Weiss v. Blue Cross/Blue Shield of Delaware

• Decision Date: 26 March 1997
• Docket Number: BAP No. MW 96-057.
• Citation: 206 BR 622
• Parties: Steven WEISS, Chapter 7 Trustee, Appellant, v. BLUE CROSS/BLUE SHIELD OF DELAWARE, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

206 B.R. 622 (1997)

Steven WEISS, Chapter 7 Trustee, Appellant, v. BLUE CROSS/BLUE SHIELD OF DELAWARE, Appellee.

BAP No. MW 96-057.

United States Bankruptcy Appellate Panel, First Circuit.

March 26, 1997.

Mark H. Bluver, and Susan E. Zak, Shatz, Schwartz and Fentin, P.C., Springfield, MA, for Appellant.

Joseph H. Reinhardt, Hendel, Collins & Newton, P.C., Springfield, MA, for Appellee.

Before VOTOLATO, LAMOUTTE and HAINES, Bankruptcy Judges.

MEMORANDUM OF DECISION

HAINES, Bankruptcy Judge.

Steven Weiss, trustee of chapter 7 debtor Head Injury Recovery Center, Inc. (HIRC), appeals from the bankruptcy court's entry of summary judgment dismissing his claims against Blue Cross/Blue Shield of Delaware (Blue Cross). The bankruptcy court concluded that the claims were barred by the limitation provisions contained in the insurance policies under which Weiss sought payment. For the reasons set forth below, we affirm.

Jurisdiction

The bankruptcy court's entry of summary judgment is a final order from which appeal to the Bankruptcy Appellate Panel lies under 28 U.S.C. § 158(a), (c)(1).¹

Standard of Review

We review de novo the bankruptcy court's legal conclusion to grant summary judgment on the defendant's motion. FDIC v. Ins. Co. of N. Am., 105 F.3d 778, 779 (1st Cir.1997); see Concrete Equip. Co. v. Fox (In re Vigil Bros. Constr., Inc.), 193 B.R. 513, 516 (9th Cir. BAP 1996) (Bankruptcy Appellate Panel reviews trial court's legal conclusion de novo); Citibank (South Dakota) N.A. v. Lee (In re Lee), 186 B.R. 695, 697 (9th Cir. BAP 1995) (same).

The summary judgment standard is well-rehearsed and familiar. "Summary judgment is appropriate when `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.\'" Barbour v. Dynamics Research Corp., 63 F.3d 32, 36 (1st Cir.1995) (quoting Fed.R.Civ.P. 56(c)), cert. denied, ___ U.S. ___, 116 S.Ct. 914, 133 L.Ed.2d 845 (1996). "In operation, summary judgment\'s role is to pierce the boilerplate of the pleadings and assay the parties\' proof in order to determine whether trial is actually required." Wynne v. Tufts Univ. School of Medicine, 976 F.2d 791, 794 (1st Cir.1992), cert. denied, 507 U.S. 1030, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993). "To succeed, the moving party must show that there is an absence of evidence to support the nonmoving party\'s position." Rogers v. Fair, 902 F.2d 140, 143 (1st Cir.1990); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986).

"Once the moving party has properly supported its motion for summary judgment, the burden shifts to the non-moving party, who `may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing there is a genuine issue for trial.\'" Barbour, 63 F.3d at 37 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986)). "There must be `sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable or is not significantly probative, summary judgment may be granted.\'" Rogers, 902 F.2d at 143 (quoting Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511) (citations and footnote in Anderson omitted). We "view the facts in the light most favorable to the non-moving party, drawing all reasonable inferences in that party\'s favor." Barbour, 63 F.3d at 36.

Borschow Hosp. and Medical Supplies, Inc. v. Cesar Castillo Inc., 96 F.3d 10, 14 (1st Cir.1996). In summary judgment parlance, a dispute is "genuine" if

"`the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party.\'" Rivera-Muriente v. Agosto-Alicea, 959 F.2d 349, 352 (1st Cir.1992) (quoting United States v. One Parcel of Real Property, Etc., 960 F.2d 200, 204 (1st Cir.1992)). "A fact is material if it `carries with it the potential to affect the outcome of the suit under the applicable law.\'" One National Bank v. Antonellis, 80 F.3d 606, 608 (1st Cir.1996) (quoting Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir. 1993)). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). Thus, the substantive law defines which facts are material. Id. at 248, 106 S.Ct. at 2510.

Sanchez v. Alvarado, 101 F.3d 223, 227 (1st Cir.1996).

