The U.S. Supreme Court issued a rare unanimous decision earlier this week finding that employee benefit plans can set reasonable time limitations on when a plan participant may bring a lawsuit seeking plan benefits – even when the time limitation is shorter than what would otherwise be permitted under the Employee Retirement Income Security Act of 1974 (ERISA) and analogous state statutes.
In Heimeshoff v. Hartford Life & Accident Ins. Co., Case No. 12-729 (Dec. 16, 2013), Petitioner Julie Heimeshoff, a long-term Wal-Mart executive, began to suffer from a multitude of ailments caused by fibromyalgia. As a result, in August 2005, she filed a claim for disability benefits with the plan administrator for Wal-Mart’s disability plan - Hartford Life & Accident Insurance Co. On December 8, 2005, after considering the medical evidence offered by Ms. Heimeshoff, Hartford denied her claim for failure to provide sufficient proof of loss.
Ms. Heimeshoff subsequently filed an internal appeal of the denial of her claim with Hartford as she was required to do under the plan. On November 25, 2007, Hartford ultimately upheld its decision to deny disability benefits to Ms. Heimeshoff and informed her that she had exhausted her administrative remedies. On November 18, 2010, Ms. Heimeshoff filed suit in federal court seeking judicial review of the denial of her claim pursuant to ERISA Section 502(a)(1)(B). Hartford moved to dismiss the case arguing that, pursuant to the terms of the relevant disability plan, Ms. Heimeshoff was required to file suit within three years from the time proof of loss was due under the plan. In this case, that would have been no later than December 8, 2008. Ms. Heimeshoff argued in response that despite the plan language modifying the time to bring suit, the three-year limitations period should run from November 25, 2007 – the date on which the plan upheld its final denial of her claim for benefits.
The Court determined that although a statute of limitations typically begins to run when a claim actually accrues (usually after the final denial of benefits by the plan administrator in the ERISA context), parties are perfectly within their rights to modify the applicable statute of limitations so long as the modified time limitation is reasonable. Justice Thomas, writing for the Court, concluded that “in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself is a reasonable period.”
Obviously, the Supreme Court’s decision is a major victory for ERISA plans and their employer sponsors. In light of the decision, plan sponsors should give consideration to amending plan documents to include a statute of limitations provision similar to the one in Heimeshoff. Beyond the ERISA context, however, the Court’s decision may serve as a clear endorsement of suit limitation provisions in general and falls in line with similar decisions from various lower courts. For example, just last year, the Sixth Circuit Court of Appeals held in Oswald v. BAE Industries, Inc., 483 Fed.Appx. 30 (6th Cir. 2012) that private employers may enter into agreements with their employees to shorten the applicable statute of limitations for employment claims to as little as six months. If you have not done so already, now might be a good time to engage counsel to determine whether such suit limitation provisions make sense for your business.