Court Opinion

ID: 2823993
Source: CourtListenerOpinion
Date Created: 2015-08-10 20:00:49.457451+00
Date Added: 2024-06-11T09:25:07.769405
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                _____________

                                     No. 14-3821
                                    _____________

                                 RALPH LEPORACE,
                                                             Appellant

                                           v.

       NEW YORK LIFE AND ANNUITY; UNUM GROUP CORPORATION;
              PAUL REVERE LIFE INSURANCE COMPANY
                           _____________

                    On Appeal from the United States District Court
                         for the Eastern District of Pennsylvania
                             District Court No. 2-11-cv-02000
                   District Judge: The Honorable Michael M. Baylson

                   Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                                    July 17, 2015

         Before: SMITH, GREENAWAY, JR., and SHWARTZ, Circuit Judges

                               (Filed: August 10, 2015)
                               _____________________

                                      OPINION*
                               _____________________

SMITH, Circuit Judge.

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
       In this appeal, Ralph Leporace challenges, inter alia, the dismissal by the United

States District Court for the Eastern District of Pennsylvania of his claim for benefits

under an individual disability insurance policy retroactive to May 31, 2005. We will

affirm the order of the District Court.1

                                             I.

       In 1995, Leporace purchased an individual disability insurance policy from New

York Life Insurance Company (New York Life). In 1997, Leporace applied for and

began to receive monthly disability benefits. On May 31, 2005, New York Life notified

Leporace by letter that it was terminating his benefits based on, inter alia, the independent

medical evaluation Dr. Stephen Mechanick, a psychiatrist. The letter advised Leporace

that he could challenge the termination of benefits by submitting a written appeal within

180 days. Leporace did not submit a written appeal because, in his view, the ineligibility

determination “was not an unreasoned decision.” A120. Instead, Leporace resumed

paying the premiums for the policy.

       Almost five years after the termination of disability benefits, in March of 2010,

Leporace requested that New York Life reinstate his disability benefits retroactive to May

31, 2005. As support for this request, Leporace provided a report from his treating

psychiatrist, Dr. Brenner. New York Life requested information regarding Leporace’s

restrictions and limitations from May 31, 2005 to the present.          Leporace’s counsel

forwarded some of Dr. Brenner’s medical records to New York Life. Correspondence

1
  The District Court had jurisdiction under 28 U.S.C. § 1332. We exercise appellate
jurisdiction under 28 U.S.C. § 1291.
                                             2
regarding Leporace’s medical records continued between New York Life and Leporace

for some time. On October 26, 2010, New York Life denied the request for retroactive

disability benefits and requested additional information regarding Leporace’s eligibility

for future benefits.

       Leporace filed an administrative appeal of New York Life’s refusal to reinstate his

disability benefits retroactive to May 31, 2005. On January 28, 2011, New York Life

notified Leporace that it had completed its review of Leporace’s administrative appeal

and that New York Life would not alter its decision. On March 20, 2011, almost six

years after the initial decision terminating Leporace’s disability benefits, Leporace filed a

complaint in the District Court.2 He alleged claims for breach of contract and bad faith

under 42 Pa. Cons. Stat. § 8371.3 New York Life filed a motion under Federal Rule of

Civil Procedure 12(b)(6) seeking the dismissal of both the contract and the bad faith

claims based on Pennsylvania’s respective four and two year statutes of limitations. See

42 Pa. Cons. Stat. § 5525(a)(8); Ash v. Cont’l Ins. Co., 861 A.2d 979, 984 (Pa. Super. Ct.

2004) (agreeing with the trial court’s conclusion “that a bad faith action under Section

8371 is a statutorily-created tort action subject to a two-year statute of limitations”).

