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Northwest OH Legal Blog

Thursday, February 13, 2014

United States Supreme Court Unanimously Upholds Disability Plan’s Limitations Period on Court Actions by Participants Who Have Been Denied Benefits

The United States Supreme Court has given a ringing endorsement to plan-imposed time limits on court actions by participants who have been denied benefits by an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).  On December 16, 2013, the Supreme Court, in Heimeshoff v. Hartford Life & Accident Insurance Co. et al., unanimously held that contractual limitations provisions in an ERISA-governed employee benefit plan are enforceable unless the time limits imposed by such provisions are unreasonably short or, in the alternative, a controlling statute preempts them.

Under the facts in Heimeshoff, Julie Heimeshoff, in 2005, reported chronic pain and fatigue that interfered with her duties as a senior public relations manager for Wal-Mart Stores, Inc. (“Wal-Mart”).  After she was diagnosed with lupus and fibromyalgia, Heimeshoff stopped working, and she filed a claim for long-term disability benefits with Hartford Life & Accident Insurance Co. (“Hartford”), the administrator of Wal-Mart’s Group Long Term Disability Plan (“Plan”).  Hartford denied Heimeshoff’s claim on the ground that she had failed to provide satisfactory proof of loss.

In 2006, another physician evaluated Heimeshoff and determined that she was disabled. That evaluation and other evidence were submitted to Hartford, but Harford again denied her claim after a Harford-retained physician concluded that Heimeshoff was able to perform the activities required by her sedentary position at Wal-Mart.  In 2007, Heimeshoff requested and was granted an extension of the Plan’s appeal deadline, but later that year Hartford issued a final denial of her claim.  In 2010, within three years after Hartford’s final denial of her claim, but more than three years after proof of loss was due, Heimeshoff sued in district court, seeking review of her denied claim under ERISA Section 502(a)(1)(B).

Hartford and Wal-Mart moved to dismiss, arguing that Heimeshoff’s complaint was barred by the Plan’s time limit on court actions by participants following an adverse benefit determination.  Pursuant to this Plan-imposed limit, any litigation challenging an adverse benefit determination was required to be filed within three years after the time that “proof of loss” was required to be submitted to the plan’s administrator in connection with a participant’s claim for benefits.  The federal district court for the District of Connecticut granted the motion to dismiss, and the United States Court of Appeals for the Second Circuit affirmed on appeal.

The Supreme Court upheld the rulings of both lower courts, holding that unless there is a controlling statute to the contrary, “…a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.”  Noting that ERISA is silent as to the appropriate statute of limitations for benefit claims under ERISA Section 502(a)(1)(B), Justice Clarence Thomas, writing for the Court, reasoned that parties are free to agree to contractual provisions that are different from the general statute of limitations that would otherwise be applicable to such claims.  This freedom of contract includes both the length of the limitations period and the date on which the limitations period begins to run.  Further, the principle of enforcing written plan terms “is especially appropriate when enforcing an ERISA plan” because of the “particular importance of enforcing plan terms as written” in actions under ERISA Section 502(a)(1)(B).

The Supreme Court concluded that an ERISA plan’s limitations provision is to be given effect unless— 

  • the period is unreasonably short or
  • a “controlling statute” prevents the limitations period from taking effect.

In this case, the Plan’s three-year limitations provision was not unreasonable because Heimeshoff was left with almost one year to file suit after the Plan’s administrative review process had concluded.

The Supreme Court also rejected Heimeshoff’s argument that ERISA is a “controlling statute” that is contrary to the Plan’s limitations provision.  According to the Court, it was “highly dubious” that the Plan’s limitations provision would undermine ERISA’s remedial scheme that requires an internal review process for all disability benefit claims filed by participants.  The Court added that there is also no risk of endangering judicial review by allowing a plan to set a limitations period that begins to run before the plan’s internal review is complete.  In the Court’s view, a three-year limitations period is quite common, and courts may apply traditional doctrines such as waiver or estoppel to prevent a plan administrator from invoking a limitations provision as a defense when the administrator’s conduct causes a participant to miss a deadline for judicial review.

Now that the Supreme Court has authoritatively spoken on the legitimacy of plan-imposed time limits on the filing of court actions by participants who have been denied benefits by an ERISA-governed employee benefit plan, plan sponsors that wish to reduce the uncertainty surrounding statutes of limitations applicable to ERISA-based benefit claims would be well advised to review their plan documents to make sure that their plan documents provide a reasonable time limit for filing lawsuits in such cases.


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