In Heimeshoff v. Hartford Life & Accident Ins. Co. 134 S. Ct. 604 (2013), the Supreme Court held that an ERISA disability plan’s three-year limitations period, running from the date of proof of loss, was enforceable even though the statute of limitations began to run before the participant’s cause of action accrued. The case contains important lessons for plan sponsors, well beyond the narrow ruling of the case.
The group long-term disability plan of Wal-Mart Stores, Inc. provided that any suit to recover benefits must be filed within three years after “written proof of loss” is due. Generally, written proof of loss must be sent to the insurer within 90 days after the start of the period for which the employee claims disability benefits. Under the Wal-Mart plan, the limitations period begins before the participant can exhaust the plan’s claims procedures and before the right to sue for benefits accrues under ERISA Section 502(a)(1)(B).
In 2005, Julie Heimeshoff filed a claim with Hartford for long-term disability benefits. The insurer issued its final denial in 2007. In 2010, she filed suit for benefits under ERISA, more than three years after proof of loss had been due, but less than three years from the date of Hartford’s final denial.
Supreme Court Enforces Plan’s Limitations Period
The district court enforced the plan’s limitations period and dismissed Heimeshoff’s lawsuit. After the Court of Appeals for the Second Circuit affirmed, the Supreme Court granted certiorari to resolve a split among the courts of appeals on this issue.
In a unanimous decision written by Justice Thomas, the Supreme Court held that courts should enforce the limitations period as written in the Wal-Mart plan because such period is reasonable and there is no controlling statute to the contrary.
Justice Thomas’ opinion is noteworthy for its detailed discussion of ERISA exhaustion principles that the Supreme Court had not previously addressed. In Heimeshoff, the Supreme Court unanimously recognized that “courts of appeals have uniformly required that participants exhaust internal review before bringing a claim for judicial review under §502(a)(1)(B)” and that a participant’s cause of action for ERISA benefits “does not accrue until the plan issues a final denial.”
ERISA does not prescribe a statute of limitations for bringing a suit for benefits. Accordingly, courts typically apply the state statute of limitations for breach of written contracts, which are often five or more years long. Relying on the common-law principle that such statutes of limitations can be shortened by agreement of the parties, many ERISA plan sponsors have adopted plan provisions that limit the period for filing suit.
In Heimeshoff, Justice Thomas noted that “the critical aspect of this case” is the plan term commencing the period of limitations at the date of proof of loss and found that “[t]he principle that contractual limitations provisions ordinarily should be enforced as written is especially appropriate when enforcing an ERISA plan.” The Court emphasized the critical importance of the plan document, as noted in recent Supreme Court cases, including US Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013); Conkright v. Frommert, 559 U.S. 506 (2010); Kennedy v. Plan Administrator for DuPont Sav. and Invest. Plan, 555 U.S. 285 (2009); and Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003).
The Supreme Court rejected the arguments from Heimeshoff and the Department of Labor (DOL) that the limitations period in the Wal-Mart plan would undermine ERISA’s remedial scheme of internal review of denied claims followed by judicial review. The Court noted that the DOL claims regulations “structure internal review to proceed in an expeditious manner.” The Court found there was no indication that such limitations periods, which are “quite common,” diminish the opportunity for judicial review. Moreover, to the extent that administrators attempt to prevent judicial review by delaying the resolution of claims in bad faith, the consequence of failing to meet the regulatory deadlines is immediate access to judicial review for the participant.
ERISA Lessons for Plan Sponsors
Heimeshoff teaches important lessons to plan sponsors:
- Serious consideration should be given to adopting a reasonable limitations period for each ERISA plan. The period of limitations should run from a date certain rather than from the plan’s final denial of a claim. If the period runs from the date of proof of loss in a disability plan, for example, benefit decisions will more likely be made based on timely information rather than years after critical events.
- Plan claims procedures should comply with DOL regulations and expeditiously adjudicate benefit claims in accordance with those regulations.
- Plan sponsors should regularly review and update each plan document to be sure the document is current and compliant. The Supreme Court’s decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), made clear that the plan document, not the summary plan description, is the critical legal document that courts will review to determine disputes regarding the ERISA benefits.
- The Supreme Court has continued its skepticism in recent years regarding ERISA arguments advanced by the DOL. In Conkright, in part in Amara, and now in Heimeshoff, the Court has rejected the DOL’s views as to important ERISA issues. Later this year, in Fifth Third Bancorp v. Dudenhoeffer, 692 F.3d 410 (6th. Cir. 2012), cert. granted, 82 U.S.L.W. 3364 (U.S. Dec. 13, 2013) (No. 12-751), the Supreme Court will decide whether investments in employer stock are entitled to a “prudence presumption” under ERISA and whether that presumption should apply at the pleadings stage of an ERISA “stock-drop” lawsuit. The DOL’s amicus brief in this case has argued against this presumption, an argument rejected by most courts of appeals. ERISA practitioners will watch closely to see what weight the Supreme Court gives to the views of the DOL.