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Northwest OH Legal Blog

Tuesday, November 3, 2015

Third Circuit Court of Appeals Requires Benefit Denial Letters to Include Notice of Plan-Imposed Limitations Period for Civil Actions

The Employee Retirement Income Security Act of 1974 (“ERISA”) requires all ERISA-governed plans to notify claimants of their right to bring a civil action in court for the purpose of recovering benefits or enforcing their rights under the plan’s terms.  In Mirza v. Insurance Administrator of America, Inc., No. 13-3535 (3d Cir. August 26, 2015), the United States Court of Appeals for the Third Circuit became the latest court to require that ERISA-governed benefit denial letters include specific notice of the plan’s limitations period for bringing a civil action in court.  In reaching this conclusion, the Third Circuit joined the First and Sixth Circuits of the United States Court of Appeals.  See Moyer v. Metro. Life Ins. Co., 762 F.3d 503 (6th Cir. 2014); Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675 (1st Cir. 2011).

Background.  Under the facts in Mirza, Dr. Neville Mirza performed back surgery on a patient who was a participant in an ERISA-governed healthcare plan sponsored by her employer.  Following the surgery, the patient assigned to Dr. Mirza the right to pursue her plan benefits.  Dr. Mirza then submitted a claim to the claims administrator, Insurance Administrator of America (“IAA”).  IAA denied the claim on the ground that the surgery was medically investigational.  Dr. Mirza appealed the decision, but the claims administrator, by letter dated August 12, 2010, upheld IAA’s decision.  The letter notified Dr. Mirza of his right to bring a civil action under ERISA Section 502(a)(1)(B), but did not inform him of the plan’s one-year limitation period for bringing suit.

Sometime thereafter, Dr. Mirza and another healthcare provider to whom the participant had assigned her benefit claim rights retained a law firm to pursue their respective claims.  On April 11, 2011, 8 months after the plan’s final denial letter, the law firm obtained a copy of the plan document.  The plan document required that any lawsuit against the plan or the plan administrator following an adverse benefit determination be filed within one year following receipt of the plan’s final denial letter.  Dr. Mirza brought suit on March 8, 2012—almost 19 months after he received the final denial letter.

Despite the plan’s time restriction on civil court actions against the plan or the plan administrator, Dr. Mirza filed a complaint in federal district court, naming IAA as a defendant.  IAA moved for summary judgment on Dr. Mirza’s claim, asserting that the statute of limitations had run.  The federal district court for the District of New Jersey granted IAA’s motion to dismiss.  The district court reasoned that the plan’s one-year deadline for seeking judicial enforcement was reasonable, that Dr. Mirza’s suit was brought after that period had expired, and that he was not entitled to equitable tolling because he had notice (through his attorney) of the deadline.

Ruling on Appeal.  Relying on ERISA’s regulatory requirements for benefit denial letters, the United States Court of Appeals for the Third Circuit reversed.  The court asserted that the equitable tolling issue was irrelevant and focused only on the defendants’ regulatory obligations under ERISA.  United States Department of Labor Regulation Section 2650.503-1(g)(1)(iv), which governs the manner and content of benefit determination notices, requires plan administrators to provide “[a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under [ERISA] Section 502(a) following an adverse benefit determination on review.”  The court interpreted the word “including” in the ERISA regulation to mean that plan administrators, in their benefit denial letters, must inform claimants of any plan-imposed deadlines for judicial review. 

The court observed that this interpretation of the ERISA regulation had been recently adopted by the Courts of Appeal for the First and Sixth Circuits.  The court also rejected defendants’ argument that the denial letter to Dr. Mirza substantially complied with the regulations.  The court held that the plan administrator’s failure to include the plan’s judicial review time limits in the adverse determination letter caused the letter to fail to be in substantial compliance with the applicable regulatory requirements.  The court then concluded that the proper remedy for the defendants’ failure to comply with the regulation was to abrogate the plan’s limitations period and apply the most analogous statutory limitations period under New Jersey state law.  In this case, that was New Jersey’s six-year breach-of-contract limitation period.  Because Dr. Mirza’s complaint fell within that period, the court remanded the case to the district court for further proceedings.

Takeaways.  The Third Circuit’s opinion should alert plan administrators that when they issue benefit denial letters, they should now err on the side of caution by explicitly notifying the recipient of any plan-imposed deadlines for judicial review.  As a possible silver lining, the Third Circuit court stopped short of requiring notice of the limitations period for the most analogous state law claim.  It noted that, while the issue was not before the court, such a requirement would require legal research into various state laws for each claim and could potentially cause a plan administrator to be perceived as providing legal advice to claimants.  Nonetheless, the court’s decision in Mirza should, at the very least, prompt plan administrators to review their procedures for notifying claimants of adverse benefit determinations.


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