MARK BENNETT v. OHIO NATIONAL LIFE ASSURANCE CORPORATION
A166049
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE
Filed 6/20/23
CERTIFIED FOR PUBLICATION; Marin County Super. Ct. No. CIV1903075
On August 13, 2019, Bennett sued for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court granted summary judgment to Ohio National after concluding the claims were barred by the statutes of limitation — four years for breach of contract and two years for breach of the implied covenant of good faith and fair dealing. Both causes
On appeal, Bennett argues the trial court erred because his causes of action did not accrue until all elements — including actual damages — were complete. Bennett contends he suffered no harm as of June 8, 2015, because Ohio National continued to pay disability benefits. Only on September 3, 2018 — when Ohio National began withholding benefits, and Bennett thereby incurred damages — did his causes of action accrue. We agree and reverse.
BACKGROUND
Bennett, an oral and maxillofacial surgeon, purchased three disability income insurance policies from Ohio National in 1984, 1991, and 1995. The policies provided coverage if he became totally disabled or had a total disability — the inability “to do the substantial and material tasks” of his job due to injury or sickness. Injury is defined as an “[a]ccidental injury sustained while this policy is in force,” and sickness is defined as a “[s]ickness diagnosed or treated while this policy is in force.” Income, defined as the monthly benefit amount to be paid under the contract, “is paid at the end of each month of Disability for which it is due.”
The policies each articulated a maximum benefit period, the “longest period of time that Income will be paid for one Disability or for a combined period of Residual and Total Disability from the same or related cause.” Bennett would receive lifetime benefit payments if the total disability either “(a) starts before Age 55 due to Sickness; or (b) starts before Age 65 due to Injury.” Total disability due to sickness starting on or after age 55, however, would result in payments ending at age 65.
In 2006, when Bennett was 53 years old, he was thrown from a horse. He sustained injuries to his left shoulder and collarbone. He underwent surgery to repair a tear in his shoulder but had ongoing numbness and tingling in his left hand. Initially, he was able to continue working by changing certain operating techniques and using different tools. Despite accommodations, medication, and physical therapy, he later developed pain in his left hand. By 2012, he had chronic pain and later reduced the number of surgeries he performed and decreased his patient load. He stopped working entirely in 2014.
Bennett filed a claim with Ohio National reporting he was totally disabled; that is, he was unable to work as an oral surgeon because of a physical condition he developed from his 2006 accident. In a letter dated April 2014, Ohio National approved the claim for total disability, effective January 2, 2014, and provided him benefits beginning on that date. The letter noted Ohio National would continue to evaluate the cause of the claimed disabling condition to determine whether it was due to sickness or injury.
On June 8, 2015, Ohio National sent Bennett another letter. This one stated it had determined his condition was due to sickness — a degenerative disc disease, causing compression of nerve roots and thus tingling and numbness in the left hand — rather than injury. Because his total disability started after the age of 55, Bennett‘s benefit would not be paid for life, but would instead terminate on the first day of the policy year upon reaching age 65 — September 3, 2018.
On several occasions between June 2015 and September 2018, Ohio National requested Bennett complete a “Continuance of Disability Statement,” documenting his current work status, and provide a physician‘s
In August 2019, Bennett sued for breach of contract and breach of the implied covenant of good faith and fair dealing. Ohio National moved for summary judgment arguing the statutes of limitation barred the claims. In opposition, Bennett argued the time to sue did not begin to run until September 3, 2018, when he suffered actual damages in the form of losing replacement income and assets essential to his health and welfare.
