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Apr 2015

Statutes of Limitations: Don’t Blow It

When a hospital refers a case to SAC, our first line of inquiry is: what is the statute of limitations (“SOL”)? Statutes of limitations are laws that restrict the amount of time after an event occurs that a proceeding may be initiated to address your claim. If the time to bring the case to court or arbitration has passed, then the claim cannot be filed even if it is the greatest case you have ever had. If the SOL has been “blown” the case is “time barred.”  This is because statutes of limitations were designed to facilitate the resolution of cases in a reasonable amount of time.

The time period for statutes of limitations may vary depending on the legal basis relied upon for recovery, known as the cause of action. At SAC, the two most common statutes of limitations we encounter are the four-year statute of limitations for breach of written contract and the two-year statute of limitations for quantum meruit.

When a hospital and a payor have a written contract, but the payor fails to reimburse the hospital according to the terms of that contract, the hospital may have a cause of action for breach of written contract. Pursuant to California Code of Civil Procedure 337(1), an entity has four years from the date the dispute arose to bring a cause of action for breach of written contract. However, parties may contract to decrease this amount of time. In many of the contracts that SAC reviews,  the parties have agreed to decrease the time period for bringing an action from the statutory four years to two years, one year, or even as little as six months from the date the dispute arose. These contract provisions work exactly like statutes of limitations and if not met can also bar the claim.

On the other hand, when the hospital does not have a contract with the payor, one of the best causes of action to allege is quantum meruit, which allows an entity to recover the reasonable value of its services. However, unlike the generous four-year period afforded in breach of contract situations, pursuant to California Code of Civil Procedure section 339(1), a hospital  only has two years to file an action for quantum meruit. For the purposes of the types of cases SAC handles, this two-year period begins on the day the patient is discharged from the hospital. Thus, if a patient was treated from November 4, 2014 through November 6, 2014, the quantum meruit statute of limitation would run on November 6, 2016.  As such, SAC would need to file an action on this claim by November 6, 2016.

At SAC, we make it a priority to determine the statute of limitation as the first step to evaluate a case because we do not want to be barred from bringing the case. However, hospitals should also be aware of the possible SOLs for claims so they can ensure they refer claims timely before the statute of limitations or contractual deadline runs.  It is important to be aware of the implications of the SOL and contact a knowledgeable attorney if you have questions..

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