Defending an ERISA claim is a substantial investment — both of time and money. One way to ensure dismissal of litigation at an early juncture is by demonstrating that the action is time-barred. Whether the claim is time-barred turns on when it accrued.
The Heimeshoff Decision
The Supreme Court’s December 16, 2013 decision in Heimeshoff v. Hartford Life & Accident Ins. Co., No. 12-729 (Dec. 16, 2013) provides defense counsel with ammunition to begin accruals on an early date, thus making it more likely that a defense based on limitations will succeed.
Julie Heimeshoff filed a claim for long-term disability benefits from her employer’s LTD plan. Heimeshoff exhausted the administrative review process and nearly three years later filed suit.
The Plan’s terms required Heimeshoff to sue within three years of the time that proof of loss was due under the Plan. Under those terms, Heimeshoff’s three-year period actually ran out a year after the final denial was made. ERISA provides that accrual ordinarily begins upon a claim’s final denial, but is silent as to whether parties can contract for an earlier date.
The Supreme Court concluded that the plan terms controlled to render Heimeshoff’s claim time-barred because the plan’s limitation period was reasonable and not contrary to controlling authority.
The Supreme Court held that the Plan’s three-year period beginning when proof of loss was due was not unreasonable because Heimeshoff had nearly one year after the administrative review process concluded to file suit. The Supreme Court was also not persuaded that the three-year period undermined ERISA’s remedial scheme. It disagreed that participants would shortchange the internal review process or that circumstances like Heimeshoff’s were common. The Court emphasized that three-year time bars only stop claims by participants that have not diligently pursued their rights. Traditional doctrines such as waiver, estoppel, and equitable tolling can protect those who are barred notwithstanding their diligence.
What Does this Mean for Employers?
As we have previously noted, the Courts regularly hear cases challenging the enforceability of plan terms. The Supreme Court’s Heimeshoff decision continues the trend of giving priority to ERISA plan terms in the face of such claims. Employers should craft reasonable, favorable plan language on accrual of claims. Benefits statements and summary plan descriptions should advise participants that accrual of claims challenging a benefit determination occurs upon notice and not upon a final denial. After all, the right to file a claim for ERISA benefits is not limited to benefits when due, but also covers claims to enforce a right to “clarify [ ] rights to future benefits under the terms of the plan.” 29 USC § 1132(a)(1)(B).