On the heels of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Acc. Ins. Co, a federal district court in New York has held in Halpern v. Blue Cross/Blue Shield of Western New York, 12-CV-407S (W.D.N.Y., Sept. 4, 2014) that a group health benefit plan’s shorter one-year limitations period is unenforceable because section 3221(a) of New York Insurance Law allowed for a two-year limitations period.  Despite the fact that the New York’s Superintendent of Insurance approved the plan and had discretion to approve policies with provisions deviating from section 3221’s requirements, the court determined that a policy provision approved by the Superintendent could not run counter to the existing law. 

Background

The plaintiff in this case sued for breach of contract against the insurance company for the denial of reimbursement claims under a group health benefits plan (the “Plan”).  After removing the state court complaint under the Employee Retirement Income Security Act (“ERISA”), both parties moved for summary judgment.  The defendant argued that the plaintiff’s claim for residential treatment benefits was untimely because the Plan’s contractual limitations period required the filing of suit within one year.  Alternatively, the defendant argued that the benefits at issue were not covered under the Plan.  The plaintiff’s argument to refute the timeliness claim focused on section 3221(a), which contained a minimum statute of limitations period of two years. 

Section 3221(a) states, in pertinent part that: “No policy or group or blanket accident and health insurance shall … be delivered or issued for delivery in this state unless it contains in substance the following provisions or provisions which in the opinion of the superintendent are more favorable to the holders of such certificates or not less favorable to the holders of such certificates and more favorable to policyholders.”  The required policy provisions include a minimum two-year statute of limitations (“no action at law or in equity shall be brought to recover on the policy prior to the expiration of sixty days after poof of loss has been filed … and no action shall be brought after the expiration of two years following the time such proof of loss is required by the policy”).   The defendant contended that this section was not controlling because the case arose under ERISA and, therefore, the limitations could be contractually shortened. 

Outcome

Noting this was not a case of borrowing a limitations period from state law, the court pointed out that because policy provision requirements are mandated by section 3221(a) and these requirements are directed toward the insurance industry, section 3221(a) was, therefore, a statute that regulates insurance.  As such, section 3221(a)’s mandatory policy provisions were saved from ERISA preemption (ERISA’s preemption exception exists for state law that regulates insurance).  The court also rejected the defendant’s argument that the Plan was consistent with section 3221(a) simple because it was approved by New York’s Superintendent of Insurance who has authority to approve policy provisions that deviate from section 3221’s requirements.  The court held that a policy provision approved by the Superintendent cannot run afoul or counter to the legislative intent, nor can it violate existing law.  Thus, the court applied section 3221 and the Plan was read as conforming with that section’s required minimum limitations period of two years following the requisite time for submitting the proof of loss. 

Heimeshoff v. Hartford Life & Acc. Ins. Co., (2013)

In reaching its conclusion, the Halpern court did not discuss the recent decision in Heimeshoff v. Hartford.  In that case, the Supreme Court addressed whether a Plan’s requirement for any suit to recover benefits under section 502(a)(1)(B) to be filed within three years after the proof of loss is due is enforceable under ERISA.   The plaintiff filed suit more than three years after the proof of loss was due.  Noting that ERISA does not contain its own statute of limitations for actions under section 502(a)(1)(B), the district court explained that the limitations period provided by the most analogous state statute would apply.  The applicable Connecticut law allowed for the Plan to specify a limitations period that was not less than one year from the time when the loss it insured against occurred.  The district court then held that a three-year limitations period set to begin when proof of loss is due was enforceable, so the claim was deemed untimely.   The Second Circuit affirmed.  The Supreme Court held that absent a controlling law to the contrary, a participant and a Plan can agree in the contract to a limitations period, including one that starts to run before the cause of action accrues, provided the time limitation is reasonable.  Stated another way, the Court held that it must give effect to the Plan’s limitations provision unless the period is unreasonably short or there is a controlling statute to the contrary.  The three-year limitations period was deemed not unreasonable, even though under the language of the Plan the limitations period began to commence before the internal review was complete.   With respect to the reference about a controlling statute to the contrary, plaintiff argued that the Court must look to whether state law would toll the limitations period throughout the exhaustion process.  The Court held that because the parties had adopted a limitations period by contract (the Plan), there was no need to borrow the state statute of limitations or the state’s tolling rules.  

The Heimeshoff decision was assumedly not mentioned in the Halpern case because there was no argument before the Supreme Court in Heimeshoff about whether the Connecticut state law “regulates insurance.” Consequently, the Court did not discuss whether ERISA preemption existed, or not, as in the Halpern case.              

Takeaways

While Heimeshoff gave ERISA plan sponsors, administrators and participants guidance that a three-year benefit limitations period (as written in that particular Plan) is reasonable, before relying on a similar provision in Plan documents, consideration must also be given to what the controlling state law states with respect to policy provisions and whether that law could be considered as one that regulates insurance in such a way to defeat ERISA preemption.  Likewise, contractual limitations periods should be reviewed to ensure that they are reasonable (as noted by Heimeshoff), but the particular state law at issue may play a significant role as to whether the contractual period will be controlling.