Readers of a certain generation will remember the 1980s G.I. Joe cartoon that often ended with the tagline “Knowing is half the battle.” On April 26, in Mirza v. Insurance Administrator of America, Inc., the US Court of Appeals for the Third Circuit made a similar pronouncement: when seeking to enforce an ERISA plan’s imposed statute of limitations, the court stated that “notice of the statute of limitation is half the battle.” On the heels of this decision, plan administrators are cautioned to make certain that their benefit denial letters clearly disclose any applicable statute of limitations in the plan that may shorten the period for filing suit.
Often described as a “statute of repose,” a statute of limitation (SOL) imposes a deadline by which an individual must bring a claim. After that deadline, the claim is considered “time-barred,” meaning that the claimant is SOL . . . that is, in this case, “simply out of luck.” If a lawsuit is brought after the expiration of the SOL, the court is empowered to dismiss the case without ever considering the merits in the underlying dispute.
ERISA contains a six-year SOL for fiduciary breach claims but does not impose a limitations period for benefit claims. As a consequence, courts typically look to an applicable state SOL for breach of contract claims (by analogizing ERISA plans to contracts). However, as the Supreme Court recently affirmed, an ERISA plan can impose its own SOL, and that provision will be enforced, provided that the limitations period is “reasonable.”
In Mirza, the Third Circuit considered whether a health plan’s one-year SOL provision time-barred a lawsuit filed almost 19 months after the claimant exhausted the plan’s administrative claims and appeals procedure. In analyzing the issue, the Mirza court looked to Department of Labor regulations, which provide that a plan administrator’s benefit denial notice must include “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 benefit determination.” The court held that this provision “requires that adverse benefit determinations set forth any plan-imposed time limit for seeking judicial review,” and “[w]ithout this time limit, a notification is not in substantial compliance with ERISA.” Because the benefit denial letter was deficient, the Mirza court concluded, the only appropriate remedy is to apply a default six-year state contracts law SOL.
It is a “trivial burden on plan administrators,” the Mirza court explained, “to require them to inform claimants of deadlines for judicial review in the documents claimants are most likely to actually read—adverse benefit determinations.” Include the SOL in your benefit denial letters or you will find yourself SOL in enforcing it.