Background of the Case

The petitioner, Julie Heimeshoff, sought benefits under Wal-Mart’s long-term disability plan (Plan) from Hartford Life & Accident Insurance Co. (Hartford), the Plan’s claims administrator. The Plan contains the following limitations provision: “Legal action cannot be taken against The Hartford . . . [more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.” As a result of that provision, a Plan participant must file a lawsuit seeking benefits within 3 years from the date on which the participant was required to submit an initial written claim for benefits to Hartford.

Heimeshoff submitted her initial claim to Hartford before the claim deadline, which was December 8, 2005. Hartford did not, however, issue a final denial of her claim until November 26, 2007. On November 18, 2010, nearly three years after Hartford’s final denial, Heimeshoff filed suit in the District Court of Connecticut seeking review of Hartford’s decision under ERISA §502(a)(1)(B).

Wal-Mart and Hartford moved to dismiss Heimeshoff’s suit on the basis that it was time-barred by the Plan’s limitation period, which had run by December 8, 2008 (3 years from the initial filing deadline). The District Court granted Wal-Mart and Hartford’s motion to dismiss and, on appeal, the Second Circuit affirmed. Heimeshoff petitioned the Supreme Court, and the Supreme Court granted certiorari to resolve a split among the Circuit Courts of Appeal.

The Supreme Court’s Decision

The Supreme Court first noted that participants must exhaust their plans’ internal review processes before bringing a claim for benefits under ERISA §502(a)(1)(B). Thus, a participant’s judicial cause of action will not accrue until the plan issues a final denial of his or her claim. Accordingly, Heimeshoff’s ERISA §502(a)(1)(B) cause of action did not accrue until November 26, 2007, the date Hartford issued its final denial of her claim.

Heimeshoff argued that the Plan’s limitation period was invalid because it violated the general rule that statutes of limitation should start to run only when a claimant’s cause of action accrues. The Supreme Court rejected Heimeshoff’s argument, however, holding that the general rule did not apply where the parties had contractually agreed to a limitations period beginning at a particular time.

In the absence of a controlling statute to the contrary, the Court stated that a plan’s contractual limitations provision should apply so long as it is reasonable. Because ERISA itself does not impose a specific statue of limitations for bringing judicial actions under §502(a)(1)(B), the Court held that plans and their participants could agree by contract to a particular limitations period for bringing such suits.

Tellingly, the Court further noted that enforcing such provisions as written is “especially appropriate” in the context of enforcing the terms of an ERISA plan, given that “[t]he plan, in short, is at the center of ERISA.” (citing US Airways, Inc. v. McCutchen, 569 U.S. ___, ___ 133 S. Ct. 1537 (2013).) This is the third case in a row (following CIGNA Corp. v. Amara, 563 U.S. ___, ___, 131 S. Ct. 1866 and McCutchen) where the Supreme Court has clearly stated that the terms of an ERISA plan document govern participants’ avenues for relief.

Considering whether the Plan’s limitations period was “reasonable,” the Court noted that Heimeshoff did not claim that the Plan’s 3-year period was unreasonably short on its face. In fact, even though Hartford’s review of her claim had taken longer than usual, the Court noted that Heimeshoff was still left with about one year in which to file suit. Further, Heimeshoff did not dispute that a one-year limitations period, beginning at the completion of the Plan’s internal review process, would have been reasonable. Thus, in the absence of any evidence that Heimeshoff was prevented from bringing a timely claim, the Court concluded that the Plan’s limitation provision was reasonable.

Heimeshoff next argued that, even if the Plan’s limitation provision was reasonable, ERISA was nevertheless a “controlling statute to the contrary.” Heimeshoff asserted that the Plan’s limitation provision undermined ERISA’s internal review procedures because participants would sacrifice their internal review rights in order to have more time to file suit. The Supreme Court found this likelihood to be “highly dubious,” given that courts generally limit their review of ERISA claims to the administrative record developed during internal review. Thus, the Court held that participants had little to gain (and much to lose) by giving up their internal review rights simply to gain more time for judicial review.

Heimeshoff also claimed that allowing limitations periods to begin to run before internal review is complete could jeopardize ERISA’s judicial review procedures, since plan administrators might try to avoid judicial review by delaying internal claims decisions in bad faith. The Court, however, noted that administrators (as plan fiduciaries) must follow ERISA’s claims review regulations, and that any bad faith delays might implicate traditional defenses to statutes of limitations, such as waiver and estoppel. Further, the Court could find no significant evidence that statutes of limitations like the Plan’s had thwarted judicial review or caused ERISA §502(a)(1)(B) claimants to be time-barred.

Application

The Supreme Court’s decision provides plan sponsors with some leeway to defend themselves against “stale” claims, where evidence may be been lost and memory of the facts dimmed. When establishing a time period for filing lawsuits, plan sponsors will need to consider whether the period’s length and its starting point provide participants with a reasonable opportunity to pursue their claims. Based on the Court’s opinion, a limitations period providing at least one year following the final decision on a participant’s claim would seem to be reasonable, but sponsors will need to consider all the facts and circumstances facing their own plans. Plan participants will also need to be mindful of their plans’ limitations periods, especially periods that may begin to run before the final determination of their claims, and to promptly pursue any judicial remedies they may have.

In establishing a time period for filing lawsuits, plan sponsors should also keep in mind that the Supreme Court has held that only the terms of an ERISA “plan” govern its permissible remedies. Further, in Amara, the Court clearly stated that the terms of a summary plan description do not qualify as “plan terms.” Thus, adding a time period for filing lawsuits only to the plan's summary plan description, but not to the official plan document, would not be sufficient. Rather, the plan sponsor must add any limitations period to the plan document itself to ensure that the limitations period will be effective.