92 Cal.App.5th 723
Cal. Ct. App.2023Background
- Bennett, an oral/maxillofacial surgeon, held three Ohio National disability policies paying monthly while totally disabled; lifetime payments depended on whether disability was due to injury (younger cutoff) or sickness (payments end at age 65).
- Bennett stopped working in 2014 and Ohio National approved total disability effective January 2, 2014, while reserving determination of cause.
- On June 8, 2015 Ohio National notified Bennett it had recharacterized his condition as a sickness (degenerative disc disease), meaning benefits would terminate on his 65th birthday policy year, September 3, 2018.
- Despite that letter, Ohio National continued monthly payments and required ongoing proof of disability; payments remained the same amount and continued through September 3, 2018 when payments stopped.
- Bennett sued August 13, 2019 for breach of contract and bad faith; the trial court granted summary judgment for Ohio National as time-barred, finding accrual on June 8, 2015. The Court of Appeal reversed, holding accrual occurred when Bennett sustained damages on September 3, 2018.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did Bennett's breach-of-contract and bad-faith claims accrue for statute-of-limitations purposes? | Accrual occurred when benefits were actually withheld and Bennett incurred damages (Sept. 3, 2018). | Accrual occurred when insurer unequivocally denied entitlement to lifetime injury-based benefits (June 8, 2015). | Claims accrued only when plaintiff sustained actual damages (when payments ceased Sept. 3, 2018); June 2015 letter did not start the limitations period because benefits continued. |
Key Cases Cited
- Neff v. New York Life Ins. Co., 30 Cal.2d 165 (Cal. 1947) (unconditional denial can start suit when denial coincides with withheld benefits)
- Erreca v. Western States Life Ins. Co., 19 Cal.2d 388 (Cal. 1942) (disability policy is a continuing contract; insurer liable only for benefits that have accrued)
- Love v. Fire Ins. Exchange, 221 Cal.App.3d 1136 (Cal. Ct. App. 1990) (no action for implied covenant where benefits were fully and promptly paid; limitations run once benefits are delayed/withheld)
- Vu v. Prudential Prop. & Cas. Ins. Co., 26 Cal.4th 1142 (Cal. 2001) (distinguishes accrual from estoppel; denial alone does not always toll limitations)
- Spellis v. Lawn, 200 Cal.App.3d 1075 (Cal. Ct. App. 1988) (statute runs when at least some actual damages are sustained)
- Thomson v. Canyon, 198 Cal.App.4th 594 (Cal. Ct. App. 2011) (cause of action accrues when complete with all elements; accrual waits for perceptible harm)
- CDF Firefighters v. Maldonado, 158 Cal.App.4th 1226 (Cal. Ct. App. 2008) (damages is an essential element of contract claims requiring accrual be tied to sustained loss)