Background

Facts

Viewing the summary judgment record in a light most favorable to the appellant, the pertinent facts are as follow:

HIRC operated as a nursing facility in Newark, Delaware, offering rehabilitative services to people with head injuries. On or about May 7, 1992, HIRC admitted Jeff Twilley (Twilley), a Blue Cross/Blue Shield insured, for rehabilitative services following brain surgery.² He assigned his rights to policy benefits to HIRC upon admission. HIRC discharged Twilley on April 30, 1993.

The Blue Cross policy included the following clause limiting the time within which actions to recover policy benefits could be instituted: "No legal action may be brought against us for failure to provide benefits unless brought within two years from the date the service in question was rendered."

Blue Cross paid $75,600.00 in benefits to HIRC on May 21, 1993. That payment compensated HIRC for services provided to Twilley from May 7, 1992, through October 9, 1992. Blue Cross declined to pay more, asserting that services HIRC provided Twilley after October 9, 1992, were not medically necessary and, therefore, not compensable.

Procedural History

On February 8, 1993, HIRC filed for chapter 11 protection. The case was converted to chapter 7 on August 18, 1994. Weiss was appointed trustee immediately thereafter.

On April 30, 1996, Weiss filed a four-count adversary complaint against Blue Cross/Blue Shield, seeking $192,046.05, plus interest, as payment for medical services provided Twilley from October 9, 1992, through April 30, 1993.³

Blue Cross moved for summary judgment, arguing that Twilley's assignment of insurance contract rights to HIRC was invalid and that, in any event, Weiss's legal action was time-barred by the policy's two-year limitation of actions clause. Blue Cross subsequently abandoned reliance on the anti-assignability clause and sought dismissal solely by its limitations argument. The bankruptcy court dismissed the action as time-barred.

Discussion

On appeal Weiss argues that Delaware law prohibits Blue Cross from shortening the statutory three-year limitations period within which to bring breach of contract actions,⁴ that if such a contractual limitation provision is permissible it cannot operate without specific notice to the insured during the pendency of a claim and, alternatively, that by entering into several tolling agreements during negotiations, Blue Cross is equitably estopped from relying upon the contractual limitations period in defense of his claims. He concedes that the limitations clause is unambiguous and that if enforceable (absent estoppel) it operates to bar the estate's claims.⁵

1. Validity of the Contractual Limitation Clause.

Delaware statute sets a three-year limitations period for contract actions, Del. Code Ann. tit. 10, § 8106, including actions on insurance contracts. Allstate Ins. Co. v. Spinelli, 443 A.2d 1286, 1287 (Del.1982) (action against automobile insurance carrier sounds in contract, thus timeliness of suit governed by § 8106). Weiss asserts that Delaware law does not permit Blue Cross to shorten the limitations period to two years through a provision in its health insurance policies. The argument overlooks Delaware's longstanding recognition of the general principle that contracting parties, including parties to insurance contracts, may agree to reduce the statutory limitations period that would otherwise apply. Closser v. Penn Mut. Fire Ins. Co., 457 A.2d 1081, 1083 (Del. 1983) ("settled Delaware law . . . that a one year limitation on suit in a casualty insurance contract is reasonable and binding on an insured"); Betty Brooks, Inc. v. Ins. Placement Facility of Delaware, 456 A.2d 1226, 1228 (Del.1983) (one year limitation in casualty insurance policy valid); Wesselman v. Travelers Indem. Co., 345 A.2d 423, 424 (Del.1975) ("In the absence of an express statutory prohibition, the provision in the instant insurance policy, limiting the time in which suit may be brought thereon to a period less than that set by the Statute of Limitations, is not deemed to be in conflict with the Statute and is controlling."); Ottendorfer v. Aetna Ins. Co., 231 A.2d 263 (Del. 1967); see generally George J. Couch et al., Couch on Insurance § 75:71 (2d rev. ed. 1983) (in the absence of legislative prohibition, insurance policy terms reducing claims period from statutory periods otherwise applicable are valid).

Weiss urges us to consider Del.Code Ann. tit. 18, § 3914, which states:

an insurer shall be required during the pendency of any claim received pursuant to a casualty insurance policy to give prompt and timely written notice to claimant informing him of the applicable state statute of limitations regarding action for his damages.

He asserts that the absence of any similar provision in the Delaware statutes relating to health insurance policies militates in favor of our finding that Delaware's legislature did not consider a shortened limitations period in health insurance contracts good public policy. Alternatively, he argues that if a claims limitation clause in a health insurance policy is permissible, the carrier must, by analogy to § 3914, provide specific notice of the limitations period during the pendency of the claim.

Neither argument carries the day. First, § 3914 does nothing to upset settled Delaware law permitting contracting parties to set claims limitations periods. It does...