At the very end of 2013, the Supreme Court in Heimeshoff v. Hartford Life & Accident Insurance Company, 134 S. Ct. 604 (2013), enforced a three-year contractual limitation period which commenced when the ERISA plan participant's proof of disability was due.
Recognizing that a cause of action does not accrue until the issuance of a final denial, the Court nonetheless ruled: "Absent 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. In Heimeshoff, approximately one year remained to file suit following the end of the administrative review process, allowing the Court to conclude that the limitation provision was "reasonable."
Responding to concerns regarding the effect of a lengthy administrative review period on the running of such a limitation period, the Court reasoned that "in the rare case 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." 134 S. Ct. at 615. The Court specifically suggested "waiver or estoppel" where the administrator's conduct caused the participant to miss the lawsuit deadline, and "equitable tolling" in the event that "extraordinary circumstances" prevented the timely filing of a suit.
The Court did not directly address related scenarios, such as when a disability claim has been paid through the entire contractual limitation period and only thereafter denied, leaving the participant with no recourse if the plan terms are applied literally.
Similarly, and although it was an issue in the district court, the Court did not address the extent to which a plan administrator must notify the participant (beyond the notice provided by the plan documents themselves) of the contours of any applicable contractual limitation provision.
In the nearly two years since Heimeshoff, those issues and others have percolated in the lower courts.
The Impossibility Scenario
One obvious dilemma arising out of Heimeshoff was how to apply a contractual limitation provision where the limitation period had expired by the terms of the plan before a benefits claim had been denied. Heimeshoff emphasized fidelity to the terms of a written ERISA plan. Yet, in this scenario, such fidelity would lead to an unintended and untenable result.
A very similar issue was confronted squarely by the Northern District of Illinois, in an unpublished decision in Nathan v. Unum Life Insurance Company of America, Case No. 13-cv-8706 (N.D. Ill. Jun. 25, 2014). There, the disability plan contained a three-year deadline for legal actions measured from the date that proof of claim was required. The participant's claim arose in July 2005, and he was paid benefits until his claim was denied on May 29, 2008. The participant appealed administratively and the final decision upholding the denial was issued on June 18, 2009. The participant filed suit on December 5, 2013.
The parties agreed that proof of claim had been due no later than March 19, 2006. The parties also agreed that the participant could not have sued within three years of that date because internal remedies were not exhausted until June 18, 2009. The plaintiff asserted that the contractual provision was thus unenforceable, and that a ten-year Illinois statute of limitation for contract actions should apply. Unum argued that the Court should look to federal common law, and that the plan's contractual limitation provision should simply be tolled until the final decision was issued.
The court agreed with Unum: "[T]he Plan's three-year limitations provision should be applied to Plaintiff's claims, with an accrual date tolled to when Plaintiff received Defendants' final decision on June 18, 2009." Slip op., p. 7. Adopting the plaintiff's argument "would result in a distinction between employees who were denied benefits initially and those who were initially awarded benefits but were later denied: the former would be limited under the Plan to three years to bring suit, while the latter would get ten years to institute an action," the court continued. Id. at 8. "This interpretation," the court wrote, "runs afoul of the Supreme Court's instruction in Heimeshoff that the plan's terms be enforced." Id.
The court concluded: "Plaintiff was on notice from the Plan that he needed to file within three years of some date. It is therefore reasonable and equitable to impose a three-year deadline from the date Plaintiff received notice of the Plan's final decision – in other words, the last possible date for Plaintiff's claim to accrue." Id. at 8-10.
While benefits were terminated in Nathan within three years from the date that proof of loss was due, the same commonsense approach would be equally applicable to lawsuits brought to recover benefits denied long after the original limitations period would have ended, absent equitable tolling.
That some tolling will have to be contemplated in these circumstances is further illustrated by Nelson v. Standard Insurance Company, 2014 WL 4244048 (S.D. Cal. Aug. 26, 2014), where the court declined to enter judgment on the pleadings for the insurer based on the asserted limitation period, which ended five months before the date of the final denial letter.
Another interesting issue that remains in play after Heimeshoff is whether ERISA requires the plan administrator to remind the participant of the deadline for filing a lawsuit at the time of claim denial (or subsequent affirmance on administrative appeal).
In the district court, Heimeshoff argued that Hartford had been obligated to give notice of the limitations period in its denial letter and that its failure to do so precluded the company from raising the time bar. The district court disagreed, noting that ERISA claims regulations (29 C.F.R. § 2560.503-1) required a statement of the claimant's right to bring a civil action, but said "nothing about time limits with respect to civil actions ..." 2012 WL 171325, at *6 (D. Conn. Jan. 20, 2012). Moreover, "[a] civil action seeking remedies under the plan is a separate and distinct review process from those contemplated in the claim proceedings under a benefits plan," the court added. Id.
The Second Circuit concluded that it did not need to address the issue since Heimeshoff's counsel had "conceded in the district court and at oral argument that he had received a copy of the plan containing the unambiguous limitations provision long before the three-year period for [Heimeshoff] to bring the claim had expired." 496 F. App'x 129, 130-31 (2d Cir. Sept. 13, 2012). As a result, the appellate court held, Heimeshoff was "not entitled to equitable tolling." Id. at 131.
