On December 16, the United States Supreme Court issued its opinion in Heimeshoff v. Hartford Life & Accident Insurance Company. The unanimous decision, which was written by Justice Clarence Thomas, affirmed the Second Circuit’s ruling that the three-year contractual limitation period for filing suit to recover benefits under an ERISA plan is enforceable even though that limitation period begins to run before the participant’s right to sue accrues. 

The contractual limitation period at issue precluded a plan participant from bringing suit more than three years after “proof of loss” was due under the plan’s terms.  ERISA, however, has been judicially construed to require that plan participants exhaust administrative remedies through an internal review and appeal process before the participant has a right to sue to recover benefits.  This means that the contractual limitation periods like the one in Heimeshoff begin running before the cause of action, or right to sue, accrues.  In other words, the contractual limitation period could theoretically bar a lawsuit even before the plan participant had the right to sue. 

Heimeshoff argued that this result conflicts with the general rule that a limitation period commences when the plaintiff has the right to sue.  The court rejected this argument, noting that in the majority of cases the plan participant still had over a year left to bring suit after the exhaustion of administrative remedies. 

Justice Thomas explained that “[i]n the ordinary course, the regulations contemplate an internal review process lasting about one year.”  “We cannot,” Justice Thomas continued, “fault a limitations provision that would leave the same amount of time in a case with an unusually long internal review process while providing for a significantly longer period in most cases.”

The court therefore concluded that “[a]bsent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.”  The court did recognize that “rare” cases might arise in which the internal review process precluded a plan participant from bringing suit within the contractual limitation period.  The court expressed little concern for those situations, noting that judges could use equitable doctrines, such as waiver and estoppel, to address those unusual circumstances.  As Justice Thomas explained:

“[even] in the rare cases where internal review prevents participants from bringing §502(a)(1)(B) actions within the contractual period, courts are well equipped to apply traditional doctrines that may nevertheless allow participants to proceed. If the administrator’s conduct causes a participant to miss the deadline for judicial review, waiver or estoppel may prevent the administrator from invoking the limitations provision as a defense.  To the extent the participant has diligently pursued both internal review and judicial review but was prevented from filing suit by extraordinary circumstances, equitable tolling may apply.” (internal citations omitted)

At oral argument in October, Justice Sonia Sotomayor raised the possibility that if the court ruled against Heimeshoff, the Department of Labor could potentially issue a clarifying regulation requiring a minimum period of time – one year, for example – in which the participant could bring suit following the conclusion of the administrative process. 

The decision in Heimeshoff suggests that such a regulation is unlikely, especially given the court’s belief that equitable doctrines sufficiently address the “rare” situation where little or no time exists to file suit at the end of the administrative process.

Heimeshoff is noteworthy for, among other things, the court’s recognition of “the particular importance of enforcing plan terms as written.”  The Supreme Court’s decision offers reassurance to plan administrators and claim administrators that courts will uphold the agreement of the parties unless that agreement is contrary to a controlling statute or is unreasonable. 

For further analysis of this decision, please see SCOTUS DECIDES: Three-Year Contractual Limitations Period Enforceable in ERISA LTD Plan on Barger & Wolen's Insurance Litigation & Regulatory Law blog.