In Pritchard v. Regence Bluecross Blueshield of Oregon, 2009 Or. App. LEXIS 51 (January 28, 2009), Oregon’s Court of Appeals reversed a trial court judgment that dismissed an insured’s claim as untimely. The Complaint, filed in December of 2006, alleged that the insurer, Regence Bluecross, breached its health insurance policy by unilaterally changing the terms of the policy in May of 1999 to cover the insured’s growth hormone medical treatments as a prescription drug benefit instead of as a major medical benefit. The change resulted in Regence Bluecross paying only 50% of the medication expense rather than the 80% it had been paying previously.
Regence Bluecross successfully argued to the trial court that the claim was barred by the six year statute of limitations, ORS 12.080, because any breach occurred in May of 1999 when the company first changed the amount of its payments. The insured argued on appeal that there were multiple breaches: one for every month when Regence Bluecross paid 50% rather than 80% of the medication costs. While conceding that the statute of limitations barred her claim with respect to deficient payments prior to December of 2000, the insured argued that the statute did not bar her claim with respect to deficient payments after that time. The Court of Appeals agreed with the insured. After acknowledging the general rule that “an insurance contract is breached when benefits are wrongfully denied by the insurer,” the Court ruled that “each wrongful denial of a claim for benefits constitutes a discrete act by the insurer that causes harm to the insured separate from and independent of the injuries caused by the denial of other claims, and accordingly, constitutes a discrete breach of the obligation to pay benefits under the policy.”
The effect of the Pritchard ruling extends beyond the health insurance context. Take, for example, a coverage dispute over pollution clean-up costs. If the insurer denies a claim outright, that denial date should control for purposes of calculating the statute of limitations. Because, as the Pritchard court commented, “an ongoing accrual of economic damages does not extend the statute of limitations to revive a stale claim,” it should not matter if the insured continues tendering new bills related to the same clean-up claim: the original denial date will continue to control. However, if the insurer accepts coverage but disputes the amount that should be paid, there will be a new statute of limitations date for each time the insured tenders an invoice and the insurer pays less than what the insured claims is due. According to the Pritchard court’s reasoning, it would not matter if the insurer clearly stated more than six years ago that it would only pay a certain portion of any invoices submitted. Instead, each disputed payment would trigger a new statute of limitations date.