The trial court granted summary judgment. Relying on Neff v. New York Life Insurance Co. (1947) 30 Cal.2d 165 (Neff), the court explained a “suit may be commenced upon an insured‘s claim after the insurance company‘s unconditional denial of liability thereon, when all facts essential to the statement of a cause of action are within the knowledge of the aggrieved party.” (Id. at p. 175.) The court also noted an unreported federal decision, Flynn v. Paul Revere Ins. Group (9th Cir. 2001) 2 Fed.Appx. 885 (Flynn), in which the court determined the plaintiff‘s causes of action related to lifetime disability benefits accrued when the insurance company denied the right to benefits, not when the insurance company stopped making monthly payments. (Id. at p. 886.) Because there was nothing ambiguous or tentative in Ohio National‘s June 2015 letter indicating it had determined Bennett‘s total disability was due to sickness nor any indication it was reserving final
DISCUSSION
The parties dispute the date the claims accrued. A breach of contract claim is subject to a four-year statute of limitations. (
Summary judgment is proper when there is “no triable issue as to any material fact” and “the moving party is entitled to a judgment as a matter of law.” (
The statutes of limitation “dictate the time period within which a cause of action may be commenced.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604;
Under these principles, claims for breach of contract and bad faith regarding disability insurance payments do not accrue until there is a breach and the plaintiff sustains damages. (Cf. Love, supra, 221 Cal.App.3d at pp. 1151-1152, fn.10 [requiring plaintiff to show benefits were delayed or withheld for breach of implied covenant].) ” ‘Where benefits are fully and promptly paid, no action lies for breach of the implied covenant — no matter how hostile or egregious the insurer‘s conduct toward the insured may have been prior to such payment.’ ” (Ibid., italics omitted.) “[A]bsent an actual withholding of benefits due, there is no breach of contract and likewise no breach of the insurer‘s implied covenant.” (Ibid., italics omitted.) In Erreca v. Western States Life Insurance Co. (1942) 19 Cal.2d 388 (Erreca), the court explained a disability insurance policy is “a continuing contract for periodic
On the facts here, the elements of Bennett‘s causes of action were not complete until September 3, 2018, when Ohio National ceased making its monthly disability payments. (Thomson, supra, 198 Cal.App.4th at p. 604 [” ‘when the wrongful act does not result in immediate damage, “the cause of action does not accrue prior to the maturation of perceptible harm” ’ “].) Despite indicating in June 2015 that it had determined Bennett‘s disability was due to sickness rather than injury, Ohio National continued to pay monthly benefits for more than three additional years. Ohio National‘s determination did not alter or diminish the payments. And the amount of the monthly payment was not affected by Ohio National‘s determination of the underlying cause — the amount was the same whether the disability was
Rather than addressing the concept of accrual in contract and bad faith claims, Ohio National argues a “suit may be commenced upon an insured‘s claim after the insurance company‘s unconditional denial of liability.” (Neff, supra, 30 Cal.2d at p. 175.) Because its June 2015 letter unequivocally denied lifetime benefits, Ohio National argues Bennett had all the facts necessary to sue.2 But in Neff, the insurer denied the insured‘s claim that he was totally disabled due to tuberculosis and concluded he was not entitled to disability benefits; he thereby incurred damages when the insurer withheld benefits. (Id. at p. 170.) His claim thus accrued, and the statute of limitation barred a lawsuit filed 16 years later seeking unpaid disability benefits. (Id. at p. 172.) When the insurer originally denied liability, the insured had all the facts — including damages in the form of withheld benefits — essential to maintaining the causes of action.
Indeed, the other cases cited by Ohio National — all involving insured parties suffering economic loss in conjunction with the unequivocal denial of a benefit that was due (rather than future potential loss, as Ohio National
Casualty Co. v. Superior Court (1989) 210 Cal.App.3d 604, 607, 609 (State Farm) [denial of benefits for structural damage to home].) Here, in contrast and despite denying Bennett‘s claim for disability payments based on injury, Ohio National continued to pay Bennett the full amount of his monthly disability benefits until September 2018.
Particularly regarding the breach of contract claim, Bennett did not have all the facts necessary to state a cause of action as of June 2015. Bennett‘s disability insurance policy was a “continuing contract for periodic installment payments” on a monthly basis contingent on proof of ongoing loss — his continued disability — at regular intervals. (Erreca, supra, 19 Cal.2d at p. 402.) Even after Ohio National notified Bennett in June 2015 it would terminate his benefits in September 2018, it nonetheless required him to complete a continuing disability statement on a regular basis, updating his current restrictions, limitations, and treatment, and providing a physician‘s progress statement certifying the same. Ohio National acknowledged that ”should [Bennett] remain disabled under the terms of the policies, his disability income benefits will end when he reaches Age 65 (September 3, 2018).” (Italics added.) Bennett was not entitled to a lump sum of lifetime benefits under his disability insurance policies. Thus, he had no breach of contract cause of action for future benefits that might accrue after September 3, 2018. (Erreca, at p. 402.)
