the statute of limitations on suit against an insurer begins to run once the insurer has issued an unequivocal denial of payment in writing. The court said that the written EOB notices unequivocally stated that Blue Shield would either not pay or pay only a portion of Dev’s bills, and that “The EOBs all put Dev on notice that its claim for payments were being denied in part or in whole, which was the essential fact of Dev’s quantum meruit claims. Dev filed this lawsuit … more than two years after receiving these notices. Its claims are, therefore, time-barred.”
The court noted that Dev had appealed each of those decisions, but Blue Shield had continued to refuse to pay Dev’s bills fully. Dev claimed that the subsequent correspondence created an “expectation for compensation,” which undercut the denials contained in the EOBs, or rendered them equivocal. But the court rejected the argument that the claims did not accrue until the conclusion of communications regarding the appeals, and also rejected the argument that Blue Shield was estopped from raising the statute of limitations defense because Dev had relied on the appeals process to resolve any payment issues.
The court said that “Although there is no case regarding the effects of an internal, voluntary appeal process on the statute of limitations in the context of an insurer’s denial of a medical provider’s claims for payment, there are several cases in the home insurance context holding that an insurer’s willingness to consider additional evidence, or provide a voluntary appeal process, after it had given unequivocal notice that a claim was rejected did not toll the limitations period.” (Citing Singh v. Allstate Ins. Co. (1998) 63 Cal.App.4th 135 and Migliore v. Mid-Century Ins. Co. (2002) 97 Cal.App.4th 592.) The Dev court went on saying:
“Importantly, the language of the denial letter in Singh, which the plaintiffs claimed made it equivocal, is precisely the language used in Blue Shield’s EOBs, which Dev claims created an ‘expectation for compensation.’ Specifically, the Singh court noted that ‘[the insurer’s] letter told plaintiffs their claim was denied, but stated that, if plaintiffs had any further information they would like [the insurer] to consider, to bring the information to [its] attention.’  Blue Shield’s … EOBs stated that ‘[i]f you have questions about your claim or your claim has been denied and you believe that additional information will affect the processing of your claim, you should contact [the] Customer Service Department…. If you are not satisfied with [its] response to your inquiry, you may initiate an appeal in writing.’ In Singh, the court concluded that ‘[t]he extension of a courtesy, to look at anything else that plaintiffs might have to offer, did not render the denial equivocal.’  That conclusion applies with equal force here where the plaintiff was a medical provider rather than the insured. The fact that Blue Shield … provided an optional appeals process does not change the finality of their denial of Dev’s claims. Just as with the denial in Singh, the EOBs ‘could hardly be … more unequivocal denial[s]. There was nothing tentative or conditional about [them].’”
“Moreover, under Dev’s theory, any party engaging in an insurance company’s optional appeal process could continuously toll the statute of limitations, thereby rendering it a ity…. As the Ninth Circuit explained: ‘Holding that [the insurer] may inadvertently extend the limitations period by answering claimants’ inquiries or by considering new information ‘would contravene a strong public policy to encourage an insurance company to reconsider its original denial when confronted with potentially new facts. If insurance companies were saddled with the situation that whenever [they] reconsidered an earlier decision it would inaugurate a new limitations period, companies would be reluctant to offer policy holders the luxury of a second evaluation.’” (Citing Wagner v. Director, Federal Emergency Mgmt. Agency (9th Cir. 1988) 847 F.2d 515, 521.)
The Dev court summed up stating that “Dev had knowledge of the facts giving rise to its claim of quantum meruit when it received the EOBs, with their unequivocal denial of its bills, more than two years prior to filing this lawsuit. Dev engaged in a voluntary appeals process with Blue Shield … which did not change or undercut the EOBs’ denials of Dev’s claims. Accordingly, Dev’s quantum meruit claims are time-barred, and the trial court correctly entered judgment on that basis.”
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