In 2013, the Supreme Court reaffirmed that ERISA plans can impose shorter limitations periods than would otherwise be the case if the plan was silent. Nevertheless, the United States Court of Appeals for the Third Circuit recently held that, even though there was evidence that a claimant had notice that of the plan’s limitations period, which had expired, that limitations period could not prevent his lawsuit. What led the Court to this decision? Read on to find out.
In Mirza v. Insurance Administrator of America, Inc., No. 13-3535, 2015 WL 5024159 (3d Cir. Aug. 26, 2015), the plaintiff was a doctor who performed a discectomy on his patient, a participant in an ERISA-governed health care plan sponsored by her employer. 2015 WL 5024159 at *1. The participant assigned her right to seek payment of her medical bills to the plaintiff. Id. There was no dispute that the assignment allowed the plaintiff to step into the shoes of the participant to pursue her rights under ERISA. Id.
After the doctor submitted a claim to the administrator for payment, the claim was denied because it was deemed to be “medically investigational,” and that denial was upheld through all administrative appeals. Id. Significantly, while the final denial letter advised the doctor of his right to bring a lawsuit, none of the denial letters identified that the plan only allowed a plaintiff one year from a final denial to file a lawsuit. Id.
Evidence was presented to the district court that, months before the plan’s limitations period had expired, the doctor’s attorney was provided with notice that the plan had a one-year limitations period, including by being provided the plan’s documents which included that limitation. Id. at *2. The district court held that the plaintiff was imputed with his attorney’s knowledge and that knowledge precluded any claim that the limitations period should be equitably tolled for lack of notice. Id. In the absence of equitable tolling, the district court held that the plan’s limitations period was enforceable because it was not unreasonable. Id.
The Court of Appeals reversed, holding the district court erred by focusing on equitable tolling, rather than the administrator’s failure to follow Department of Labor (“DOL”) regulations. Id. at *3. Specifically, DOL regulations provide that “the plan administrator shall provide a claimant with written or electronic notification of any adverse benefit determination,” and that such notification must include, among other things “[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 section 502(a)of the Act following an adverse benefit determination on review.” 29 CFR § 2560.503-1(g)(1)(iv). The Third Circuit held that this regulation required the administrator to include the plan’s one-year limitations period in its denial letters. Id. at *4-5. While acknowledging that ERISA only requires administrators to substantially comply, and not strictly comply, with such regulations, the court held that failure to inform the plaintiff of the plan’s limitations period resulted in the letter not being in substantial compliance with the DOL regulations. Id. at *6.
The Third Circuit then turned to the significance of the evidence suggesting the plaintiff was on notice of the deadline even though it was not included in the denial letters. Id. at *7. The court held that “[if] we allowed plan administrators in these circumstances to respond to untimely suits by arguing that claimants were either on notice of the contractual deadline or otherwise failed to exercise reasonable diligence, plan administrators would have no reason at all to comply with their obligation to include contractual time limits for judicial review in benefit denial letters. Instead, they could almost invariably argue that the contractual deadline was in the plan documents and that claimants are charged with knowledge of this fact.” Id. The Court further held that such an “approach would render hollow the important disclosure function of” the DOL’s regulations. Id.
As a result, the Court held that “[t]he better course here is to set aside the plan’s one-year deadline for filing suit.” Id. at *8. ERISA does not impose a specific statute of limitations for benefits claims. Rather, in the absence of a specific statute of limitations imposed by the plan, courts use the most analogous state law claim from the state in which the lawsuit was pending – typically the statute of limitations for breach of contract. As the underlying lawsuit was filed in the District of New Jersey, the Third Circuit held New Jersey’s six-year statute of limitations for breach of contract actions applied. Id. Because the lawsuit was filed within six years, the Third Circuit vacated the district court’s order of dismissal. Id.
This case is significant because it imposes a procedural requirement in order to enforce a plan-imposed limitations period (i.e., that denial letters must notify the plaintiff of the time to file a lawsuit, at least if the plan imposes a limitations period, even if the plaintiff is otherwise aware of that requirement). Generally speaking, courts have enforced such limitations periods and their use has been largely approved by the Supreme Court, most recently in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013).
While time will tell whether there will be widespread adoption of a strict rule prohibiting enforcement of plan limitations periods if those limitations deadlines are not mentioned in denial letters, even if the plaintiff is aware of the deadline, this must at least be viewed as the rule in the Third Circuit. However, at minimum, this should provide a strong reminder for plan administrators that they are best served by referencing such deadlines in denial letters, and not merely relying upon the inclusion of the deadline in the plan documents.
