Opinion
Case No. 01-CV-0768 H (AJB)
April 4, 2002
On May 3, 2001, Plaintiff David J. Rodolff ("Plaintiff') filed a complaint against defendants Provident Life and Accident Insurance Company, a Tennessee corporation, Northrop Voluntary Accidental Death and Dismemberment Plan for Employees of Northrop Grumman Corporation, a group welfare benefits plan under ERISA, and Does 1 Through 10 ("Defendants"), as a result of Provident's denial of benefits to Plaintiff under a group accident insurance policy governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. On September 26, 2001, Defendants filed a Motion for Summary Judgment. On October 22, 2001, Plaintiff filed a Cross-Motion for Summary Adjudication that was limited to the issue of whether the suit is time-barred. The Court held a hearing on the matter on November 19, 2001. Thomas Monson and Susan Home appeared on behalf of Plaintiff. Joseph M. Rimac and Michael Topp appeared on behalf of Defendants.
BACKGROUND
Plaintiff was employed by Northrop Grumman Corporation ("Northrop") and received from Northrop, among other benefits, Accidental Death and Dismemberment ("ADD") coverage. Plaintiff lived with his wife Dianne Rodolff in Norco, California, until her death on May 4, 1997.
Plaintiff, through his employer, submitted a claim for accidental death benefits under the group Accidental Death and Dismemberment Policy ("Policy") issued by Provident on January 12, 1998. The plan designated Northrop as the Plan Administrator and Provident as the Claims Administrator. A.C. Newman Insurance Correspondents Inc. ("A.C. Newman") performed claims administration on behalf of Provident.
On October 10, 1998, Provident denied Plaintiffs request for benefits for two reasons. First, Provident contended that Plaintiffs spouse died from an overdose of medication that was therefore not an "accident" covered by the policy. Second, Provident stated that decedent's endocarditis, a bacterial infection of the heart valves, was potentially the actual direct cause of her cardio-respiratory failure.
Plaintiff appealed the denial on December 7, 1998. Plaintiff included in his appeal letter the report of Dr. John F. Thompson, Pharm.D., FCP, a clinical and forensic pharmacologist. Dr. Thompson's report stated that the combination of drugs in Mrs. Rodolff's system were in the lower lethal range and that the synergistic effect of the drugs caused her cardio-respiratory failure.
Provident sought a review of the medical records by Dr. Timothy C. Reynolds, M.D. Provident then issued a second denial letter on April 7, 1999. Based upon Dr. Reynold's report, Provident reversed its previous two bases for non-coverage. Provident asserted that Plaintiff's wife died from the natural progression of underlying disease factors, including hypertrophic cardiomyopathy and severe tricuspid valve dysfunction. In making. it's determination, Provident dismissed the findings in Dr. Thompson's report.
The denial letter of April 7, 1999, stated that A.C. Newman would allow Plaintiff to comment on Dr. Reynold's report or supply any additional information. Plaintiff did not submit any further documentation to A.C. Newman, however Plaintiff filed suit on May 3, 2001.
LEGAL STANDARD
A motion for summary judgment shall be granted where "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); See also British Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th Cir. 1978),cert. den., 440 U.S. 981 (1979). Any doubt as to the existence of any issue of material fact requires denial of the motion. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The opposing party cannot rest on the mere allegations or denials of his pleading, but must "go beyond the pleadings and by her own affidavits, or by the "depositions, answers to interrogatories, and admissions on file' designate `specific facts showing that there is a genuine issue for trial.'" Celotex, Corp. v. Catrett, 477 U.S. 317, 324 (1986) (citation omitted). Material facts are those which "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 255.
A genuine dispute will exist if the facts indicate "a reasonable jury could return a verdict for the nonmoving party." Id. at 254. In considering a summary judgment motion, the evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in the nonmovant's favor. Id. Credibility determinations, the weighing of evidence, and the drawing of legitimate inferences are functions of the trier of fact. Id. at 255.
