High Court Agrees to Examine Contractual Limitations Periods Under ERISA

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By Jacklyn Wille  

 

The U.S. Supreme Court announced April 15 that it will address the question of when the statute of limitations for judicial review of an adverse disability benefit determination begins to accrue under the Employee Retirement Income Security Act (Heimeshoff v. Hartford Life & Accident Insurance Co., U.S., No. 12-729, cert. granted in part 4/15/13).

In September 2012, the U.S. Court of Appeals for the Second Circuit issued an unpublished opinion affirming a long-term disability plan's denial of a participant's claim for benefits on the grounds that the participant's lawsuit was barred by the plan's contractual three-year limitations period (179 PBD, 9/17/12; 39 BPR 1777, 9/18/12; 54 EBC 1084). In that ruling, the Second Circuit permitted the plan's contractual limitations period to begin running before the participant was eligible to bring a legal action challenging her claim denial.

The Supreme Court declined to address two additional questions presented by the petition. Specifically, the court will not consider the extent to which an ERISA fiduciary must notify a claimant of the deadline for filing suit or the proper remedy for a fiduciary's failure to provide adequate notice of this deadline.

District Court Dismisses Claim as Time-Barred

Julie Heimeshoff suffered from fibromyalgia and chronic pain. In 2005, she applied for long-term disability benefits from a plan administered by Hartford Life & Accident Insurance Co. Hartford denied her claim in December 2005, finding that she had failed to provide satisfactory proof of her disability. After an informal appeal, Hartford issued its “last and final denial letter” on Nov. 25, 2007, according to Heimeshoff.

The Hartford plan imposed a three-year limitations period on legal actions challenging adverse benefit determinations. Heimeshoff filed a lawsuit challenging Hartford's decision on Nov. 18, 2010. Hartford moved to dismiss her claim, arguing that it was barred by the limitations period. According to Hartford, the plan required Heimeshoff to file suit no later than Dec. 8, 2008, which was three years after her “proof of loss” was due to Hartford.

The U.S. District Court for the District of Connecticut agreed with Hartford. According to the district court, the Hartford policy “unambiguously” provided that no legal action could be brought more than “3 years after the time written proof of loss is required to be furnished according to the terms of the policy.” Proof of loss must be submitted “within 90 days after the start of the period for which The Hartford owes payment,” the district court said. Finding these provisions unambiguous, the district court granted Hartford's motion to dismiss Heimeshoff's claim as time-barred.

The Second Circuit affirmed. It found that ERISA does not prohibit a contractual limitations period that begins to run before the time at which an ERISA plan issues a final claim denial, causing the claimant's legal claim to accrue. Here, “[t]he policy language is unambiguous and it does not offend [ERISA] to have the limitations period begin to run before the claim accrues,” the Second Circuit said.

High Court Grants Review

In December 2012, Heimeshoff petitioned the Supreme Court for review. The high court agreed to address the question of when a statute of limitations should accrue for judicial review of an ERISA disability plan's adverse benefits determination. According to Heimeshoff, many ERISA plans require claimants to exhaust administrative remedies before filing suit, while “[a]t the same time, the limitations period begins running and wastes away while the claimant is going through the administrative review process.”

This “contradicts ERISA's well-established requirement that the beneficiary exhaust her administrative remedies before filing suit,” Heimeshoff argued.

In her petition, Heimeshoff argued that the circuits “conflict” over the accrual time for ERISA statutes of limitation, with the Fourth and Ninth circuits prohibiting limitations periods that begin running before a legal claim has accrued and the Second, Fifth, Sixth, Seventh, Eighth, and Tenth circuits upholding such limitations periods.

In its brief in opposition, Hartford argued that Heimeshoff “mischaracterize[d] the nature and degree of conflict among the circuits” on the issue of contractual limitations periods. According to Hartford, “every circuit but one to have considered that question has held that a contractual limitations period like the one included in Hartford's Policy is enforceable unless its application would be unreasonable in a particular case.”

Hartford disagreed with Heimeshoff's characterization of the Ninth Circuit's opinion in Price v. Provident Life & Accident Insurance Co., 2 F.3d 986, 17 EBC 1097 (9th Cir. 1993), which Hartford said hinged on the fact that the plan administrator failed to notify the claimant that his claim had been denied.

Some Questions Unanswered

The Supreme Court specifically declined to address two other questions Heimeshoff presented. The court will not address the extent to which an ERISA plan fiduciary must notify a disability benefits claimant of the time limits for judicial review of an adverse benefit determination. Further, it will not weigh in on the proper remedy when an ERISA fiduciary fails to give proper notice of the time limits for filing a judicial action challenging a disability benefits denial.

The petition for review was filed by Steven P. Krafchick and Carla T. Lawrence of Krafchick Law Firm, Seattle. The brief in opposition was filed by Seth P. Waxman, Catherine M.A. Carroll, and Daniel Winik of Wilmer Cutler Pickering Hale & Dorr, Washington.

By Jacklyn Wille  


The full text of the Second Circuit's opinion is at http://www.bloomberglaw.com/public/document/Heimeshoff_v_Hartford_Life__Accident_Insur_Docket_No_1200651_2d_C.