In Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S.Ct. 604 (2013), the Supreme Court held that an ERISA plan’s contractual limitations period can be enforced, so long as the claimant has a reasonable time after exhausting his or her administrative remedies to file suit. In other words, a plan’s language can shorten the limitations period and can make the shorter limitations period start to run before the administrative claim denial that accrues the claim, if the participant still has a reasonable period to file suit after the claim is denied.
For practitioners, applying Heimeshoff’s holding would depend often on what the Supreme Court means by a “reasonable” period to file suit. An inquiry into what might be reasonable can be understood as including (1) how long a plaintiff had to file suit after whatever gives rise to a claim under the plan (in Heimeshoff, becoming allegedly disabled), (2) how long a plaintiff had to file suit after the final denial of an administrative claim, and (3) whether a particular plaintiff had any obstacles to filing suit that might warrant allowing that plaintiff more time to file suit than other plan participants would have under the plan’s language.
Heimeshoff: The Facts, the Holding, and Possible Questions
In Heimeshoff, the petitioner, Heimeshoff, began to report chronic pain and fatigue in 2005 and was later diagnosed with lupus and fibromyalgia. Her employer’s disability plan’s insurer denied her claim based on her not having provided satisfactory proof of loss. The plan’s limitation provision required Heimeshoff to file any suit seeking disability benefits within three years after proof of loss was due. Proof of loss in this context meant telling the insurer within 90 days that plaintiff considered herself to be disabled and thus entitled to disability benefits. Heimeshoff filed suit on November 18, 2010, which was less than three years after the final denial of her claim but more than three years after proof of loss was due.
The contractual limitation issues in Heimeshoff have arisen more frequently than one might expect, because many insured welfare plans are funded by insurance policies that are required to have such a provision. As the Supreme Court recognized, the plan’s “limitations provision at issue is quite common; the vast majority of States require certain insurance policies to include 3-year limitations periods that run from the date proof of loss is due.” Id. at 614; see id. at n.5 (citing state statutes for 40 states).
Following the plan language, the district court granted the insurer’s motion to dismiss on the grounds that the suit was barred by the plan’s limitations provision. The Second Circuit Court of Appeals affirmed that decision, finding that “it did not offend [ERISA] to have the limitations period begin to run before the claim accrues.” Heimeshoff v. Hartford Life & Acc. Ins. Co., 496 Fed. App’x 129, 130 (6th Cir. 2012), aff’d, 134 S.Ct. 604 (2013).
Before the Supreme Court, Heimeshoff argued that the plan’s limitations period should be tolled until the date of her final claim denial, giving her three years from the date of the final denial to file suit. Until that date, her administrative remedies had not been exhausted, her claim for ERISA plan benefits had not accrued, and she thus could not file a lawsuit. Heimeshoff further argued that the limitations period was unreasonable because it began during the administrative review process, in effect reducing the three-year limitations period, and could even run before the final denial of her claim.
The Supreme Court first held that her employer had the right to include a shorter contractual limitations provision in its plan: “[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.” 134 S.Ct. at 610.
The Supreme Court emphasized the importance of the plan documents, stating that the plan “in short, is at the center of ERISA” and “[t]his focus on the written terms of the plan is the linchpin of ‘a system that is [not] so complex that administrative costs, or litigation expenses, unduly discourage employers from offering [ERISA] plans in the first place.’” Id. at 612; but see White v. Sun Life Assurance Co. of Canada, 488 F.3d 240, 249 (4th Cir. 2007) (rejecting the reasonableness approach adopted by the Supreme Court in Heimeshoff, because a “sometimes-enforcing approach ... would disregard the written plan requirement” itself, since the “reasonableness” inquiry is “nowhere contained in [the] plan”).
The Supreme Court said, “[e]ven in this case, where the administrative review process required more time than usual, Heimeshoff was left with approximately one year in which to file suit.” Id. at 612. Actually, using the dates in the Supreme Court’s opinion, Heimeshoff’s time left to file suit after the final denial appears to have been almost three months less than one year. Heimeshoff stopped working June 8, 2005. Ninety days after June 8, 2005, was September 7, 2005; three years after that date was September 7, 2008; and the final denial was November 26, 2007. Id. at 608-09. In other words, Heimeshoff apparently had nine months and ten days after the end of her administrative remedies to file suit.
Proceeding with its analysis, the Supreme Court concluded that the plan’s three-year limitations period in Heimeshoff was reasonable. The Supreme Court declined to import into ERISA state law tolling rules when the parties adopted a contractual limitations period in the plan. Because she had no obstacles to bringing a timely claim within one year, the plan’s limitation period was upheld as reasonable.
