Moreland v. Aetna U.S. Healthcare, Inc.

²⁹¹ DEBORAH S. EYLER, J. The Circuit Court for Prince George’s County dismissed the claims of Thomas W. Moreland and Julie Moreland, the appellants, against Aetna U.S. Healthcare, Inc. (“Aetna”), the appellee and cross-appellant, on the ground that they were time-barred. The court also dismissed Aetna’s third-party claim against Leonard L. Lucchi, Esquire, the cross-appellee. On appeal, the appellants pose four questions, which we have combined and reworded as follows: I. Did the circuit court err in dismissing the appellants’ claims on the ground of limitations because (a) the court incorrectly concluded that the appellants’ causes of action accrued on October 3, 1991, as a matter of law; and (b) the court incorrectly concluded that the issues of inquiry notice and fraudulent concealment of causes of action were not for a trier-of-fact to resolve? 1 On cross-appeal, Aetna poses one question, which we have rephrased: II. Did the circuit court err in dismissing all of Aetna’s third-party claims against Lucchi when it dismissed the appellants’ claims against Aetna?

For the following reasons, we shall affirm the judgment of the circuit court. FACTS AND PROCEEDINGS On August 16, 1990, Thomas L. Moreland (“Moreland”) suffered severe burns and other injuries in a well explosion ²⁹² accident. He was hospitalized and received extensive medical treatment for his injuries. When the accident happened, Moreland was a member, through his employer, of the Healthplus health maintenance organization plan (the “HMO Plan”).

The HMO Plan is subject to a Group Membership Service Agreement/Certificate of Coverage (the “Agreement”), which includes a subrogation clause. Aetna is the successor corporation to Healthplus. Aetna paid the bills for Moreland’s medical and hospital treatments for his injuries (except for co-payments he was required to pay). The sum paid by Aetna on Moreland’s behalf totaled $254,859.70.

Moreland retained Lucchi to represent him in an action for damages against the tortfeasor responsible for the accident (the “tort action”). The subrogation clause of the Agreement purported to subrogate Aetna to Moreland’s rights of recovery against the tortfeasor and entitle it to reimbursement from the tortfeasor of the medical and hospital expenses it had paid for Moreland, plus the cost of suit and attorneys’ fees. For that reason, when settlement discussions ensued between Moreland (through Lucchi) and the tortfeasor’s insurance carrier, Lucchi contacted Aetna. In response to a request by Lucchi, Aetna agreed to reduce its subrogation lien to $203,887.76, to have Lucchi communicate the reduction to the tortfeasor’s insurance carrier, and to pay Lucchi a fee equal to a pro rata share of the entire sum recovered in settlement.

Ultimately, negotiations resulted in a settlement of the tort action for $400,000. On October 3, 1991, pursuant to their agreement, Lucchi forwarded Aetna a check for $152,915.82, which represented Aetna’s subrogation recovery of $203,887.76 minus Lucchi’s $50,971.94 fee. More than eight years later, on March 10, 2000, the Maryland Court of Appeals held in Riemer v. Columbia Med. Plan, 358 Md. 222, 233 , 747 A.2d 677 (2000), that “pursuant to sections 190-701(f) and 19-710(b) and (o) of the Health Gener ²⁹³ al Article, and the general statutory scheme of Maryland’s Health Maintenance Organization Act, an HMO may not pursue its members for restitution, reimbursement, or subrogation after the members have received a financial settlement from a third-party tortfeasor, any contract to the contrary notwithstanding.” Within days of the decision, the General Assembly enacted Senate Bill 903, Ch. 569, 2000 Md. Laws, effective June 1, 2000, authorizing contracts between HMOs and their subscribers to contain provisions “allowing the health maintenance organization to be subrogated to a cause of action that a subscriber has against another person.” 2 On May 7, 2001, in the Circuit Court for Prince George’s County, the appellants sued Aetna, seeking to recover the $152,915.82 Aetna had received in the 1991 settlement of the tort action.

Lucchi represented the appellants in their suit against Aetna. Aetna filed a motion to dismiss and a third-party complaint against Lucchi for two counts of indemnification and one count each of legal malpractice, breach of fiduciary duty, breach of contract, constructive fraud, negligent misrepresentation, and intentional misrepresentation. The appellants retained new counsel and filed an amended complaint. Their amended complaint stated claims for unjust enrichment; negligent misrepresentation; intentional misrepresentation; and violation of the Maryland Consumer Protection Act.