Relying on Spellis v. Lawn (1988) 200 Cal.App.3d 1075, Ohio National suggests sustaining actual damages is immaterial to a cause of action‘s accrual date. We disagree. Spellis is not so expansive. The court noted where ” ’ “an injury, although slight, is sustained in consequence of the wrongful act of another, and the law affords a remedy therefor, the statute of limitations attaches at once.” ’ ” (Id. at pp. 1079-1081, italics added.) But
Flynn, supra, 2 Fed.Appx. 885 — holding plaintiff‘s claims accrued when insurer denied disability payments rather than when insurer stopped making monthly disability payments — does not alter our conclusion. (Id. at p. 886.) First, we are not bound by federal appellate decisions. (People v. Brooks (2017) 3 Cal.5th 1, 90.) Moreover, while federal decisions may have persuasive weight, we find little in Flynn. (Brooks, at p. 90.) The court simply states, with little analysis, that “the statute of limitations began running when [the plaintiff] knew or had reason to know that his claim for disability payments under the accident provision had been denied.” (Flynn, at p. 886.) But both cases Flynn cites in support of this premise — Love and State Farm — involve plaintiffs immediately incurring damages as a result of the insurer‘s alleged breach. (Flynn, at p. 886; Love, supra, 221 Cal.App.3d at p. 1143 [insurer denying any coverage and withholding benefits for property damage]; State Farm, supra, 210 Cal.App.3d at p. 607, 609 [same].) More importantly, Flynn fails to grapple with state law that “actual harm is required before a cause of action accrues,” the critical issue here. (Lederer v. Gursey Schneider LLP (2018) 22 Cal.App.5th 508, 521, 530-531; Flynn, at p. 886.)
We are similarly unpersuaded by the other mostly unreported federal district court cases cited by Ohio National, all of which rely on Flynn or case law already distinguished above. (See, e.g., Finnell v. Equitable Life Assur. Soc‘y (E.D.Cal., Nov. 19, 2007, No. Civ. S-07-0129) 2007 U.S.Dist. Lexis 85355 [relying on the same statements in Love, supra, 221 Cal.App.3d at p. 1143 and State Farm, supra, 210 Cal.App.3d at p. 609, as relied on in Flynn]; Hong v. AXA Equitable Life Ins. Co. (N.D.Cal., Dec. 4, 2018, No. 18-cv-04039-JST) 2018 U.S.Dist. Lexis 205336 [relying on State Farm]; Finkelstein v. AXA Equitable Life Ins. Co. (N.D.Cal. 2018) 325 F.Supp.3d 1061, 1067 [relying entirely on Flynn for determining when statutes of limitation accrue, and rejecting argument a letter denying disability benefits was not a final decision]; Albers v. Paul Revere Ins. Grp. (N.D.Cal., Dec. 23, 2021, No. 20-cv-08674 NC) 2021 U.S.Dist. Lexis 251731 [relying on Finkelstein and Flynn for statute of limitations discussion], revd. in part by Albers v. Paul Revere Ins. Group (9th Cir., June 7, 2023, No. 22-15100) 2023 U.S.App. Lexis 14122 [holding statutes of limitations did not begin to run until the plaintiff sustained damages, which first occurred when her lifetime benefits were withheld].)
Indeed, other unreported federal district court cases have concluded claims accrue when the insurer defendant withholds a benefit under the insurance policy, not when the insurer notifies the insured they will not receive the payment or benefit at issue at a future date. (Wren v. Transamerica Life Ins. Co. (C.D.Cal., May 21, 2021, No. EDCV 21-178 JGB (SPx)) 2021 U.S.Dist. Lexis 99103 at p. *11 [until insurer withheld payment, there was a possibility the insurer would issue the benefit under the policy,
In sum, we conclude Bennett‘s breach of contract and breach of implied covenant of good faith and fair dealing claims are not barred by the statute of limitations.4
DISPOSITION
The judgment is reversed. Bennett is to recover his costs on appeal.
Fujisaki, Acting P. J.
Petrou, J.
Rodríguez, J.
A166049
Pillsbury & Coleman, Terrence Joseph Coleman and Ryan H. Opgenorth, for Plaintiff and Appellant.
Kantor & Kantor, Glenn R. Kantor and Peter S. Sessions for United Policyholders, as Amicus Curiae on behalf of Plaintiff and Appellant.
Maynard Cooper & Gale, Misty Ann Murray and Ophir Johna, for Defendant and Respondent.
Maynard Nexsen, Misty Ann Murray and Ophir Johna, for Defendant and Respondent.