2
  Leporace sued not only New York Life, but also UNUM Group Corporation, and the
Paul Revere Life Insurance Company. Leporace averred that UNUM was the successor
and/or manager of New York Life’s disability policies. The Paul Revere Life Insurance
Company is allegedly the administrator for New York Life and a subsidiary of UNUM.
We refer to these three entities collectively as New York Life.
3
  The complaint included a claim under Pennsylvania’s Declaratory Judgments Act, 42
Pa. Cons. Stat. § 7531, which also challenged New York Life’s denial of benefits. The
District Court did not address this count separately. Because Leporace does not
challenge the District Court’s handling of that claim, we do not discuss it here.
                                               3
       In December of 2011, the District Court granted in part New York Life’s Rule

12(b)(6) motion to dismiss Leporace’s claims based on the denial of benefits effective

May 31, 2005, concluding the claims were time-barred. It rejected Leporace’s assertion

that his claim was timely under the terms of his policy and distinguished our decision in

Hofkin v. Provident Life & Accident Insurance Co., 81 F.3d 365 (3d Cir. 1996). A timely

motion for reconsideration was unsuccessful.

       Within days of the District Court’s dismissal of Leporace’s claims based on the

denial of benefits, New York Life granted, under a reservation of rights, Leporace’s

request for disability benefits going forward. On July 31, 2012, New York Life advised

Leporace that it had removed the reservation of rights because Leporace now satisfied the

definition of Total Disability under the policy.

       In the meantime, Leporace filed a third amended complaint asserting a breach of

contract and a statutory bad faith claim based on the denial of disability benefits from

2010 going forward. After discovery concluded and because benefits had been restored,

only Leporace’s bad faith claims proceeded to trial.4 The jury returned a verdict in favor

of New York Life. The District Court denied Leporace’s motion for a new trial. This

timely appeal followed. Leporace contends that the District Court erred: (1) in granting

the Rule 12(b)(6) motion and denying the motion for reconsideration; (2) in its handling

4
  At trial, Leporace advanced that New York Life was liable because it acted in bad faith
in violation of the implied covenant of good faith and fair dealing in the insurance
contract and under 42 Pa. Cons. Stat. § 8371.
                                             4
of evidentiary issues raised in a motion in limine and at trial; and (3) in denying the

motion for a new trial.5

                                              II.

       Leporace contends that the District Court erred in its application of the statute of

limitations and in distinguishing Hofkin, a case concerning the timeliness of a contract

claim. 81 F.3d at 367. Under Pennsylvania law, a bad faith “claim brought under section

8371 is a cause of action which is separate and distinct from the underlying contract

claim.” March v. Paradise Mut. Ins. Co., 646 A.2d 1254, 1256 (Pa. Super. Ct. 1994).

Accordingly, Hofkin does not provide a basis for concluding that the District Court erred

in dismissing Leporace’s bad faith claim. Because it is beyond dispute that the two year

statutory period applicable to Leporace’s § 8371 bad faith claim had expired by the time

this action was initiated in March of 2011, we conclude that Leporace’s contention of

error in the dismissal of his bad faith claim lacks merit.

       As to the timeliness of the contract claim, we begin with the well-established

principle that, generally, “an action based on contract accrues at the time of breach.

Where the contract is a continuing one, the statute of limitations runs from the time when

5
  We exercise plenary review over both an order granting a motion to dismiss and “a
district court’s application of [the] statute[] of limitations.” Pearson v. Sec’y Dep’t of
Corrs., 775 F.3d 598, 601 (3d Cir. 2015). We apply an abuse of discretion standard in
reviewing the denial of a motion for reconsideration, Max’s Seafood Cafe ex rel. Lou-
Ann, Inc. v. Quinteros, 176 F.3d 669, 673 (3d Cir. 1999), and evidentiary rulings, Ansell
v. Green Acres Contracting Co., 347 F.3d 515, 519 (3d Cir. 2003). The District Court’s
order denying a motion for new trial also is reviewed “for abuse of discretion, ‘except
over matters of law, which are subject to plenary review.’” Blystone v. Horn, 664 F.3d
397, 415 (3d Cir. 2011) (quoting Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d
267, 272 (3d Cir. 2001)).
                                              5
the breach occurs or when the contract is in some way terminated.” Cole v. Lawrence,

701 A.2d 987, 989 (Pa. Super. Ct. 1997) (citations omitted). Because it is clear that the

payment of disability benefits ceased on May 31, 2005, the four year statute of limitations

in § 5525(a)(8) for contract actions began to run at that time. Thus, any claim for

benefits retroactive to May 31, 2005, expired on May 31, 2009.              As a result, the

complaint filed in March of 2011 was time-barred under § 5525(a)(8).

