In Heimeshoff v. Hartford Life & Accidental Insurance Co., No. 12-729, the U.S. Supreme Court unanimously held that limitations periods in ERISA welfare plan documents are enforceable so long as the limitations period is reasonable.
ERISA requires plan administrators to adopt internal claims review procedures to administer plan benefits. If a claim is denied, the beneficiary generally can sue to recover the benefits allegedly due. While ERISA does not specify a limitations period for such a lawsuit, some plan documents do.
Julie Heimeshoff worked as a public relations manager for Wal-Mart, which offered a group disability benefits plan administered by Hartford. The plan provided that any lawsuit alleging a wrongful denial of benefits had to be brought within three years of the time that a beneficiary’s “proof of loss” is due. The proof of loss explains the basis for the beneficiary’s claim for benefits and is generally submitted to the plan administrator at the start of the administrative claims process.
Heimeshoff became disabled and filed a claim for benefits. Her proof of loss was due on December 8, 2005. After administrative review, her claim was denied on November 26, 2007.
On November 18, 2010, almost three years after the conclusion of the administrative process, but five years after her proof of loss was due, Heimeshoff filed a lawsuit challenging the plan administrator’s decision. The district court dismissed her action as time-barred, and the Second Circuit affirmed. The Supreme Court granted certiorari to resolve whether the plan’s limitations provision was enforceable.
The Supreme Court’s Opinion
Heimeshoff, with amicus support from the Department of Labor, argued that a statute of limitations cannot accrue until the plaintiff has a valid cause of action – that is, until the plan administrator issues a final denial of her claim in the administrative process. Heimeshoff argued that ERISA contemplates an administrative process before litigation, and that it would unduly burden the process if the statute of limitations ran during the claims review period.
The Supreme Court disagreed. It ruled that parties to an ERISA welfare plan may contract for a particular limitations period and accrual date, as long as the period is not unreasonably short and a controlling statute does not require a contrary result.
The Court explained that contractual limitations provisions are ordinarily enforced as written. This rule is “especially appropriate” for an ERISA plan because plan documents are the “linchpin” of ERISA’s statutory scheme. Indeed, ERISA authorizes a plan participant to bring a suit “to enforce his rights under the terms of the plan.” Because parties can contract for a limitations period, it follows that they can also contract for the date when the limitations period starts to run. The Court thus held that the contractual limitations and accrual periods were enforceable.
The Court also considered whether the limitations period at issue – within three years after proof of loss is due – is unreasonably short, or whether there is a controlling statute to the contrary. The Court answered both questions in the negative. First, even though the administrative review process took longer than usual, the contractual limitations period still left Heimeshoff with approximately a year to file suit after the conclusion of the administrative process. The Court noted that it is rare for plans to leave participants with less than a year to file suit after the administrative process. The Court specifically concluded that if participants found their lawsuit time-barred, it was likely because participants “have not diligently pursued their rights.” In addition, the Court noted that “even in rare cases 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. If the administrator’s conduct causes a participant to miss the deadline for judicial review, waiver or estoppel may prevent the administrator from invoking the limitations provision as a defense.” Finally, plans offering appeals or dispute resolution beyond what is contemplated in the internal review regulations must agree to toll the limitations provision during that time. 29 CFR §2560.503–1(c)(3)(ii).
Heimeshoff confirms that limitations provisions in ERISA welfare plans will be upheld if they are reasonable and suggests that plan sponsors should consider whether to include a contractual limitation period in such plans.