ERISA: 1st Circuit — Statute of Limitations Bars “Years of Benefit Underpayment” Claims

more+
less-

A new lawsuit hits your desk asserting that for the past seven (7) years the ERISA plan has been incorrectly underpaying the beneficiary.

Plaintiff alleges that because the most recent incorrect underpayment occurred just last month, then the statute of limitations does not bar the claim…

BUT isn’t that claim barred by the statute of limitations?  YES.

Here’s the case of Riley v. Met Life, __ F.3d __ (1st Cir. March 4, 2014) (incorrect payment claim barred by statute of limitations even when most recent incorrect payment was made within statute of limitations period).

FACTS: Riley, a manager, became disabled in 2000. He received short term disability benefits, but eventually returned to work in a non-managerial role with a substantially lower salary in 2001. He became disabled again and eventually sought and obtained ERISA- governed long term disability benefits (LTD) starting in 2005. Met Life calculated benefits using his lower, non-managerial salary, instead of his managerial salary which resulted in a $1350 per month difference in LTD benefits.  In March 2012, Riley sued for unpaid benefits.

ISSUECan a new ERISA cause of action accrue upon each underpayment of benefits owed under the ERISA Plan?

FIRST CIRCUIT HELD:  NO.

  1. “[A]n ERISA cause of action accrues when, after a claim for benefits is made and a specific sum is sought, the ERISA plan repudiates the claim or the sum sought, and that rejection is clear and made known to the beneficiary.” Op. at 6-7.
  2. Riley argued back in 2005 that Met Life should have used his managerial salary to calculate benefits.  Met Life used the non-managerial lower salary to calculate benefits and paid benefits from 2005 onward.  Op. at 8.
  3. “There is no dispute that Riley’s suit is untimely….[because Riley was aware of his claim for] approximately six years and eleven months before he filed this suit….”  Op. at 8.
  4. Issuing an incorrect payment is not a “continuing violation” that can trump the statute of limitations. The court rejects a theory “‘whereby a new cause of action would accrue upon each underpayment of benefits under the plan.’“  Op. at 11 (quoting 3rd circuit).

KEY TAKE AWAY:  The First Circuit is in good company with the Second, Third, and Ninth Circuits which also have rejected a “continuing violation” accrual theory in erroneous ERISA benefit payment claims.

Topics:  Beneficiaries, Employee Benefits, ERISA, Statute of Limitations

Published In: Civil Procedure Updates, Insurance Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Lane Powell PC - ERISA Law Blog | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »