On December 16, 2013, the United States Supreme Court upheld a limitations period in a long-term disability plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). In Heimeshoff v. Hartford Life & Accident Insurance Co., the Court resolved a split among the U.S. Circuit Courts of Appeal, and held that an ERISA plan may contain an enforceable limitations period, even one that begins to run before the cause of action accrues, as long as the period is reasonable.
Julie Heimeshoff was employed by Wal-Mart, and participated in the company’s long-term disability plan, under which benefits were provided through an insurance policy. The policy included a limitations period for filing suit for wrongful denial of benefits under ERISA § 502(a)(1)(B). Specifically, the policy provided that “Legal action cannot be taken against [the insurer] . . . [more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.” Heimeshoff filed a claim for benefits in August 2005, which was denied. After the insurer granted Heimeshoff’s request for an extension of time to file an appeal, it issued a final denial of her claim on November 26, 2007.
On November 18, 2010, almost three years after the final denial, Heimeshoff filed suit in federal court under ERISA. The insurer moved to dismiss on the grounds that the Heimeshoff’s claim was untimely under the plan’s three-year limitations period. Heimeshoff countered by arguing that the limitations period should begin to run on the date of the final denial, or upon exhaustion of her administrative remedies. The district court found that the limitations period was enforceable and granted the motion to dismiss. The Second Circuit Court of Appeals affirmed. The Supreme Court granted certiorari to resolve the split among the Courts of Appeals regarding these “common contractual limitations periods.”
Supreme Court’s Analysis
The Supreme Court upheld the Second Circuit’s decision, and held that the plan’s three year limitations period was reasonable and enforceable. The Court noted that ERISA does not provide a statute of limitations for claims under Section 502(a)(1)(B), and that courts have generally looked to the most analogous state statute of limitations. The Court also noted that a statute of limitations frequently begins to run when a cause of action “accrues,” or “when ‘the plaintiff can file suit and obtain relief.” However, the Court found that these rules were inapplicable because, in this case, “the parties have agreed by contract to commence the limitations period at a particular time.”
Relying on U.S. Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013) and CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the Supreme Court continued to emphasize the importance of enforcing ERISA plan terms as written. Therefore, it explained that, unless a limitations period is unreasonably short or a controlling statute prevents the limitations period from taking effect, a plan’s limitations period must be enforced, even if it commences before the administrative process has concluded.
The Court found that the three-year limitations provision was not unreasonably short because administrative review typically takes one year under the applicable ERISA regulations, which would leave a participant with another two years to file suit under ERISA. The Court also held that no controlling law prevented the enforcement of the plan’s limitations provision. Heimeshoff contended that this framework would undermine the administrative review process because claimants would “shortchange their own rights” in order to secure additional time to seek judicial review. The Court dismissed this argument, reasoning that it is in a participant’s best interest to present evidence during the administrative stage. Further, the Court rejected the argument from the United States that plan administrators would attempt to delay resolution of claims in bad faith during the administrative process. The Court explained that ERISA’s regulations require prompt action during the administrative review, and, in any event, such conduct could provide a basis for a waiver or estoppel defense to a statute of limitations.
What Heimeshoff Means For ERISA Plan Administration
The Supreme Court’s decision resolves a split among the U.S. Circuit Courts of Appeal regarding the enforceability of ERISA plan limitations periods, and makes clear that ERISA does not require a contractual limitations period to be based on the time period following a participant’s exhaustion of his or her administrative remedies. ERISA plan sponsors and administrators should review their plan documents, including summary plan descriptions, to ensure that the limitations periods contained therein are reasonable, in accordance with Heimeshoff. Those with plans that do not include limitations provisions may want to consider amending their plan documents to add a reasonable limitations period. Adding such a provision will prevent a court from turning to the most analogous state law limitations period and would prevent the burden of different limitations periods in cases in different jurisdictions.