They alleged that Aetna had improperly asserted a subrogation lien against their recovery in the tort action because, under Riemer , Aetna was without authority to include a subrogation clause in the Agreement and to exercise a right of subrogation. ²⁹⁴ Aetna renewed its motion to dismiss, arguing, inter alia, that the appellants’ claims were time-barred under Md.Code (1957, 1998 Repl.Vol.) section 5-101, of the Courts and Judicial Proceedings Article (“CJ”), because their causes of action accrued on October 3, 1991, but they did not file suit until more than three years later. In their opposition, the appellants argued that their causes of action did not accrue until March 10, 2000, when the Court of Appeals issued its decision in Riemer , in the alternative, Aetna fraudulently concealed the appellants’ causes of action from them until March 10, 2000; there was a confidential relationship between Aetna and the appellants that meant the appellants were “under no duty to have discovered ... [their] cause of action prior to issuance of the Riemer decision”; and the issue of when the appellants were on inquiry notice of their causes of action was a factual question. Lucchi moved to dismiss Aetna’s third-party complaint on the grounds that Aetna had failed to allege any legal harm and did not allege facts to support its claim for punitive damages. On November 9, 2001, the court held a hearing on the pending motions.

It granted Aetna’s motion to dismiss the appellants’ claims on the ground of limitations. Lucchi argued that the court’s dismissal of the appellants’ claims meant it should dismiss Aetna’s third-party claims. Aetna argued to the contrary, asserting that its third-party complaint included claims that were not for indemnification and therefore were independent of the appellants’ claims. The court granted Lucchi’s motion.

The appellants noted a timely appeal; Aetna noted a timely cross-appeal. DISCUSSION I The appellants contend the circuit court erred in ruling that their claims against Aetna were time barred as a matter of law, and in dismissing the claims on that basis. They main ²⁹⁵ tain that under the “discovery rule,” as explained in Poffenber-ger v. Risser, 290 Md. 631, 634-35 , 431 A.2d 677 (1981), they were not on inquiry notice of their causes of action until March 10, 2000, when the Riemer decision was handed down by the Court of Appeals; therefore, their suit, having been filed within three years of that date, was timely. The appellants make two alternative arguments as to why the court erred in dismissing their claims.

First, the question of when they were on inquiry notice of their claims was factual, and therefore was for the trier of fact to decide; and second, the question of whether Aetna fraudulently concealed their causes of action from them also was a factual issue that was for the trier of fact to decide. In connection with the latter argument, the appellants maintain that they were in a confidential relationship with Aetna. The appellants’ four claims against Aetna all were governed by the three-year general statute of limitations in C J section 5-101. That statute provides, in pertinent part, that “[a] civil action at law shall be filed within three years from the date it accrues.” Md.Code § 5-101 (1957, 1998 Repl.Vol.).

Thus, the operative date for determining when limitations runs on a cause of action is the date of accrual. In Poffenberger v. Risser, supra, the Court of Appeals applied the “discovery rule” to all tort claims, holding that a cause of action in tort accrues when the plaintiff has “express cognition” of his claim or has “awareness implied from ‘knowledge of circumstances which ought to have put a person of ordinary prudence on inquiry [thus charging him] with notice of all facts which [a diligent] investigation would in all probability have disclosed if it had been properly pursued.’ ” 290 Md. at 637 , 431 A.2d 677 (quoting Baynard v. Norris, 5 Gill. 468, 483 (1847)). More recently, in Lumsden v. Design Tech Builders, Inc., 358 Md. 435, 445 , 749 A.2d 796 (2000) (quoting Poffenberger v. Risser, supra, 290 Md. at 637 , 431 A.2d 677 ), the Court of Appeals explained the “discovery rule” as follows: A cause of action accrues only when the claimant knows or should know of the wrong.... A claimant reasonably should ²⁹⁶ know of a wrong if the claimant has “knowledge of circumstances which ought to have put a person of ordinary prudence on inquiry [thus, charging the individual] with notice of all facts which such an investigation would in all probability have disclosed if it had been properly pursued.” [T]he clock for a statute of limitations begins to run when a claimant gains knowledge sufficient to put him on inquiry notice.

