Belrose, a full-time employee of Camber Corporation, underwent arthroscopic knee surgery in September 2002. As a participant in his employer’s ERISA plan, Belrose began receiving short-term disability benefits under a group insurance policy issued by Hartford.
Shortly after his surgery, Belrose was diagnosed with aortic valve disease, coronary angina, and coronary artery disease. He began receiving long-term disability benefits under the plan as a result of his heart condition in December 2002.
Belrose continued to receive long-term disability benefits under the plan until Hartford terminated the benefits in October 2005. Belrose appealed the decision, but it was upheld and a final denial was issued in June 2006.
Belrose sued under ERISA, and Hartford moved to dismiss on the ground that the complaint was time-barred by the plan’s contractual limitations period.
The plan provided a three-year limitations period commencing on the date Belrose submitted his proof of loss. Belrose argued that because his proof of loss was required in September 2002, the plan required him to file an action against Hartford by September 2005, which was before his benefits were terminated in October 2005, and before the termination decision was upheld on appeal in July 2006. Thus, Belrose argued that the limitations period under the plan was in violation of public policy.
The Fourth Circuit Court of Appeals ruled that the plan’s commencement date was irrelevant, stating: "Regarding the date of accrual of a limitations period in an ERISA plan, we have held that despite the terms of accrual which may be contained within the plan, ‘[a]n ERISA cause of action does not accrue until a claim of benefits has been made and formally denied.’" (Quoting White v. Sun Life Assur. Co. of Canada, 488 F.3d 240, 246 (4th Cir. 2007)).
The court rejected Belrose’s argument that applying federal law in this instance was impermissible "blue penciling" of the contract. The court reasoned that it was not rewriting the contract terms, but merely applying the uniform federal law governing ERISA cases, despite contractual provisions to the contrary.
Belrose nevertheless maintained that the three-year limitations period was a violation of Virginia public policy, because Virginia law provides for a five-year statute of limitation for actions brought under a contract. The court dismissed this argument as well, quoting the Supreme Court of Virginia and the Virginia Code, which permits a one-year contractual limitation period in the insurance context. See Bd. of Supervisors of Fairfax County v. Sentry Ins., 239 Va. 622, 391 S.E.2d 273, 275 (Va. 1990) (upholding "contractual statutes of limitations for periods shorter than that fixed by statute when they were not against public policy and the time period was not unreasonably short").
The court thus concluded that the plan’s three-year limitations period began in June 2006, when the benefits termination was final, and that Belrose’s claim, brought in 2010, was consequently time-barred.
Click Here to view the full May 2012 Edition of the ERISA and Life Insurance News.