United States: The Third Circuit Requires Benefit Denial Letters To Contain Plan Limitations Period

In Mirza v. Insurance Administrator of America, Inc., No. 13-3535 (3d Cir. August 26, 2015), the Third Circuit became the latest Court to require benefit denial letters to include a notification of the plan's limitations period for bringing suit. In reaching this conclusion, it joined the First and Sixth Circuits. See Moyer v. Metro. Life Ins. Co., 762 F.3d 503 (6th Cir. 2014); Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675 (1st Cir. 2011).

The case stems from the denial of Dr. Neville Mirza's claim for benefits under an ERISA-governed welfare plan. Dr. Mirza was assigned the right to pursue benefits by a patient he performed back surgery on, who was a participant in the plan sponsored by her employer. Dr. Mirza submitted a claim to the claims administrator, Insurance Administrator of America, which denied the claim because the surgery was medically investigational. Dr. Mirza appealed the decision, but the claims administrator upheld its decision by letter dated August 12, 2010. The letter notified Dr. Mirza of his right to bring a civil action under ERISA § 502(a)(1)(B), but did not inform him of the plan's one-year limitation period for bringing suit. Around that time, the participant visited another medical provided and again assigned her rights to pursue a benefit claim to the provided. Dr. Mirza and the other provider both retained the same law firm to pursue their respective claims. In pursuing the claim from the other healthcare provider, the law firm obtained a copy of the plan on April 11, 2011, which contained the plan provision limiting the initiation of a lawsuit to one year from receipt of the final denial letter. Dr. Mirza brought suit on March 8, 2012 — almost 19 months after receiving the final denial letter.

Eventually the claims made their way to court and the defendant moved for summary judgment on Dr. Mizra's claim on statute of limitations grounds. The District Court for the District of New Jersey granted that motion. It reasoned that the plan's one-year deadline for seeking judicial enforcement was reasonable, that Dr. Mirza's suit was brought after that period had expired, and that he was not entitled to equitable tolling because he had notice (through his attorney) of the deadline.

On appeal, writing for a three-judge panel, Judge Julio Fuentes vacated the lower court's opinion based on ERISA's regulatory requirements for benefit denial letters. The court stated that the equitable tolling issue was irrelevant and focused only on the defendants' regulatory obligations. The court held that plan administrators must inform claimants of plan-imposed deadlines for judicial review in their benefit denial letters. The ERISA regulation regarding benefit denial letters requires them to set forth "a description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse determination." 29 C.F.R. 2650.503-1(g)(1)(iv). The court interpreted the word "including" to require that denial letters inform claimants of any plan limitation period for bringing a civil action. Judge Fuentes noted that this approach was also recently adopted by the First and Sixth Circuits. See Moyer v. Metro. Life Ins. Co., 762 F.3d 503 (6th Cir. 2014); Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675 (1st Cir. 2011). It also rejected defendants' argument that the denial letter to Dr. Mirza substantially complied with the regulations. The court opined that the failure to include the judicial review time limits in the adverse determination letter rendered it not in substantial compliance. The court then concluded that the proper remedy for the defendants' failure to comply with the regulation was to abrogate the plan's limitations period and apply the most analogous state law statutory limitations period. In this case, that was New Jersey's six-year breach of contract limitation period. Dr. Mirza's complaint fell within that period and the court thus remanded the case to the district court.

The Third Circuit's opinion represents a further negative development for ERISA plan administrators. It follows in the wake of the Sixth Circuit's decision in Moyer, which we wrote about here. As we noted, that decision broke with several district court opinions that had found that adverse determination letters need not contain a notification of the plan's judicial review limitations period. As a possible silver lining, the Third Circuit stopped short of requiring the inclusion of the limitations period for the most analogous state law claim. It noted that, while the issue was not before the court, such a requirement would require legal research into various state law for each claim and would potentially result in the administrator providing legal advice to claimants. Nonetheless, the decision should at least warrant a review by plan administrators of their procedures for notifying claimants of adverse benefit decisions.

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