       Leporace asserts, however, that § 5525(a)(8) does not govern the timeliness of his

claim. In his view, the District Court erred by failing to apply Hofkin, 81 F.3d at 365. In

that case, after initially receiving benefits for a period of total disability, Hofkin and his

disability insurer communicated over several years about his entitlement to residual

disability benefits. In the absence of a decision, Hofkin initiated a civil action in federal

court alleging that he was entitled to residual disability benefits under the insurance

policy. The insurance policy included, as mandated by Pennsylvania’s insurance law, 40

Pa. Stat. § 753(A)(7), (11), clauses entitled “Proofs of Loss” and “Legal Actions,” which

addressed when a proof of loss must be filed and when a legal action is barred. Id. at

369-70. The insurer, contending Hofkin’s civil action was time-barred under the “Legal

Actions” clause of the policy, moved for judgment as a matter of law. Hofkin, 81 F.3d at

368. The District Court agreed, but we reversed. Id. at 367, 375.

       Although the “Legal Actions” clause provided a three year limitation period, this

same clause specified that the period did not begin to run until “after the time written

proof of loss is required to be furnished.” Id. at 370 (citation and quotation marks

omitted). We interpreted the “Proofs of Loss” clause as requiring the filing of a proof of

                                              6
loss ninety days “after the termination of a continuous period of disability.” Id. at 367.

Because Hofkin argued he had a continuous disability, we concluded it was “possible that

the suit limitation provision in the Legal Actions clause ha[d] not yet been triggered.” Id.

at 375.

          According to Leporace, because he has a continuous disability, Hofkin controls

our analysis. We are not persuaded. Hofkin, as the District Court noted, is factually

distinguishable. Unlike Hofkin, where the insured and insurer communicated over the

course of several years regarding his entitlement to residual disability benefits, this case

involves a clear and unmistakable termination of benefits effective May 31, 2005. The

letter from New York Life explained the reason for the termination and apprised

Leporace that he could appeal that decision. Yet Leporace waited almost five years

before notifying New York Life that he disagreed with the decision and almost six years

before he filed a complaint in federal court.

          Furthermore, application of Pennsylvania’s four year statute of limitations was not

at issue in Hofkin. Rather, timeliness was at issue solely because of the limitation of suit

clause in the insurance policy. Indeed, in light of the communications between the

insured and the insurer over the course of several years and in the absence of a decision

denying benefits, the statute of limitations in § 5525(a)(8) had yet to be triggered.

          In Knoepfler v. Guardian Life Insurance Co. of America, we predicted that the

New Jersey Supreme Court would follow the approach set out in Hofkin and would

construe the “Legal Actions” clause in a disability policy to require the filing of a “proof

of loss after the end of the entire period of disability.” 438 F.3d 287, 288 (3d Cir. 2006).

                                                7
Although Knoepfler involved a termination of the insured’s benefits, we do not consider

it controlling. Like Hofkin, Knoepfler is distinguishable because the dispute concerned

the timeliness of the contract action, not because of a statute of limitation, but based on

the limitation of suit clause in the insurance policy. In fact, Knoepfler’s federal action

was filed well within New Jersey’s six-year statute of limitations.

       Neither Hofkin nor Knoepfler present a scenario like Leporace’s involving a clear

and unequivocal termination of benefits triggering the statutory limitations period, a

failure by the insured to take any action whatsoever during the applicable statutory

limitations period, and a request years later after the expiration of the statute of

limitations for the reinstatement of benefits. For that reason, we conclude that the

District Court did not err by failing to apply Hofkin and in concluding that Leporace’s

claim for disability benefits retroactive to May 31, 2005 was time-barred.6

       For the above reasons, we will affirm the District Court’s order.

6
  We have carefully considered Leporace’s other contentions of error and conclude that
they lack merit.
                                             8