United States: The Supreme Court To Opine On The Use Of Contractual Limitation Periods In ERISA Plans

Last year, we reported on how the federal discovery rule – pursuant to which claims for benefits do not accrue until the participant could reasonably have discovered the claim – can require plans to defend the merits of dated claims.1 In that article, we noted that efforts to protect plans had taken the form of contractual provisions that not only narrow the limitations period, but also prescribe when the claim accrues for statute of limitations purposes.  We noted then that although most circuit courts had enforced such contractual provisions, some had not, and we had hoped that the courts that have declined to enforce contractual accrual provisions would soon "see the light" and reverse course.  Now, with the Supreme Court's granting of certiorari in Heimeshoff v. Hartford Life & Accident Insurance Co.2 , it is likely that that the high court will provide guidance and uniformity on this issue.

ERISA's Rules on Statutes of Limitations and Contractual Limitations Periods

ERISA does not contain a statute of limitations period for suits challenging the denial of benefits by a plan administrator.  Rather, courts borrow the limitations period from the most analogous state statute.  Although state law determines the relevant statute of limitations period for benefit claims, federal common law determines when a claim for relief accrues.  Courts utilize the federal "discovery rule" to determine the accrual date for an ERISA benefits claim.  The rule generally provides that a statute of limitations begins to run when a plaintiff discovers or should have discovered the injury that forms the basis for the claim.  In the ERISA context, the discovery rule has evolved to the so-called "clear repudiation rule," pursuant to which a benefit claim will accrue when a fiduciary repudiates a claim for benefits and that repudiation is clear and made known to the beneficiary.  Some courts applying this standard have concluded that the limitations period runs from when the participant was on reasonable notice of the claim.3 Regardless, a formal denial of the claim is not required. 

The fact that courts borrow from state law to determine the limitations period does not prevent parties from contracting for a shorter limitations period.  Federal courts have generally enforced contractual limitation periods for benefit claims as long as they are made known to participants and beneficiaries and are not "manifestly unreasonable."  The courts are less consistent in enforcing contractual accrual provisions. 

The Supreme Court recently granted certiorari in Heimeshoff to resolve the circuit split on the question of "[w]hen should a statue of limitations accrue for judicial review of an ERISA disability adverse benefit determination?"

Heimeshoff v. Hartford – The District Court Ruling

Julie Heimeshoff had been a Wal-Mart employee for nearly twenty years.  In 2005, she filed a claim for long term disability benefits as a result of various ailments caused by fibromyalgia.  Wal-Mart's disability plan was administered by Hartford Life & Accident Insurance Co.  Hartford denied Heimeshoff's claim in December 2005, finding that she had failed to provide satisfactory proof of her disability.  After an appeal, Hartford issued its "last and final denial letter" on November 25, 2007.4

On November 18, 2010, Heimeshoff filed suit against Hartford and Wal-Mart, challenging the denial of her benefits under Section 502(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA").  Hartford moved to dismiss the lawsuit arguing that Heimeshoff's claim was barred by the plan's limitation period, which required that legal actions be brought within three years from the time that proof of loss was due under the plan. 

The United States District Court for the District of Connecticut agreed with Hartford, concluding that Hartford's policy "unambiguously" provided that no legal action could be brought more than "3 years after the time written proof of loss is required to be furnished according to the terms of the policy."  Proof of loss must be submitted "within 90 days after the start of the period for which The Hartford owes payment."5  The court concluded that these provisions were unambiguous.  Because Heimeshoff's proof of loss was due no later than September 30, 2007 and she had not filed suit until November 18, 2010, the court dismissed her claim as time-barred.6

The Second Circuit Affirms

Heimeshoff appealed the District Court's dismissal of her claim, arguing that the limitations period should not have begun to run until after her administrative claim was denied.  The Court of Appeals rejected her challenge, relying on Second Circuit precedent that in turn relied on decisions of the Sixth, Seventh, Eighth and Tenth Circuits, holding that ERISA allows a limitations period to being running before the right to bring a judicial claim accrues, unless the application of the shortened limitations period would be unreasonable in the particular case.7 Accordingly, it held that the district court properly dismissed Heimeshoff's claim as untimely as she had filed her lawsuit several months after the plan's three year period had expired.

The Supreme Court Will Consider Whether A Contractual Limitations Period Is Enforceable

In April, the Supreme Court granted Heimeshoff's petition for certiorari.  The high court agreed to address the question of when a statute of limitations should accrue for judicial review of an ERISA disability plan's adverse benefits determination. 