The Supreme Court in dicta noted that in “rare cases” equitable doctrines can apply to toll a plan’s limitations period. Id. at 615. For example, the Supreme Court hypothesized that “[i]f an ERISA plan administrator's conduct causes a plan participant to miss the deadline for judicial review of an internal denial of benefits, waiver or estoppel may prevent the administrator from invoking a contractual limitations provision as a defense.” Id. Additionally, “[t]o 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.” Id. (internal citations omitted).
To apply the Heimeshoff holding, the reasonableness analysis includes three possible questions:
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Is the total time for a plaintiff to file suit reasonable?
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Is the time after the final claim denial reasonable for a typical plaintiff to file suit?
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Is the time reasonable for the particular plaintiff to file suit?
Answering the first and second questions should be simple; one only needs a rule for how many days are sufficient for a typical plaintiff to file suit. The third question cannot be answered with a simple rule, because what might be equitable would depend on the particular participant’s circumstances, and thus would vary case by case.
Is the Total Time to File Suit Reasonable?
The provision held to be reasonable in Heimeshoff ran three years after proof of loss was due, and proof of loss was due within 90 days after the start of the first disability benefit period. Id. at 608 n.1. Accordingly, the total time in Heimeshoff for the plaintiff to file suit was 39 months (90 days plus three years) total time after her alleged disability. One question is how much total time to file suit is required for a plan’s limitations provision to be reasonable?
Based on the Supreme Court’s reasoning in Heimeshoff, limitations periods shorter than three years would appear to be reasonable. As to whether the total time for a plaintiff to file suit is reasonable, one court has already applied Heimeshoff to uphold a plan’s limitations provision shorter than three years.
In Kienstra v. Carpenter’s Health and Welfare Trust, 2014 WL 562557 (E.D. Mo. Feb. 13, 2014), the plan’s contractual limitations provision required filing suit two years after the denial of the claim. The court in Kienstra held that “[a]ny civil action under Section 502(a) of the Employee Retirement Income Security Act must be filed within two years of the date of the Trustees’ decision” was reasonable when the action was filed two-and-a-half years after the denial of the claim was communicated to the participant. Id. at *1.
One pre-Heimeshoff case held that a much shorter total limitations period than the 39 months in Heimeshoff can be reasonable. In Northlake Regional Medical Center v. Waffle House System Employee Benefit Plan, 160 F.3d 1301, 1304 (11th Cir. 1998), the plaintiff argued on appeal that the limitations period was too short; the Eleventh Circuit disagreed. The plan had a 90-day limitations period that did not begin to run until after the last stage of the administrative process. The court held that “the time required by the Plan’s internal appeals process (ten months here) plus the additional ninety days of the limitations period provided an adequate opportunity for Northlake to investigate the claim and file suit.” Id. So, under Northlake, a plan’s limitation provision that results in a total time of thirteen months can be reasonable. See Fetterhoff v. Liberty Life Assurance Co., 282 Fed. App’x 740, 743-44 (5th Cir. 2007) (holding plan’s limitations period of one year deadline from proof of claim to be reasonable).
Is the Time to File Suit after the Final Denial Reasonable?
As discussed above, the Supreme Court said “Heimeshoff was left with approximately one year in which to file suit,” but she actually had only nine months and ten days. Another question is how much time after the final denial, which ends the administrative process, is required for a plan’s limitations provision to be reasonable?
One court has already applied Heimshoff to the question of whether the time after the final claim denial is reasonable for a typical plaintiff to file suit. In Tuminello v. Aetna Life Insurance Company, 2014 WL 572367 (S.D.N.Y. Feb. 14, 2014), the participant had nine months to file suit after she exhausted her administrative remedies, and the court held that amount of time was reasonable as well.
Most recently, in an unpublished opinion, the Sixth Circuit held that a plan’s limitations provision that required suit to be filed six months after a final decision was enforceable. Claeys v. Aetna Life Ins. Co., 2013 WL 6610259 (Dec. 16, 2013). The Claeys opinion was dated the day after the date of the Supreme Court’s Heimeshoff opinion, and it did not cite the Second Circuit or the Supreme Court Heimeshoff opinions. Cf.Abena v. Metropolitan Life Ins. Co., 544 F.3d 880, 884 (7th Cir. 2008) (enforcing plan’s limitations period when the plaintiff had only seven months to file his lawsuit after he had exhausted his administrative remedies); Dye v. Associates First Capital Corp. Long-Term Disability Plan, 243 Fed. App’x 808 (5th Cir. 2007) (enforcing plan requirement that suit be filed within 120 days from final denial); White v. Worthington Industries, Inc. Long Term Disability Income Plan, 266 F.R.D. 178, 185 (S.D. Ohio 2010) (holding 71 days left to file suit to be reasonable); Sheckly v. Lincoln Nat’l Corp. Employees Ret. Plan, 366 F. Supp. 2d 140, 145-48 (D. Me. 2005) (enforcing plan requirement that suit be filed within six months from final denial).
