The California Court of Appeal affirmed the lower courts grant of summary judgment for two insurers on the ground that a physician’s lawsuit was untimely under the two-year statute of limitations for quantum meruit. In affirming the lower court’s decision, the Court held that the statute of limitations on a physician’s quantum meruit claim for payment against two health insurers began to run upon the receipt of the Explanation of Benefits (EOB), which the panel determined to be the date of the first unequivocal written denial, despite the physician’s engagement in the insurers’ internal appeals process.

The plaintiff, Vishva Dev, M.D., Inc. (“Dev”), provided medical services between 2011 and 2012 to two patients that had health care coverage through Blue Shield of California Life Insurance Company (“Blue Shield Life”) and one patient that had health care coverage through California Physician Services, also known as Blue Shield of California (“Blue Shield of California”). Dev submitted claims for all three patients, requesting payment from their respective health insurer. Dev did not have a contract with either Blue Shield Life or Blue Shield of California. Dev received EOBs on March 8, 2011 and June 22, 2012 for the two patients insured by Blue Shield Life, and an EOB on August 15, 2012 for the patient insured by Blue Shield of California. Under all three responses, the insurers denied payment of the additional amount billed. Dev then voluntary engaged in both insurers internal appeals process. The appeals process for the two patients covered by Blue Shield Life was exhausted on March 26, 2013 and August 20, 2013, and for the patient covered by Blue Shield of California was exhausted on December 6, 2012.

Once the appeals processes were exhausted, Dev filed an action against Blue Shield Life and Blue Shield of California for payment of the claims on October 7, 2014. The insurers filed a joint motion for summary judgment, alleging that Dev’s claims for quantum meruit were barred by the two-year statute of limitations. Dev alleged that its claims were not time-barred, as the cause of action for a quantum meruit claim did not accrue until the conclusion of the parties’ communications, as continued through the insurers’ internal appeals process. Dev further alleged that the correspondence between the parties created an “expectation of compensation” that undercut the notice of the written denials.

The trial court granted summary judgment to the insurers on the ground that Dev’s quantum meruit claim was untimely. The California Court of Appeals affirmed the lower court’s ruling.

The panel noted that the statute of limitations for quantum meruit claims is two years in California, and it commences when a party knows or should have known the facts essential to the claim. The Court, relying on cases involving homeowner’s insurance, determined that the statute of limitations for a quantum meruit claim begins to run once the insurer has issued an unequivocal denial of payment in writing, giving the insured knowledge of the facts essential to the insured’s claim. Thus, the sole issue in this case was when Dev knew or should have known the facts essential to its quantum meruit claim that Blue Shield Life and Blue Shield of California denied payment in full or in part for its rendered services.

The Court of Appeal held that the date Dev first received the EOB, he had or should have had knowledge of the facts essential to the quantum meruit claim. Since Dev filed suit on October 7, 2014, more than two years after the EOB denied its claim for payment (March 8, 2011, June 22, 2012, and August 15, 2012), the Court held the quantum meruit claim against Blue Shield Life and Blue Shield of California was time-barred under the state of limitations.

The Court further determined that engaging in an insurer’s internal appeals process does not toll the statute of limitations. The court reasoned that a review of the denial does not make the previous denial unequivocal. Additionally, as a matter of policy, the statute of limitations would be a nullity if any party could arbitrarily extend the period by engaging in an optional appeals process.

The lesson for health care providers and plans in California is clear: in the absence of an explicit contract provision to the contrary, the issuance of an EOB that denies all or a part of a claim may start the statute of limitations. Additionally, engagement with the insurer’s voluntary, internal appeals process will not toll the statute of limitations.