Price v. Provident Life and Acc., Ins. Co.

• Decision Date: 26 August 1993
• Docket Number: No. 92-55417,92-55417
• Citation: 2 F.3d 986
• Parties: , 17 Employee Benefits Ca 1097 Deno PRICE, Plaintiff-Appellant, v. PROVIDENT LIFE AND ACCIDENT, INSURANCE COMPANY, aka, The Provident; The Florsheim Shoe Company, aka The Florsheim Shoe Company-South, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 986

2 F.3d 986

62 USLW 2184, 17 Employee Benefits Ca 1097

Deno PRICE, Plaintiff-Appellant, v. PROVIDENT LIFE AND ACCIDENT, INSURANCE COMPANY, aka, The Provident; The Florsheim Shoe Company, aka The Florsheim Shoe Company-South Defendants-Appellees.

No. 92-55417.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 4, 1993.

Decided Aug. 26, 1993.

Bridget Baynes, Santa Ana, CA, for plaintiff-appellant.

Laura E. Fannon, Kelly, Herlihy & Bane, San Francisco, CA, for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before: BROWNING, FARRIS and KELLY, ^* Circuit Judges.

FARRIS, Circuit Judge:

Deno Price filed suit to recover damages against Provident Life and Accident Insurance Company for its failure to pay medical expenses incurred by his decedent son under an insurance contract issued through his employer. The district court granted summary judgment in favor of Provident, holding that the statute of limitations had run on Price's claim.

We reverse.

Deno Price was provided medical benefits by Provident through his employer, Florsheim Shoes, from April 26, 1982 through May 18, 1984. The policy provided coverage to Price's offspring from birth. Price's son, Andre, was born September 9, 1982. Andre was born with biliary atresia, a serious medical condition, for which he received extensive treatment between January 1983 and his death on April 20, 1984. The hospital submitted his bills directly to Provident. Price filed a claim with Medi-Cal, the state of California's version of Medicaid, to cover any costs that exceeded Provident's policy limit of $100,000.

Provident sent Price thirty-three notices, thirty of which indicated payment of various medical bills and three of which indicated nonpayment of bills due to a "preexisting condition". In January and March 1983, Andre incurred medical bills totalling $93,000. Provident never notified him that they were denying coverage for those bills. Medi-Cal apparently paid those bills, but Price alleges that he did not know it until 1989 when Medi-Cal sought to attach funds that Price obtained in a medical malpractice action on behalf of Andre. Price reimbursed Medi-Cal for a portion of the benefits. His attorney subpoenaed records from Provident which showed that the claims had been denied.

Price filed suit against Provident in 1991, alleging breach of contract, bad faith and fraud. Provident removed the action to federal court, asserting diversity and federal question jurisdiction. The benefits plan was an ERISA plan, and therefore, controlled by federal law.

Provident asserted that Price's action was barred by both the statute of limitations under the California Code of Civil Procedure, sections 337, 338, and 339 and the contractual limitations period. The insurance contract provided that claims must be filed within three years of the date on which the proof of loss was required to be furnished. The contract required proof of loss within ninety days of the loss or as soon as reasonably possible.

The district court held that the contractual statute of limitations ran from the time that proof of loss was required, which it found was ninety days after Andre's death in 1984. Thus the court found that the limitation period had expired in 1987, four years before Price filed his claim.

DISCUSSION

I. THE CONTRACT

Price argues that under the contract, which is governed by the Employee Retirement Income Security Act, 29 U.S.C. Secs. 1001-1461 (1988), the period for bringing a claim did not begin to run until he received notice that Provident denied his claims. Provident argues that it is irrelevant whether it gave Price notice that it had denied him $93,000 in benefits, because the limitations period under the contract runs from the date that proof of loss is required to be submitted to Provident, not from the date that Price knew he had a claim. Provident argues that because the contract required proof of loss within ninety days of the loss, the statute of limitations period expired at the latest three years and ninety days after the death of Price's son. We reject the argument.

"Because the cause of action is federal, ... federal law determines the time at which the cause of action accrues," and "that time is when the plaintiff knows or has reason to know of the injury that is the basis of the action." Northern Cal. Retail Clerks Unions v. Jumbo Markets, Inc., 906 F.2d 1371, 1372 (9th Cir.1990) (citations omitted); see also White v. Jacobs Engineering Group, 896 F.2d 344, 350-51 (9th Cir.1989) (holding that inadequate notice did not trigger plan's time bar for administrative review). The injury that is the basis of Price's action is the breach of the insurance agreement. See Jumbo Markets, 906 F.2d at 1372 (defining "injury" as breach of the trust agreement). The statute of limitations was therefore not triggered until Price learned of Provident's denial of benefits. See id. at 1373; Pierce County Hotel Employees and Restaurant Employees Health Trust v. Elks Lodge, 827 F.2d 1324, 1328 (9th Cir.1987).

Provident maintains that under the contract, Price's claim had expired even if he never knew he had a claim. We find this argument remarkable. If accepted, Provident's argument would allow the insurer to simply bury a denial of coverage and wait for the statute of limitations to run. ERISA does not permit such a result. See Jumbo Markets, 906 F.2d at 1373. It mandates that the insurer give the employee notice of a denial of coverage. 29 U.S.C. Sec. 1133. The ERISA endorsement to the Provident policy recognizes Provident's duty to provide the required notice: "If an employee's claim for benefits under the Plan is denied, the Provident will provide notice to the employee in writing of denial within a reasonable time, setting forth the specific reasons for such denial. The employee may then request a review of the decision denying the claim." ¹ Provident failed to give Price the...