In a pre-Heimeshoff case, dicta indicated that a plan with a limitations period of only 30 days after a final denial would be reasonable. In Doe v. Blue Cross & Blue Shield of Wisconsin, 112 F.3d 869, 875 (7th Cir. 1997), the plaintiff had 17 months to file suit, but Judge Posner wrote that a “suit under ERISA, following as it does upon the completion of an ERISA-required internal appeals process, is the equivalent of a suit to set aside an administrative decision, and ordinarily no more than 30 to 60 days is allowed within which to file such a suit.” Id.; Davidson v. Wal-Mart Associates Health and Welfare Plan, 305 F. Supp. 2d 1059, 1069-75 (S.D. Ia. 2004) (holding that plan’s limitation requiring plaintiff to file suit 45 days after denial of final appeal was reasonable) (citing Doe); see also Delosky v. Penn State Geisinger Health Plan, 2002 U.S. Dist. Lexis 17188 (M.D. Pa. Apr. 23, 2002) (enforcing plan requirement that suit be filed within 60 days from final decision by state department of insurance).
The Northlake holding discussed above arguably is based on the length of time (90 days) after the plaintiff exhausted administrative remedies, rather than the total amount of time (thirteen months) after the alleged disability to file suit. Based on this understanding of the holding in Northlake and the reasoning in Heimeshoff, if the plan participant has notice of any contractual limitations period that results in at least 90 days for a plaintiff to file suit after exhausting administrative remedies, that plan’s limitations provision should be reasonable. Theoretically, the issue should not be the total time to file suit under the plan’s limitations period, but whether the plan’s limitations period gives the plaintiff a reasonable opportunity to file suit if and after the claim is denied.
Is the Time to File Suit for the Particular Plaintiff Reasonable?
A third question is when should a court equitably toll a plan’s limitations provision and allow a plaintiff to file suit after the limitations period has already run? As to the time reasonable for a particular plaintiff, under doctrines such as waiver and estoppel, numerous issues may change the time a court might allow him or her to file suit. Analyzing even most possible issues under the traditional equitable doctrines could take a treatise.
In Heimeshoff, the Supreme Court emphasized the plan participant’s personal responsibility to submit timely proof of loss, evidence, and medical documentation, and to pursue claims diligently. The Supreme Court drew a distinction between actions of the employer that result in delay of the claims process, as opposed to the inaction or delay of a participant, who will not be excused for the failure to actively participate in the claims process.
In Viti v. Guardian Life Insurance Company of America, 2013 WL 6500515 *1 (S.D.N.Y. Dec. 11, 2013), the plaintiff argued that his mental incompetence “was so severe as to warrant equitable tolling.” Decided days before Heimeshoff, the court held that (1) extraordinary circumstances did not exist, because the plaintiff filed a Social Security disability application, with his wife’s assistance, during the same time period, and (2) the plaintiff did not act with reasonable diligence, even considering his mental incompetence, because he made no attempt to bring a timely action. Id. at *4-5. The reasoning in Viti is consistent with the Supreme Court’s emphasis in Heimeshoff on the plan participant’s personal responsibility.
As to considering traditional equitable doctrines generally, several recent cases already follow and apply Heimeshoff. These cases highlight some of the issues to anticipate.
In Wilson v. Standard Insurance Company, 2014 WL 358722 (N.D. Ala. Jan. 31, 2014), the plaintiff urged the court to toll the time limit to filing suit, arguing that the insurer did not provide a copy of the insurance policy to her and she was not provided a summary plan description (“SPD”) or anything else advising her of the three-year limitations period. The court held that the plaintiff did not demonstrate that the insurer’s conduct caused her to miss the three-year deadline. The denial letter informed her that the insurer would “provide you with copies of all requested documents, records or other information relevant to your LTD claim,” and plaintiff did not request any documents until after the three-year deadline. Id. at *7. The court also held that the ERISA claim regulation, 29 C.F.R. § 2560.503-1, “does not require a claims administrator to include in its [denial letter] to a plan participant the deadline for filing a cause of action.” Id. at *9.
In Kienestra v. Carpenters’ Health and Welfare Trust Fund of St. Louis, No. 2014 WL 562557 (E.D. Mo. Feb. 13, 2014), the plaintiff argued that the plan’s limitation period should be tolled because the plan administrator did not provide her with a copy of the policy with the denial letter. Analyzing the ERISA claim regulation, 29 C.F.R. § 2560.503-1, the court said the denial letter met the regulation’s requirements because “it specifically contained the applicable limitation time period within which to commence her suit for judicial review.” Id. at *5.