From that date forward, claimant will be charged with knowledge of facts that would have been disclosed by a . reasonably diligent investigation. The commencement of the statute of limitations is not delayed until the conclusion of that diligent investigation. Id. at 447-48, 749 A.2d 796 (quoting Poffenberger v. Risser, 290 Md. at 637 , 431 A.2d 677 ) (citation omitted). See also Hecht v. Resolution Trust, 333 Md. 324, 334 , 635 A.2d 394 (1994) (quoting Poffenberger v. Risser, supra, 290 Md. at 636 , 431 A.2d 677 ) (observing that a “cause of action accrues when a plaintiff in fact knows or reasonably should know of the wrong”).

When a cause of action accrues is usually a legal question for the court. Poffenberger v. Risser, 290 Md. at 633 , 431 A.2d 677 . When the question hinges on the resolution of disputed facts, however, it is for the fact-finder to decide. O’Hara v. Kovens, 305 Md. 280, 299 , 503 A.2d 1313 (1986). “Depending on the nature of the assertions being made with respect to the limitations plea, th[e] determination [of whether the action is barred] may be solely one of law, solely one of fact, or one of law and fact.” Poffenberger, 290 Md. at 634 , 431 A.2d 677 .

In the case at bar, the appellants concede that on October 3, 1991, the date of the settlement of the tort action, they had actual knowledge of all the facts on which their eventual claims against Aetna later were based: that the Agreement contained a subrogation clause stating that an HMO member who recovered from a thirdrparty hospital and medical costs paid by Aetna was required to repay Aetna the ²⁹⁷ recovered sum; that Aetna had asserted its subrogation lien in the tort action; that a settlement was paid in the tort action; that part of the monies paid in the settlement had been paid over to Aetna; and that Aetna had discharged its subrogation lien as a result. They argue, however, that because they were not aware of their legal remedies against Aetna, even though they were aware of all the facts that would support the remedies, they were not on inquiry notice of their causes of action, and therefore their causes of action did not accrue on October 4,1991. Recently, the Maryland federal district court, relying on Maryland law, rejected a similar argument. In Miller v. Pac.

Shore Funding, 224 F.Supp.2d 977 (D.Md.2002), a plaintiff purporting to represent a class sued a lender for various statutory violations, alleging the lender wrongfully had charged fees in conjunction with second mortgages. The lender moved to dismiss the action because it was not filed until more than three years after the plaintiff had knowledge of all the facts underlying his cause of action. The plaintiff opposed the motion on the ground that while he had notice of the facts underlying the claims he later asserted, he did not know of his legal rights to bring the claims; and until he gained knowledge of his legal rights, his cause of action did not accrue. The court rejected this argument, explaining: Knowledge of facts, however, not actual knowledge of their legal significance, starts the statute of limitations running.

See Lumsden v. Design Tech Builders, Inc., 358 Md. 435, 447 [ ], 749 A.2d 796 ...; Doe v. Archdiocese of Washington, 114 Md.App. 169, 183-86 , 689 A.2d 634 (1997) (explaining that a cause of action in tort generally accrues at the same time the act that constitutes the tort occurs—regardless whether the victim recognizes the act as legally wrong or comprehends the full extent of the harm). The discovery rule, in other words, applies to discovery oí facts, not to discovery of law. Knowledge of the law is presumed. See, e.g.

Post v. Bregman, 349 Md. 142, 156 , 707 A.2d 806 (1998) ²⁹⁸ (noting that “parties to a contract are deemed to have contracted with knowledge of existing law”). Ignorance of the rights it grants and protects does not toll the statute of limitations. If plaintiffs remain unaware of their legal rights after notice of injury, the statute of limitations sets an absolute deadline for gaining awareness. A plaintiff must exercise reasonable diligence—defined by the limitations period—“in determining whether ... particular acts or omissions causing injury are actionable in court.” Capital Dist.

Physician’s Health Plan v. O’Higgins, 939 F.Supp. 992, 1000 (N.D.N.Y.1996). Miller v. Pac. Shore Funding, supra, at 986-87 (italics in the original) (footnote omitted). We agree.

In this case, by October 3, 1991, the appellants had actual knowledge of the facts necessary to assert a claim against Aetna for wrongfully exercising a subrogation lien. They are presumed to have had the knowledge of the law that would enable them to determine whether Aetna’s assertion of the lien had been wrongful. Accordingly, they had three years from October 3,1991, to file suit. The appellants’ accrual theory, in which their causes of action did not accrue until the Court of Appeals issued its decision in Riemer , is premised entirely on notice of the law, not notice of facts.

The logical extension of their theory— that, had the Riemer case not been brought, their causes of action still would not have accrued—discloses its fallacy. The decision in the Riemer case