On December 16, 2013, the Supreme Court issued its decision in Heimeshoff v. Hartford Life & Accident Ins. Co. The Court held that an ERISA plan provision setting forth a limitations period for commencing a court action challenging a benefit claim denial, and specifying the date on which that limitations period begins, is enforceable so long as the limitations period is not unreasonably short. In light of this ruling, plan sponsors should review their welfare and retirement plan documents and consider incorporating limitation periods if those documents do not already provide one.
The plaintiff, Julie Heimeshoff, participated in an ERISA-covered disability plan under which benefits were provided through an insurance policy. The policy – a plan document for this purpose – included the following language establishing a limitations period for commencing court actions for benefit claims: “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” (the “Plan Limitations Provision”).
In August 2005, Heimeshoff filed a claim for benefits under the plan, which the insurer denied. After the insurer granted her an extension of time, Heimeshoff requested that the insurer review the denial and filed additional information to support her claim in September 2007. The insurer denied that appeal on November 26, 2007. Almost three years after the final denial, on November 18, 2010, Heimeshoff brought suit under ERISA against the insurer and the plan sponsor in federal district court in New York, seeking review of the denial of her claim.
The district court dismissed the complaint as barred by the Plan Limitations Provision. In particular, the district court rejected Heimeshoff’s argument that the three-year period prescribed by the Plan Limitations Provision should have begun to run on the date of the insurer’s final denial her benefits appeal.
The federal court of appeals based in New York affirmed. The Supreme Court agreed to review the decision to resolve a split among the federal courts of appeals regarding the enforceability under ERISA of plan-based limitations periods like the one set forth in the Plan Limitations Provision. The federal government sided with Heimeshoff and urged the Supreme Court to hold that the Plan Limitations Provision was contrary to ERISA and unenforceable.
The Supreme Court’s Analysis
A unanimous Supreme Court affirmed the court of appeals decision, holding that the Plan Limitations Provision was enforceable against Heimeshoff and required dismissal of her complaint.
The Court observed that ERISA does not provide a statute of limitations for actions challenging benefit claim denials, and that, in general, courts have borrowed the most nearly analogous state statutes of limitations. However, relying on precedent developed in contract cases where the parties had agreed to a specific limitations period, the Court decided that it must enforce the Plan Limitations Provision as written, unless it determined that either (i) the applicable limitations period was unreasonably short, or (ii) controlling law prevented that plan provision from taking effect.
The Court determined that the period specified under the Plan Limitations Provision – three years from the date “proof of loss” is due – was not unreasonably short, even though a claimant generally could bring suit only after exhaustion of the administrative claims procedures under applicable ERISA regulations.
In this regard, the Court noted that those administrative procedures typically would be exhausted within a year, leaving the claimant with another two years to file a court action challenging the claim denial. Even in Heimeshoff’s case, where the claims procedures took longer than usual, she had almost one year to bring suit after the final denial of her claim and before the end of the three-year period in the Plan Limitations Provision.
The Court also concluded that no controlling law prevented enforcement of the Plan Limitations Provision. Heimeshoff and the federal government argued that application of the Plan Limitations Provision would undermine the goals of the ERISA regulations that prescribe administrative claims procedures because the longer the claimant and plan took in working through those procedures, the shorter the claimant would have after conclusion of the procedures to file suit.
The Court rejected this argument, explaining that this circumstance would not, as a practical matter, cause claimants to fail to develop evidence at the administrative review stage because it is in the interest of claimants to pursue an efficient resolution through the administrative procedures (and, in any event, to establish an adequate administrative record in case they decide to challenge the administrative determination in court).
The Court also disagreed with the government’s suggestion that plan administrators would attempt to delay claims processing under the administrative procedures in order to shorten the effective limitations period following conclusion of those procedures.
It noted that such a tactic would be inconsistent with ERISA’s claims procedures regulations, that such conduct could provide a basis for using waiver or estoppel principles to prevent the administrator from raising the limitations defense, and that, in any event, there was no substantial historical evidence that the application of limitations periods like the one in the Plan Limitations Provision had actually thwarted judicial review of claim denials.
Considerations for Plan Sponsors
In light of the Heimeshoff decision, plan sponsors should review their welfare and retirement plan documents and consider whether it would be advantageous to add limitations periods on benefits claims to plans that do not currently provide for one. In this regard, ERISA does not by its terms provide a statute of limitations for benefit claims.
In general, in determining the deadline for bringing a court action under ERISA to challenge a benefit denial, courts have borrowed the statute of limitations for the “most analogous” type of claim under the law of state where the suit is brought (or, in some cases, the governing state law specified in plan documents).
This has led to inconsistency and uncertainty, with the limitations period in some cases being as short as six months and in others as long as 15 years. Incorporating a limitations period into the plan document can reduce uncertainty and promote consistency, fairness, and efficiency.