In Heimeshoff v. Hartford Life & Accident Insurance Co.,1 the U.S. Supreme Court upheld a long-term disability plan’s right to contractually set the statute of limitations for filing a claim in court even if that limitations period starts running before the plan’s internal procedures are exhausted.
ERISA’s Rules on Claims for Plan Benefits
One of the primary purposes of the Employee Retirement Income Security Act (ERISA) is to protect participants’ access to promised benefits. To accomplish that purpose, ERISA requires plans to establish and maintain internal administrative claims and appeals procedures to address participant disputes over plan benefits. ERISA also gives a claimant the right to bring a civil action under §502(a)(1)(B) to recover benefits due under the terms of a plan, but courts have generally required participants to first exhaust the plan’s internal claim and appeals procedures before filing suit in court.
By regulation, there are very specific minimum requirements for the internal procedural timeline to file a claim and appeal the denial of a claim. Because ERISA does not specify a statute of limitations for filing suit after the internal procedures are exhausted, courts apply the limitations period applicable to the most analogous state statute. Thus, identical lawsuits brought in different states could have very different limitations periods, so many plans started incorporating their own limitations periods and establishing their own deadlines for when a claim may be filed in court. Courts generally have upheld the plans’ self-imposed deadlines for filing lawsuits, but could not agree on whether a plan’s limitations period could start running before the claimant had exhausted the internal procedures (i.e., not until after a final denial from internal review) or whether a shorter or earlier contractual limitations period should be upheld.2
Heimeshoff v. Hartford
The plaintiff in Heimeshoff, a Wal-Mart employee named Julie Heimeshoff, submitted a claim under Wal-Mart’s ERISA covered long-term disability plan in 2005. The plan included a three-year limitations period for filing a claim in court and started that period on the date that proof of loss was required to be submitted to the plan (90 days after the start of the period for which Hartford would be responsible for payments). Hartford (the insurer) denied Ms. Heimeshoff’s claim in December 2005 because she had failed to provide requested information regarding her claim). Ms. Heimeshoff appealed, using counsel, and received a final denial from Hartford on November 25, 2007.
Ms. Heimeshoff ultimately filed suit on November 18, 2010 – within the three years after the final denial of her claim, but more than three years after the plan’s limitations period started to run (which ran from the date that proof of loss was required to be submitted to the plan). The U.S. District Court for the District of Connecticut and the U.S. Court of Appeals for the Second Circuit ruled in favor of Hartford.
The U.S. Supreme Court agreed with the Second Circuit, finding that, while a plan participant’s cause of action under ERISA § 502(a)(1)(B) does not accrue until the plan issues a final denial, a plan and its participants can agree to commence the limitations period before that time.
A unanimous Supreme Court found that a limitations period specified in an ERISA plan is enforceable so long as the period is of reasonable length, and there is no controlling statute to the contrary.3 The Court recognized the importance of allowing employers to set plan terms and for courts to enforce those plan terms. The Supreme Court did not believe that allowing the statute of limitations to run simultaneously with the internal administrative review would undermine ERISA’s remedial scheme or endanger judicial review. Further, the Supreme Court was comfortable relying on general principles of estoppel to remedy the few situations where a participant would be time barred and pointed to ERISA remedies for going directly to court when the administrator exhibits bad faith or fails to respond in a timely manner.
Plan Administrators Will Want to Review ERISA Plan Terms
Plan administrators will want to review their ERISA plans to ensure that they explicitly set forth a limitations period and describe when that limitations period begins. Setting forth these terms will enable plans to limit liability and predict how long a potential claim against the plan will remain outstanding.
Although the Court did not state how long a limitations period must be to be considered reasonable, the Court found the three-year statute of limitations to be reasonable because it provided ample time for a participant to file suit after a typical one-year internal review process. Plan administrators may also want to re-evaluate the benefit of providing additional internal appeals beyond what is required by ERISA regulation, because any such additional levels of appeal will toll the plan’s statute of limitations period, thereby lengthening the time a claimant has to file suit.