Withrow v. Bache Halsey Stuart Shield

A person does not have reason to know that their claim has been denied when the provider fails to tell the client that accepting further payments will bar future action, continues to encourage the client to provide information to aid an internal review of the claim, and never directly communicates that the provider will deny future findings.

Withrow was an employee of Bache Halsey. Part of her compensation included a Reliance Standard Life Insurance Company (Reliance) policy. Withrow became permanently disabled in 1986 with a degenerative disease and began receiving compensation at $3,950 per month. Four years later, Withrow became concerned that she was not receiving the correct compensation and made numerous attempts to contact Reliance. Reliance eventually responded by denying any error. In January of 2002, Withrow again approached Reliance and they again denied error and affirmed Withrow’s appeal. Withrow filed a claim in district court where it was dismissed as untimely. The Ninth Circuit reviewed de novo to determine whether or not Withrow had filed a timely action for violation of Employee Retirement Income Security Act by reviewing whether the statute of limitations implied by both law and contract applied to the case at bar. “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.” The Court determined that denial of benefits did not actually accrue until the appeal process ended. Turning to the second prong, the Court considered at what point Withrow reasonably should have determined that her claim was denied. Although Reliance argued that the 1990 denial was sufficient, the Court found that there was not enough evidence to find that the communications between Withrow and Reliance were sufficient to find “clear and continuing repudiation” of her claim. The Ninth Circuit reasoned that Reliance never told Withrow that by continuing to accept the monthly payments would bar any future claims. The Court also pointed to the fact that Reliance continued to work with Withrow in 2002 to review her claim. The Court found no applicable contractual limitation applied. REVERSED