According to Heimeshoff, many ERISA plans require claimants to exhaust administrative remedies before filing suit, while "the limitations period begins running and wastes away while the claimant is going through the administrative review process."  Heimeshoff contends that this "contradicts ERISA's well-established requirement that the beneficiary exhaust her administrative remedies before filing suit."  In her petition, Heimeshoff argues that the circuits "conflict" over the accrual time for ERISA statutes of limitation, with the Fourth and Ninth circuits prohibiting limitations periods that begin running before a legal claim has accrued and the Second, Fifth, Sixth, Seventh, Eighth, and Tenth circuits upholding such limitations periods.

In its brief in opposition to Supreme Court review, Hartford argues that Heimeshoff mischaracterizes "the nature and degree of conflict among the circuits" on the issue of contractual limitations periods.  According to Hartford, she misstates the position of the Ninth Circuit, and it is only the Fourth Circuit that has taken a position contrary to the majority of the circuits, which have upheld the enforceability of a contractual limitations period similar to the one in Hartford's policy unless its application would be unreasonable in a particular case. 

The Circuit Split

Although the degree of the split is disputed, everyone agrees that the Fourth Circuit has clearly refused to enforce accrual provisions derived from an ERISA plan's contractual limitations language that begin running before a claimant can file suit in court.  In White v. Sun Life Assurance Co. of Canada,8 the Fourth Circuit considered facts almost identical to those in Heimeshoff, but it specifically refused to enforce a contractual accrual date that began upon the date proof of loss was required to be furnished.  Recognizing that such provisions allow the limitations period to run before a claimant can file a judicial challenge (i.e., before an administrative claim is exhausted), the court opined that such accrual provisions create "incentives to delay [that] would undermine internal appeals processes as mechanisms for full and fair review and undermine the civil right of action as a complement to internal review."9 The Fourth Circuit refused to adopt a case-by-case, fact-intensive assessment of the reasonableness of the accrual provision.

Proskauer's Perspective

As we have previously reported, the reasoning of the Second, Sixth, Seventh, and Eighth Circuits is more consistent with the enforcement of the contractual provisions of ERISA plans.  If the high court's contract-based analysis in McCutchen10 is indicative, then we would expect the Court to base its decision on the ERISA principle that written terms of a plan should be enforced as written, upholding the Second Circuit's decision. 

A ruling in Hartford's favor could have broad implications and could conceivably lead to the application of the accrual rules in other contexts that could serve to more substantially reduce stale claims by participants.  For example, a pension plan could include provisions requiring that a challenge to benefit calculations must be filed within a reasonable period after a participant receives an annual statement of their accrued benefit, or when the participant terminates employment, rather than at the point of retirement, when relevant information may no longer be readily accessible.

Whichever way it rules, the Supreme Court's decision on this issue should provide uniformity with respect to plan rules on the accrual of benefit claims and should simplify the calculation of deadlines to file a suit for benefits under ERISA.

Footnotes

1. Aaron A. Reuter, Limiting ERISA's Limitations Period through the Use of Contractual Accrual Dates, Bloomberg Law, http://about.bloomberglaw.com/practitioner-contributions/limiting-erisas-limitations-period/

2. Heimeshoff v. Hartford Life & Accident Insurance Co., 496 Fed. App'x 129 (2d Cir. 2012) cert. granted (U.S. Apr. 15, 2013) (No. 12-729).

3. See, e.g., Novella v. Westchester County, 661 F.3d 128,147 (2d Cir. 2011); Thompson v. Retirement Plan for Employees of S.C. Johnson & Son, 651 F.3d 600 (7th Cir.  2011).

4. Heimeshoff v. Hartford Life & Accident Ins. Co., 3:10cv1813 (JBA), 2012 U.S. Dist. LEXIS 6882, at *2 (S.D.N.Y. Jan. 16, 2012).

5. Id. at *12.

6. The District Court also rejected Heimeshoff's argument that her claim was not time-barred because Hartford failed to include notice of the contractual limitations period in its denial letters.  The Supreme Court did not grant certiorari on this issue.

7. Heimeshoff, 496 Fed. App'x at 130.

8. 488 F.3d 240 (4th Cir. 2007).

9. Id. at 248 (internal quotations and citations omitted).

10. U.S. Airways v. McCutchen, 569 U.S. __, 133 S. Ct. 1537 (2013).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.