DISCUSSION
Before deciding Defendants' Motion for Summary Judgment on the merits, the Court must address two threshold issues: 1) whether Plaintiff's action is timely, and 2) which standard of review applies to this ERISA action.
I. The Suit Limitations Period
Defendants argue that Plaintiff's suit is barred because Plaintiff failed to bring suit within the time period specified by a provision in the Policy. Plaintiff argues that his claim is not time barred because 1) the proof of loss date is ambiguous, 2) the proof required date was changed by Defendant's later actions, 3) the Summary Plan Description does not include the limitations language and therefore the limitations period should be unenforceable, and 3) the limitations period did not accrue until his claim was denied. The Court concludes that Plaintiffs suit is not barred under the applicable statute of limitations or the contractual limitations provision because the limitations period did not begin to run until the claim was denied.
A. Statute of Limitations
There is no specific federal statute of limitations governing claims for benefits under an ERISA plan. Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Insur. Program, 222 F.3d 643 (9th Cir. 2000). In such cases, courts look to the most analogous state statute of limitations. Id.; see also, Flanagan v. Inland Empire Elec. Workers Pension Plan, 3 F.3d 1246, 1252 (9th Cir. 1993). Because Rodolff's claim for benefits arises in California, California law must provide the analogous statute of limitations. In the en banc Wetzel decision, the Ninth Circuit determined that California's statute of limitations for suits on written contracts, California Code of Civil Procedure Section 337, provides the applicable statute of limitations to actions brought under ERISA. Wetzel, 222 F.3d at 648.
However, accrual date of a federal action under ERISA is determined by the application of a federal rule of accrual. Northern Cal. Retail Clerks Unions v. Jumbo Markets, Inc., 906 F.2d 1371, 1372 (9th Cir. 1990) ("Because the cause of action is federal, . . . federal law determines the time at which the cause of action accrues . . .") (citations omitted). Under federal law, an ERISA cause of action accrues either at the time benefits are actually denied or when the insured has reason to know that the claim has been denied. Wetzel, 222 F.3d at 649.
Plaintiffs was informed of the original denial of his claim in a letter dated October 10, 1998. Therefore, October 10, 1998, the date of denial, is the accrual date for the statute of limitations under federal law. Plaintiff filed suit only two and a half years after the accrual date. Because Plaintiffs claims were brought within the four year statute of limitations period, they are not barred under the statute of limitations.
B. Contractual Provision
However, the Court must also look to the provisions of the policy to determine whether Plaintiffs claims are time-barred. See Wetzel, 222 F.3d at 650 (determining that the viability of a suit is dependent not only upon the statute of limitations but also upon the terms of the policy). As required by California Insurance Code Section 10350.11 (2001), the policy at issue includes a provision requiring that all legal actions be brought within three years of the due date for proof of loss. Proof of loss is due 90 days after the loss. Cal. Ins. Code § 10350.7 (2001). Reading these requirements together, Defendants argue that Plaintiffs claim expired three years and ninety days after his wife's death.
The Court disagrees. Under Defendant's theory, Plaintiff's claims could have expired even before he knew that his claims existed. Insureds do not know whether they have an action to recover benefits due unless and until those benefits have been denied. Moreover, if accepted, Defendants' argument would allow an insurer to postpone a denial of coverage until the suit limitations period had expired. see Price v. Provident Life and Accident Ins. Co., 2 F.3d 986, 988 (9th Cir. 1993). Such a result would contradict the goals of ERISA. See id. Moreover, if insurers are able to delay denying coverage until the expiration of the suit limitations period, insureds would be encouraged to bring declaratory actions prior to the exhaustion of administrative remedies. Since insureds must exhaust their administrative remedies prior to bringing an ERISA action, see, e.g., Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980), a result that encourages the filing of pre-exhausted claims does not coincide with federal ERISA law and could negate the use of the administrative claims process. Either of these results, the barring of possibly meritorious claims or the filing of numerous premature actions, is objectionable.
