## Facts

- Martha Pustilnik was a subscriber to Associated Hospital Service of Philadelphia (Blue Cross) under a “Family Contract” hospital plan.
- Pustilnik incurred radiology-related charges at Hahnemann Medical College Hospital and sought payment/benefits under the Blue Cross contract.
- Blue Cross denied liability for the claim and notified Pustilnik of the denial.
- The Blue Cross contract contained a clause requiring any legal action against Blue Cross to be brought within two years after the denial of the claim.
- Pustilnik filed suit against Blue Cross in the Philadelphia Court of Common Pleas more than two years after Blue Cross denied the claim.
- The trial court directed a verdict for Blue Cross based on the contractual limitations clause.
- The Superior Court reversed, concluding the case should proceed (including on theories such as waiver/estoppel and statutory arguments).
- The Pennsylvania Supreme Court granted review and, after reargument limited to limitations issues, revisited whether the suit was time-barred.

## Issues

1. Whether a Blue Cross subscriber’s action for benefits is barred when filed more than two years after claim denial, where the subscriber contract contains an Insurance Department–approved two-year contractual limitations period.
2. Whether 40 P.S. § 1559 (providing a four-year period in certain nonprofit hospital plan matters) prevents enforcement of the two-year contractual limitation against a subscriber’s suit.
3. Whether the record supported waiver or estoppel that would prevent Blue Cross from relying on the contractual limitations clause.

## Decision

- The Supreme Court held the two-year contractual limitations provision was valid and enforceable.
- The court held 40 P.S. § 1559 did not extend the time for a subscriber’s suit against Blue Cross and did not bar enforcement of the two-year contract limit.
- The court found no record basis to treat Blue Cross as having waived the limitations defense or as being estopped from asserting it.
- The court reinstated the result for Blue Cross: Pustilnik’s action was time-barred.

## Legal Principles

- A contractual limitations period shorter than the general statute of limitations is enforceable if it is reasonable and not prohibited by statute.
- Where a nonprofit hospital plan’s contract terms (including a suit-limitations clause) are filed with and approved by the Insurance Department under the governing statute, those approved terms are treated as presumptively reasonable unless shown to conflict with law.
- Statutory time limits directed to other types of claims (such as certain provider-related actions) do not automatically apply to subscriber suits for benefits unless the statute’s text covers those suits.
- Waiver or estoppel requires evidence that the insurer’s conduct misled the subscriber or otherwise justified noncompliance with the contractual deadline; absent such evidence, the limitations defense stands.

## Conclusion

Associated Hospital Service of Philadelphia v. Pustilnik holds that Blue Cross may enforce an Insurance Department–approved contract term requiring subscribers to sue within two years of a claim denial, and that a subscriber who files after that period—without evidence supporting waiver or estoppel—has a time-barred claim even if a longer limitations period exists for different types of actions under related statutes.


Associated Hospital Service of Philadelphia v. Pustilnik, 396 A.2d 1332 (1979)