In Tuminello v. Aetna Life Insurance Company, 2014 WL572367 (S.D.N.Y. Feb. 14, 2014), the court considered the participant’s argument that equitable tolling should apply because the participant relied on a letter sent to him concerning STD benefits over a year before he applied for the LTD benefits at issue. The court noted that reliance on a letter sent before the plaintiff even applied for LTD benefits was “not diligent pursuit of judicial review of defendant’s denial of his claims that can toll the statute of limitations.” Id. at *3. In so holding, the court stated that equitable tolling would not apply because the circumstances were not extraordinary, the participant failed to consult the provisions of his plan, and “[e]quitable tolling requires a party to pass with reasonable diligence through the period it seeks to have tolled.” Id. (quoting Johnson v. Nyack Hosp., 86 F.3d 8, 12 (2d Cir. 2006)).
In Freeman v. American Airlines, Inc. Long Term Disability Plan, 2014 WL 690207 (C.D. Cal. Feb. 20, 2014), the plaintiff argued for tolling based on the denial letter not disclosing the plan’s limitations period. Following a pre-Heimeshoff Ninth Circuit opinion, the court held that “a plan administrator was not required to separately inform participants in final denial letters of time limits already contained in the SPD ....” Id. at *4 (citing Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899, 908 (9th Cir. 2009)).
Note that under the holdings of Wilson and Freeman, a claim administrator is not required to remind a plan participant in a denial letter of the plan’s limitations period. The result in Tuminello indicates the same. Yet, under the holding (or arguably the dicta of) Kienestra, the ERISA claim regulation requires a denial letter to remind plan participants of the plan’s limitations period.
What Can a Plan Drafter or Fiduciary Do?
In light of Heimeshoff, a plan drafter or fiduciary might assume that equitable doctrines in part may turn on what a court perceives as fair. Accepting this assumption, what might a plan drafter or fiduciary do to make it more likely that the plan’s limitations provision is enforced? Two broad suggestions are (1) to word carefully the plan’s limitations language, and (2) to put the limitations period in final denial letters.
For insured welfare plans, insurance policies at times serve as the plan document and the SPD, and the plan documents and the SPD would at least need to be consistent with a policy funding the plan. The standard language in insurance policies may require regulatory approval to change. Nonetheless, it should help to add to the policy, if there is one, and to the plan document and the SPD, language requiring suit to be filed, if a claim is denied after the plan’s limitations period has run, within a certain number of days (90 days?) after a final denial.
To avoid a court’s possibly accepting arguments like those rejected in Wilson and Freemen but apparently accepted in dicta in Kienestra, a final denial letter should remind the claimant of the plan’s limitations provision. This step might also help with other possible tolling arguments.
Another similar issue a claim administrator should consider is whether to include in a denial letter a deadline for filing suit when the final denial letter is dated after the limitations deadline has run and the plan does not have language as to how long a claimant has to file suit in these circumstances. Assume that a plan’s limitations period has run before the final denial of a claim, how long after the final denial letter should a plaintiff have to file suit? A possible related issue might be whether language in a denial letter might change what might be reasonable in such circumstances.
Under the reasoning in Northlake, one could argue a claimant should have 90 days to file suit if the final denial letter is sent after the plan’s limitations deadline. But the 90-day limitation was a plan provision disclosed in the SPD in Northlake. See Barnes v. Lacy, 927 F.2d 539, 543 (11th Cir. 1991) (holding that plan participant had constructive knowledge of the SPD’s provisions). A plan participant would not have notice from the SPD or other plan documents of what would be considered reasonable when the denial letter is dated after the plan’s limitations period has run. If the plan participant had notice from the denial letter, though, one could argue that the notice and time period (90 days?) in the final denial letter was reasonable. In practice, traditional equitable doctrines should at least consider such notice to be an important factor to consider.
Conclusion
In conclusion, the key to enforcing a plan’s limitations provision under Heimeshoff often might be the amount of time after final denial of a claim that a plaintiff has to file suit. A plan fiduciary might consider taking steps to make a short time be perceived as fair, such as by adding carefully drafted language to the plan document and SPD, by including the plan’s suit filing deadlines in a denial letter, or by including how long after a denial letter the plan would consider filing suit to be tolled.
Bradley Arant Boult Cummings LLP attorney J.S. “Chris” Christie, Jr.—Chair of the firm’s Insurance Group and a member of its Employee Benefits and Executive Compensation, Litigation, Labor and Employment, and Health Care Practice Groups—co-authored this article, which examines the Supreme Court’s recent ruling in Heimeshoff v. Hartford Life & Acc. Ins. Co. and its affect on the contractual limitations period of ERISA plans and what it means for practitioners.
Republished with permission. This article first appeared in DRI: The Voice of the Defense Bar’s ERISA Report, Volume 9 Issue 1, released on April 17, 2014.
