Approximately six months ago, the Supreme Court of the United States, in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), addressed whether an employee benefit plan covered by the Employee Retirement Income Security Act (ERISA) may include a particular limitations period that starts to run before the cause of action accrues, that is, when the plaintiff can file suit and obtain relief. The Supreme Court held that the plan’s three-year limitations provision was enforceable and barred the employee’s judicial action under ERISA.

In Heimeshoff, the plan specified that the limitations period began to run when the proof of loss was due, which was before the employee-plaintiff could exhaust the plans’ administrative review process. After the plaintiff had received a final decision on his claim for benefits, he still had approximately one year left in which to file suit under the plan’s three-year limitations period, but did not file suit until almost three years after he received the final decision. The Court held that one year was reasonable, and the plaintiff’s action was time-barred. The Supreme Court left open the question of how to measure the time to bring a legal action where the accrual date used in the plan’s limitations provision, when applied to the facts of a particular case, makes it impossible for the plaintiff to file a timely suit.

On June 25, 2014, the Northern District of Illinois answered this question in a case in which Ogletree Deakins represented the defendants,. In Nathan v. Unum Life Insurance Company of America, No. 13-cv-8706 (N.D. Ill. June 25, 2014), the plaintiff filed a claim for benefits under section 502(a)(1)(B) of ERISA. The plaintiff received short-term disability benefits and 24 months of long-term disability benefits under the plan. After 24 months, the defendant terminated the disability benefits.

The plan contained a deadline for commencing legal action of three years from the date that the proof of claim was due. The plaintiff could not have sued within three years of the date that proof of claim was due because he received benefits for two years and did not exhaust his internal remedies until after three years from proof of claim. The plaintiff then waited four-and-one-half years after the final administrative denial of benefits to file suit.

The defendants moved to dismiss the complaint as untimely under the policy. They argued that because the plan’s three-year limitations period had run before the plaintiff had exhausted his administrative remedies, the proof-of-claim accrual provision did not apply. However, the defendants reasoned that the three-year period in the plan should still apply and the default accrual rule, which starts the running of a limitations period at the time of the final benefit denial, should apply.

The U.S. District Court for the Northern District of Illinois ruled in the defendants’ favor and dismissed the complaint with prejudice on the ground that it was not filed within the contractual limitations period found in the plan. The court agreed with the defendants’ reasoning, specifically ruling, “Given the Supreme Court’s direction in Heimeshoff and the Fourth Circuit’s sound reasoning in Belrose [v. Hartford Life & Accident Insurance Co., (4th Cir. 2012)], this Court agrees with the defendants that the plan’s three-year limitations provision should be applied to plaintiff’s claims, with an accrual date tolled to when the plaintiff received the defendants’ final decision on June 18, 2009.” The court added that “this approach is consistent with the Supreme Court’s directive that ‘where parties have adopted a limitations period by contract . . . there is no need to borrow a state statute of limitations.’”

So, employers with plans devoid of limitations provisions should consider the wisdom of including such provisions as they are enforceable if reasonable and will likely prevent the application of significantly longer “borrowed” state statutes of limitations even where, as here, the accrual date is inapplicable. In the context of insured plans, if a limitations provision is included in the plan, each ERISA plan sponsor and administrator should confirm that its ERISA plan includes a legal action provision that comports with state insurance law.