NOVEMBER 2013 BAD FAITH CASES: BAD FAITH CLAIM TIME BARRED BY TWO YEAR STATUTE OF LIMITATIONS DESPITE POLICY STATUTE OF LIMITATIONS OF THREE YEARS; TIME OF DENIAL IS TIME WHEN STATUTE BEGINS (Western District)
Plaintiff brought suit alleging breach of contract and bad faith for two separate denials in 2005 and 2010 of his disability claims. Plaintiff, a surgical opthamologist, purchased three disability policies with “Own Occupation” riders from the insurer and its subsidiary. Two years after the purchase of the policies, plaintiff discovered he was suffering from a cardiac disease, the progression of which would be exacerbated if he failed to reduce the level of stress in his life. Plaintiff and his cardiologist determined eliminating eye surgery from his practice would reduce his stress levels. After making this determination and discontinuing his surgical practice, plaintiff made a claim in 2004 under each of the disability policies.
In 2005, all three claims were denied, as plaintiff was in excellent health aside from his cardiac condition, which remained asymptomatic, and still capable of performing surgery. After suffering a cardiac incident in 2010, plaintiff elected to “submit additional information” regarding his 2004 claim and sought retroactive disability payments for the time period between the initial claim submission in 2004 and the present date. The insurer refused to open the 2004 claim, and treated the information regarding the 2010 bypass as a new claim. The 2010 claim was also denied, except for the time during which plaintiff was recovering from the bypass, because he ultimately returned to work and continued to perform at the same level he did before the cardiac event. Following the 2010 denial, plaintiff brought suit against the insurer.
The court dismissed plaintiff’s bad faith count based on the insurer’s denial of his 2004 claims as time barred by the two year statute of limitations. In Pennsylvania, a bad faith claim accrues at the time of the initial denial of an insured’s claim. Plaintiff argued the language of the denial letter was ambiguous, and therefore did not trigger the statute, however, the court found this argument without merit because a clear or final denial is not necessary to the trigger the statute. The insurer’s denial of the claim in 2005 was sufficient to trigger the statute, regardless of whether the denial was final, or whether plaintiff understood the status of his claim.
The court also dismissed plaintiff’s bad faith count based on the insurer’s denial of his 2010 claim as barred by the statute of limitations. While plaintiff argued the three year litigation statute of limitations in the policy trumped the two year statute on the bad faith claim, again, the court also found this argument to be meritless. Like the 2004 claim, the limitation began to run at the time of the denial; since the insurer denied the claim on November 18, 2010, and plaintiff did not file suit until January 2, 2013, the claim was barred.
Date of Decision: August 22, 2013
Sigal v. Gen. Am. Life Ins. Co., Civil Action No. 2:13-cv-00169, 2013 U.S. Dist. LEXIS 119652 (W.D. Pa. August 22, 2013) (Eddy, U.S.M.J.)