The issue did not make an appearance in the Supreme Court's opinion. Subsequent decisions continue to reveal a split on the issue.
Most prominently, a divided panel of the Sixth Circuit concluded in Moyer v. Metropolitan Life Insurance Company, 762 F.3d 503, 507 (6th Cir. 2014), that under ERISA's claims regulations the "claimant's right to bring a civil action is expressly included as a part of those procedures for which applicable time limits must be provided." The failure of the insurer to include the "judicial review time limits" in the denial letter was "inconsistent with ensuring a fair opportunity for review and rendered the letter not in substantial compliance," the court wrote. The appropriate remedy, the court concluded, was to remand to the district court "so that [plaintiff] may now receive judicial review." Id.; See also Russell v. Catholic Healthcare Partners Employee Long Term Disability Plan, 2015 WL 3540997 (6th Cir. June 8, 2015).
In Kienstra v. Carpenters' Health and Welfare Trust Fund of St. Louis, 2014 WL 562557 (E.D. Mo. Feb. 13, 2014), aff'd, 2015 WL 3756712 (8th Cir. June 17, 2015), the plan administrator included language in the final denial letter which advised of the timeframe for filing a lawsuit. In upholding the two-year contractual limitation period, the court remarked (in probable dicta) that the claims regulation required the administrator "to advise Plaintiff of the two year limitation period in the letter in which Defendant advised Plaintiff that it had completed an internal administrative review of her claim for benefits." 2014 WL 562557, at *4. See also Bell v. Xerox Corp., 52 F. Supp. 3d 498 (W.D.N.Y. 2014) (appearing to favor the view that the initial claims denial letter should include notice of the contractual period of limitation).
Most recently, the Third Circuit set aside a plan's one-year time limit where the benefits denial letter failed to mention it. Mirza v. Ins. Adm'r of Am., Inc., 2015 WL 5024159 (3rd Cir. Aug. 26, 2015).
The courts in several cases decided after Heimeshoff, however, have rejected the view that the ERISA claims regulations require notice of contractual limitation periods. See, e.g., Armstrong v. Hartford Life & Accident Ins. Co., 63 F. Supp. 3d 1191 (E.D. Cal. 2014); Freeman v. American Airlines, Inc. Long Term Disability Plan, 2014 WL 690207, at *5 (C.D. Cal. Feb. 20, 2014); Wilson v. Standard Ins. Co., 2014 WL 358722, at *9 (N.D. Ala. Jan. 31, 2014), aff'd, 2015 WL 3477864 (11th Cir. June 3, 2015); Almont Ambulatory Surgery Center, LLC v. United Health Group, Inc., 2015 WL 1608991 (C.D. Cal. Apr. 10, 2015).
Nor does an insurer or plan administrator waive a limitations defense merely by advising a participant of his or her right to bring a civil action, as required by the claim regulation. Upadhyay v. Aetna Life Ins. Co., 2014 WL 883456 (N.D. Cal. Mar. 3, 2014). Rejecting that waiver argument, the court in Upadhyay emphasized that the statement "was necessary for Aetna to comply with 29 C.F.R. § 2560.503-1(j)(4)," and that the "letter does not state that if plaintiff decides to bring that action, Aetna will waive its defenses to that action." 2014 WL 883456, at *5.
Reasonableness of Limitation Period
Finally, in the aftermath of Heimeshoff, there have been relatively few decisions addressing the reasonableness of timeframes of less than one year. Indeed, the Supreme Court predicted as much, noting that "the cases in which internal review leaves participants with less than one year to file suit are rare." Heimeshoff, 134 S. Ct. at 615.
In Tumiello v. Aetna Life Insurance Company, 2014 WL 572367, at *2 (S.D.N.Y. Feb. 14, 2014), the court found that a nine-month period between the final denial letter and the end of the limitations period was "not an unreasonably short period of time within which to file suit." See also Barriero v. NJ Bac Health Fund, 2013 WL 6843478, at *4 (D.N.J. Dec. 27, 2013) ("The Court sees no reason why this nine-month period of time did not provide Barriero with ample opportunity to seek judicial review and vindicate her rights under ERISA.").
In Lundsten v. Creative Community Living Services, Inc. Long Term Disability Plan, 2015 WL 1143114 (E.D. Wis. Mar. 13, 2015), the court found that a six month period was reasonable. See also Santana-Diaz v. Metro. Life Ins. Co., 2015 WL 317194 (P.R. Jan. 23, 2015) (finding lawsuit time barred where six months remained after final denial letter); University of Wisconsin Hosp. and Clinic Authority v. Southwest Catholic Health Network Corp., 2015 WL 402739 (W.D. Wis. Jan. 28, 2015) (six month period not unreasonable).
Following the Supreme Court's unanimous decision in Heimeshoff, the lower courts have readily enforced contractual limitations provisions, even where the amount of time remaining after administrative review is measured in months, not years. The courts remain somewhat divided, however, concerning whether a plan is obligated to remind participants of the contractual limitation period in the adverse benefit determination letter. In those jurisdictions finding such an obligation, the failure to include that language in the denial letter may preclude the ability to enforce the limitations provision.