Court: Court of Appeals for the Ninth Circuit; May 20, 1997; Federal Appellate Court
Gregery D. Williams appealed the summary judgment granted to UNUM Insurance Company, which dismissed his ERISA claim for disability benefits based on a statute of limitations defense. The district court found that Williams' claim was barred, but the appellate court reversed this decision and remanded the case. Williams, employed by Storz Surgical Instruments since May 1987, had long-term disability insurance with UNUM. He ceased working on June 16, 1988, due to a back injury from an automobile accident on July 31, 1987, and underwent spinal fusion surgery on September 22, 1988, returning to work on February 1, 1989.
Less than two months later, Williams was involved in a second accident, resulting in complications from his previous injury and a declaration of total and permanent disability by his physician, Dr. Goldthwaite. Williams initially submitted a disability claim to UNUM on January 6, 1989, for the first accident and subsequently notified UNUM of the second accident on May 24, 1989. During this call, UNUM did not inform him of the need for a new claim. Instead, they requested medical reports regarding his disability.
UNUM sent a letter on June 21, 1989, indicating that if they did not receive further information within 30 days, they would consider his request for benefits withdrawn. In July 1989, Williams’ physicians sent letters to UNUM detailing his medical condition but did not address specific inquiries about the second accident's disability period. There was confusion between UNUM and Williams regarding whether the second disability was a new or recurrent claim. Williams did not file a new claim form, and UNUM did not request one, focusing instead on medical proof of disability.
On August 1, 1989, UNUM informed Williams that his request for long-term disability benefits had been approved, and they were processing benefits for the earlier period of disability. They also requested a medical statement if Williams' physician indicated he could not return to work after February 20, 1989.
Williams believed that his application for long-term disability benefits for his second disability period was approved based on a letter from UNUM dated August 1, 1989, which he interpreted as confirming his physicians' prior documentation. However, UNUM's internal records indicated that the letter pertained only to his first disability claim, and they closed his file on September 27, 1989, without notifying him of a denial for the second claim. For four years, Williams did not follow up with UNUM. In November 1989, he submitted a second claim form to his employer and began receiving disability payments, which were actually from Aetna, not UNUM. Upon learning that UNUM should be providing benefits due to his permanent disability, Williams submitted a claim to UNUM for the second disability on June 15, 1993, but it was denied as untimely, as claims must be filed within one year of recurrence. After an internal appeal was also denied, Williams filed a lawsuit against UNUM under ERISA on June 17, 1994. The district court granted summary judgment to UNUM, ruling that Williams’ claim was barred by the three-year statute of limitations, concluding that the claim accrued no later than September 1, 1989. The court also ruled that equitable tolling did not apply due to a lack of due diligence. The interpretation of ERISA and related legal questions are reviewed de novo, with federal courts applying the most analogous state statute of limitations, which in California is three years for disability policy actions.
Federal law governs the accrual of federal causes of action, while state law dictates the statute of limitations. A cause of action typically accrues when the plaintiff is aware or should be aware of their injury. However, under California Insurance Code Section 10350.11, the point of accrual for an ERISA disability claim is defined as when written proof of loss is required. In a previous case, Nikaido, it was determined that if an insured fails to provide adequate proof of loss, the claim accrues when such proof is due.
In this situation, if Williams provided sufficient proof of disability, UNUM was required to notify him of any denial. The general federal rule states that an ERISA claim accrues either when benefits are denied or when the insured has reason to know of the denial. Conversely, if Williams did not provide adequate proof, his claim would accrue based on the timeframe set by Nikaido.
The district court did not determine if Williams submitted adequate proof of disability, which remains a factual question. If Williams did provide adequate proof in July 1989, his action would be timely if filed within three years of knowing about the denial. The court granted summary judgment to UNUM, concluding Williams knew of the denial more than three years before filing, but summary judgment is only valid if the evidence overwhelmingly supports that conclusion without material disputes.
The court must view the evidence favorably to the nonmoving party, and conflicting facts remain regarding whether Williams filed an adequate claim and when he became aware of the denial. Williams asserts that he believed his claim was approved in August 1989 and acted diligently upon discovering the denial. The district court suggested no reasonable jury could find otherwise, but the communications from UNUM to Williams were ambiguous, complicating the determination of his awareness regarding the claim.
Williams received a letter from UNUM confirming the approval of his long-term disability benefits and subsequently received regular disability benefit checks from a different provider, which he mistakenly believed were from UNUM. The reasonableness of this assumption is a factual question for the district court to resolve, particularly regarding when Williams should have known his claim was denied.
In addition, if Williams did not provide sufficient proof of disability for a subsequent claim, his legal action would start accruing from the date he was required to submit such proof. UNUM's last request for proof was on August 1, 1989, leading to their argument that the statute of limitations commenced by September 1, 1989. However, this argument may conflict with California Insurance Code section 10350.7, which mandates a 90-day period for submitting proof of loss after the insurance liability terminates.
California law, as it relates to insurance, is not preempted by ERISA, allowing state regulations to apply. Since Williams raised his compliance claim with California law for the first time on appeal, the district court must assess whether UNUM's policy meets state requirements. If it does not, California's proof of loss provisions will be incorporated into the policy. The rolling accrual rule from Nikaido applies, where proof of loss must be provided monthly, thus restarting the statute of limitations each month a claim is due.
A separate cause of action arises for each month a claimant is disabled and the company fails to make payment. Williams was required to submit proof of loss for his continuing disability within 90 days after each liability period ended under the UNUM policy. Consequently, a new cause of action accrues after each period. Even if Williams did not provide sufficient proof at the start of his second disability period, he can still assert claims for the three years preceding his lawsuit, as they are not barred by the statute of limitations. The district court incorrectly granted summary judgment to UNUM, as there are unresolved factual issues regarding whether Williams submitted adequate proof of disability and when he was aware of his claim's denial. If the UNUM policy violates California Insurance law, Williams' claims from the three years before this action are also timely. UNUM paid benefits for a specific disability period but argued that Williams' claim is time-barred, regardless of his notice of denial. However, previous rulings indicate that insurers must notify employees of coverage denials, preventing them from obscuring such denials until the statute of limitations expires. The decision is reversed and remanded for further proceedings.
