Time’s Up: Supreme Court Upholds Enforcement of Claim Limitations in ERISA Plan Language

by Orrick - Global Employment Law Group
Contact

Christmas may have come a little early for plan administrators and companies looking for clarity in ERISA litigation. Last Monday, the U.S. Supreme Court ruled 9-0 in Heimeshoff v. Hartford Life & Accident Insurance Co. that contractual limitations provisions in ERISA plans are enforceable unless the time limitation is unreasonably short or is preempted by statute.

In 2005, Julie Heimeshoff, a senior PR manager for Wal-Mart, reported chronic pain and fatigue that interfered with her duties. After being diagnosed with lupus and fibromyalgia, Heimeshoff stopped working and filed a claim for long-term disability with Hartford Life & Accident Insurance Co., the administrator of Wal-Mart’s Group Long Term Disability Plan.

Hartford was not persuaded by the evidence provided by Heimeshoff’s doctors and issued a final denial of her claim in 2007. Less than three years later, but more than three years after her proof of loss was due under the Plan, Heimeshoff filed suit, challenging the denial under ERISA § 502(a)(1)(B). She did so despite the Plan’s limitation provision, which provided that “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.”

Ruling in favor of Hartford, the Court held that the requirement that ERISA plan participants exhaust the plan’s administrative remedies before suing to recover benefits does not prohibit a plan and its participants from agreeing to a limitations period that begins to run before the final decision to deny benefits.

The decision resolved a circuit split on the enforceability of contractual limitations provisions under ERISA. The Second and Sixth Circuits took the view that the limitations were enforceable (see Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan, 572 F. 3d 76, 79–81 (2d Cir. 2009) and Rice v. Jefferson Pilot Financial Ins. Co., 578 F. 3d 450, 455–456 (6th Cir. 2009)), while the Fourth and Ninth Circuits have struck down such limitations (see White v. Sun Life Assurance Co. of Canada, 488 F. 3d 240, 245–248 (4th Cir. 2007) and Price v. Provi­dent Life & Acc. Ins. Co., 2 F.3d 986, 988 (9th Cir. 1993)).

ERISA does not contain a statute of limitations, and many ERISA plans spell out specific limitations periods. The tension behind the circuit split centered on a dispute over how to determine when the statute of limitations starts to run (i.e., when a claim accrues).

Rather than wrestling with procedural questions such as whether it was permissible for a cause of action to “accru[e] at one time for the purpose of calcu­lating when the statute of limitations begins to run, but at another time for the purpose of bringing suit” (see Reiter v. Cooper, 507 U.S. 258, 267 (1993) (noting that this was permissible)), the Court focused on the fact that “the parties have agreed by contract to commence the limitations period at a particular time” and that, as a result “we find more appropriate guidance in prece­dent confronting whether to enforce the terms of a contractual limitations provision.”

The Court looked to US Airways v. McCutchen, another recent Supreme Court ERISA case that gave broad leeway to plan drafters and (quoting McCutchen) noted that “[t]he plan, in short, is at the center of ERISA” and that the principle of enforcing contract terms as written was “especially appropriate” in ERISA cases. The Court concluded that it must “give effect to the Plan’s limitations provision unless we determine either that the period is unreasonably short, or that a ‘controlling statute’ prevents the limitations provision from taking effect.”

The Court concluded that the three-year limitations provision in the Plan was not unreasonable because Heimeshoff was left with almost one year to file suit after the administrative process had concluded—even though the process had taken longer than usual. The Court rejected the argument that ERISA is a “controlling statute” contrary to the Plan’s limitations provision, noting that it was “highly dubious” that enforcement of the Plan’s limitations period would undermine ERISA’s process of requiring an internal review of all claims prior to litigation.

The Court went on to reject various arguments made by Heimeshoff and the U.S. government, including the argument that enforcing the limitation would open the door for abuse by plan administrators inclined to delay proceedings to run out the clock on plaintiffs. The Court noted that applicable regulations set deadlines that prevent administrators from doing this and that the penalty for failure to meet such deadlines is immediate access to judicial re­view for the participant. 29 CFR §2560.503–1(l).

The Court acknowledged that equitable tolling remained available for plaintiffs who had been diligent but who ran out of time for reasons beyond their control. Although this may appear to be the plaintiff bar’s best remaining hope after the Heimeshoff decision, the Court may have closed the door before enterprising plaintiffs’ attorneys could open it. The Court flatly rejected the claim that equitable tolling should apply in this case, cautioning that its application would undermine the contractual terms of the plan: “[b]y effectively delaying the commencement of the limitations period until the conclu­sion of internal review, however, this approach reconsti­tutes the contractual revision we declined to make.”

The Heimeshoff decision continues the trend of favoring the plain language of ERISA plans. Employers can breathe a little easier, knowing that this area of the law has gained clarity and should continue to draft reasonable, favorable terms on accrual of claims and provide appropriate notice of those terms in benefit statements and summary plan statements.

Written by:

Orrick - Global Employment Law Group
Contact
more
less

Orrick - Global Employment Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!