ERISA does not generally provide a statute of limitations for claims for benefits.  Therefore, courts will generally use the statute of limitations for breach of contracts action from the state where the court is located to determine the appropriate limitations period.  In other words, if a case is filed, as this case was, in the United States District Court for the District of Connecticut, the court will use the Connecticut state law statute of limitations for breach of contract actions for ERISA benefit claims.  However, ERISA plans may set their own contractual limitations periods which will be enforced so long as they are not unreasonably short or a controlling statute otherwise precludes the contractual limitations provision from taking effect.

In this case, the petitioner and plaintiff was a participant in a long-term disability (“LTD”) plan administered and insured by the respondent and defendant, Hartford Life and Accident Insurance Company (“Hartford”).  The plan required that a lawsuit be filed within three years of when proof of claim was due, rather than from when a final denial was issued.  Under the plan, proof of claim was due within 90 days after the start of the period for which Hartford would owe payment.

Provisions such as these are very common among LTD plans, particularly insured LTD plans.  For example, plans frequently require that a participant submit proof of claim within 180 days after the participant claims to have initially become disabled.  Likewise, plans frequently require, as was the case here, that proof of claim be filed within three years after proof of claim was due.  Combining these requirements, this would mean that a lawsuit would be required to be filed within three years and 180 days after the initial disability, regardless of when a final denial was issued with respect to the participant’s claim for benefits.

Plaintiff stopped working due to claims of fatigue, pain, and difficulty concentrating in June 2005, and she filed a claim with Hartford in August 2005.  Plaintiff’s claim was initially denied in November 2005, but Hartford reopened the claim without an appeal in order to allow plaintiff to submit additional medical evidence.  After that evidence was submitted, Hartford again denied her claim in November 2006.  Plaintiff had 180 days from the date of that denial to appeal.  In May 2007, plaintiff requested and was granted an extension to file her appeal until September 30, 2007, and she, in fact, filed her appeal on September 26, 2007.  Hartford issued its final denial on November 26, 2007.  At that point, approximately two years had already passed since Plaintiff’s proof of claim was initially due.

Plaintiff commenced her lawsuit on November 18, 2010, which was within three years after the final denial, but more than three years after proof of claim was due.  The district court dismissed her complaint as having been filed beyond the plan’s limitations period and the Second Circuit affirmed.  The Supreme Court accepted the case to resolve a circuit split as to whether a plan’s limitations period could begin to run before a final denial was entered.

Plaintiff argued that the plan’s limitations period runs afoul of the general rule that statutes of limitations begin to run once the cause of action accrues and that her cause of action did not accrue until Hartford finally denied her claim.  In a unanimous opinion, the Supreme Court rejected this argument, continuing to stand by the principle that the plan may contractually set a specific limitations period, even if it begins to run before the cause of action accrues, so long as the period is reasonable.

As the Court noted, neither plaintiff nor the United States, which submitted an amicus brief on plaintiff’s behalf, claimed that the plan’s limitations period was unreasonable on its face.  Although it took longer – approximately two years – than in most cases for a final denial to be issued, the Court also noted that plaintiff did not allege that a one-year limitations period which began to run after a final denial was issued would be unreasonable.  A one-year, post-denial limitations period would have, effectively, left plaintiff with the same result.  The Court noted that, in most claims under the plan in which the administrative process did not take so long, claimants would have longer than one year after a final denial to file a lawsuit.

The Court also rejected the arguments by plaintiff and the United States that the plan’s limitations provision would undermine ERISA’s two-tiered remedial scheme, requiring that administrative appeals be exhausted before a lawsuit is filed.  Plaintiff and the United States argued that, if the plan’s limitations provision was strictly followed, participants would not take full advantage of the administrative appeals process in order to have greater opportunity for judicial review.  The Court rejected this argument for two reasons.  First, the Court noted that courts generally limit the evidence during judicial review to the administrative record created during the internal review and that, as a result, failure to prevent evidence during the administrative review would also likely prevent that evidence from being considered in a lawsuit.  Likewise, the Court also noted that many plans grant discretion to the administrator to make benefits determinations, as was the case with Hartford.  When there is an adequate grant of discretion, courts review those determinations for abuse of discretion only.  Thus, claimants are not likely to place a higher value on judicial review than internal review.

The Court also rejected the argument that following the plan’s limitations period would encourage delay.  The Court noted that there was no significant evidence to support that such provisions actually prevented judicial review as plaintiff had only identified a handful of cases in which those provisions resulted in actions being time-barred and that, in those cases, it was largely the fault of the plaintiff for not diligently pursuing their actions.

With respect to cases where administrators could be alleged to have intentionally delayed a final resolution in order to avoid the possibility of judicial review, the Court noted that courts could consider whether the doctrines of waiver, estoppel, and/or equitable tolling would preclude the administrator from invoking the plan’s limitations period.

Thus, the Court unanimously held that the plan’s limitations period should be enforced and that, under that limitations period, plaintiff had failed to timely commence her action.  Therefore, the Court affirmed judgment in favor of Hartford.

This case is an important reminder for plan sponsors to consider the possibility of litigation when they design their plans.  This decision reaffirms that, so long as a plan imposes a limitations period that is not unreasonably short, that provision is likely to be upheld.  Therefore, it is in the interest of ERISA plan sponsors and administrators to include those provisions in their plans.

The case is Heimeshoff v. Hartford Life & Accident Insurance Co., No. 12-729 (U.S. Dec. 16, 2013).