Additionally, Defendant's argument is not supported by California law regarding statutorily required suit limitations periods. A contractual limitations period is equitably tolled "from the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies the claim in writing." Prudential-LMI Commercial Ins. v. Sup.Ct., 51 Cal.3d 674, 678 (1990). Although Prudential-LMI was decided in the first-party property insurance context, the rationale provided by the court serves equally well in this first-party insurance suit: to permit the limitations period to run while the insured is pursuing its rights in the claims process, as required by the policy, would be unconscionable. Id. at 690.
Finally, since Defendants have not shown that they have been prejudiced by the delay in bringing suit, the Court should hesitate to bar Plaintiffs claims. See UNUM Life Ins Co. of America v. Ward, 119 S.Ct. 1380 (1999) (determining that California's "notice-prejudice rule" is not preempted by ERISA and that such a rule complements ERISA by allowing a longer period to file for benefits than mandated). Had Plaintiff never filed a claim for accidental death benefits originally, yet tried to file suit four years later to assert his rights to the benefits, Defendants may have been prejudiced by the delay. Such facts are not present in this case. Defendants have been aware of Plaintiffs claim for accidental death benefits since Plaintiff filed a claim for benefits in January of 1998. Nothing about these facts suggests that the two year delay between the final denial of Plaintiffs claim and Plaintiffs initiation of this suit has hindered Defendants' ability to defend this action.
Based on the above, the accrual date for the suit limitations period is equitably tolled to the date of denial, which is October 10, 1998. See Prudential-LMI, 51 Cal.3d at 678. Plaintiff filed this action only two years and six months after that date. Accordingly, Plaintiffs action is not time-barred under the three year suit limitations period contained in the Policy.
II. Standard of Review for ERISA Actions
As another threshold matter, the Court must answer the question of which standard applies to a review of the denial of Plaintiffs claims. When an ERISA plan vests its administrator with discretion to determine eligibility for benefits and to construe the terms of the plan, the district court ordinarily reviews the administrator's determination for abuse of discretion. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The degree of judicial deference associated with this standard of review may, however, be affected by factors such as conflict of interest. See id.
The facts of this case raise interesting issues about the appropriate level of review. The plan's language confers discretion upon "[t]he party hearing the appeal" of the benefits denial. PROV-00020-00021. The plan provides that such a party "has the discretionary authority to interpret that Plan and the Policy and to determine eligibility for benefits." Id. Although this language appears to fulfill the requirements of Firestone in granting discretionary authority, the Court notes that no other decision has directly answered the question of whether a plan that vests discretionary power in an unnamed party fulfills the more stringent requirements set forth in Kearney v. Standard Ins. Co., 175 F.3d 1084 (9th Cir. 1999), cert. denied 528 U.S. 964 (1999). Kearney clarifiedFirestone by requiring courts to review claims decisions de novo unless the plan language unambiguously grants discretion to the reviewing party. Id. at 1088. The Court concludes that although the plan grants discretion to an unnamed party, the plan is nevertheless unambiguous in its grant of discretionary authority to whomever administers the claims. Therefore the Court should apply an abuse of discretion standard to reviewing the denial of this claim.
However, as Firestone suggested, the degree of deference afforded a claim decision may also be affected by factors such as a conflict of interest on the part of the reviewer. In this case, A.C. Newman denied the claim initially and also reviewed Plaintiffs appeal of the October 10, 1998 denial. Because A.C. Newman is an independent claims administrator, no apparent conflict of interest exists in this case, and the "serious conflict" test outlined in Atwood v. Newmont Gold Co., 45 F.3d 1317 (9th Cir. 1995), does not apply. Consequently, the. Court will review the denial of ERISA benefits under an abuse of discretion standard.
IT IS SO ORDERED.