While an insurance carrier “labor[ed] valiantly” to rescue claims over $3.1 million in overpayments to a hospital in its network, the Business Court held it failed because the contract at issue “clearly and unambiguously” required its suit to be filed more than nine months earlier.

In Blue Cross and Blue Shield of N.C. v. MH Master Holdings, LLLP, 2023 NCBC 31, McDowell Hospital in Marion, North Carolina, submitted claims in 2018 and 2019 to Blue Cross for healthcare services to its members. But the claims were “misprocessed” and resulted in approximately $3.1 million in overpayments. Id. ¶ 6. The problem for the carrier was that its participation agreement with the hospital contained a clause that specifically limited the statute of limitations for recovery of overpayments or underpayments to two years. Id. ¶ 16.

Judge Bledsoe noted that North Carolina courts regularly allow contracting parties to agree on limitations periods shorter than provided by statute, sometimes as short as six months. See e.g., Morgan v. Lexington Furniture Indus., 180 N.C. App. 691, 2006 WL 3717555, *3 (N.C. Ct. App. Dec. 19, 2006) (approving limitations period narrowed from three years to six months). Where the Blue Cross-McDowell contract was “clear and only one reasonable interpretation exists,” with no suggestion of fraud, the Court concluded that Blue Cross’s suit to recover overpayments was barred. Id. ¶ 20.

The Court noted that Blue Cross had argued on the other side of the same issue in a 2020 Business Court case on which it now sought to rely. In Frye v. Reg’l Med. Ctr., Inc. v. Blue Cross Blue Shield of N.C., Inc., 2020 NCBC 33 (N.C. Super. Ct. Apr. 17, 2020), involving “a materially identical” limitations clause, Blue Cross had contended the provision plainly shortened the limitations period to two years. The Frye court disagreed, based on those facts, and Blue Cross urged the Court to follow Frye in McDowell and find room to maneuver in the contract’s two-year limitations bar. However, Judge Bledsoe “conclude[d] that Blue Cross advanced the correct interpretation of the [limitations] language” in Frye. Id. ¶ 27.

The Court also carefully distinguished Frye, which had held contract provisions that shorten limitations periods “must explicitly refer to the filing of lawsuits in court.” Id. ¶ 28. In Frye, the Court examined North Carolina appellate decisions and concluded that “in every case in which a contractually shortened limitations period has been deemed enforceable, the language of the respective provision clearly established that it applied to the filing of lawsuits in court.” Frye, at ¶ 44. Yet in McDowell, Judge Bledsoe reexamined the North Carolina appellate cases upon which the Business Court had relied two years earlier in Frye and determined “none of the cases cited in Frye for this point actually held that such language was required.”  Id. ¶ 28. In McDowell, the Court also relied on several out-of-state decisions on the issue that agreed explicit references to court actions were not required. See e.g., Ludwig v. Equitable Life Assurance Soc’y of the U.S., 978 F. Supp. 1379, 1381-82 (D. Kan. 1997).

The Court noted that among Blue Cross’s “valiant” efforts to avoid the limitations clause was its contention that the Court should find the provision ambiguous “as applied” because it didn’t account for peculiar conditions (as in the McDowell) when the parties were unable to resolve such disputes by resort to offsets against subsequent claim submissions. The Court observed that Blue Cross acknowledged at hearing that such “as-applied” analyses are generally applicable to constitutional, not contract, claims. Id. ¶ 22, citing State v. Grady, 372 N.C. 509, 522 (2019).

Moreover, in a close read of the limitations clause, the Court concluded that it allowed for “other remedies,” such that even where offsets were not an available option, Blue Cross still could have initiated a civil action before the two-year deadline. Id. ¶¶ 22-23.


  • The Court’s order did not depend on its comparison of Blue Cross’s differing positions in different cases involving the same contract provision. But it’s a cautionary tale for counsel who deal regularly with form or pattern contracts which a client uses repeatedly with vendors or other parties.
  • Westlaw flags McDowell as a “declined to extend,” regarding Frye, on whether shortened limitations provisions must state they apply to court actions. But for practical purposes, in examining materially identical provisions, McDowell went out of its way to reject Frye’s tacit conclusion that North Carolina case law requires greater specificity in such clauses.

Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.