This morning, the United States Supreme Court issued its decision in Heimeshoff v. Hartford Life & Accidental Life Ins. Co., concerning statute of limitation accrual issues for benefit claims under Section 502(a)(1)(B) of ERISA.
The Court unanimously held that Hartford’s Long Term Disability Plan’s requirement that any suit to recover benefits be filed within three years after “proof of loss” is due is enforceable. More specifically, “[a]bsent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.” Causes of action for benefits under ERISA do not start to accrue until a final internal appeal decision. Because Heimeshoff failed to file a claim for long-term disability benefits with Hartford within the contractual SOL period, the Court concluded her claim was rightfully denied by Hartford.
While ERISA does not provide a statute of limitations for denial of benefit claims, many plan administrators have in place a contractual 3-year limitations period like Hartford’s. Writing for the unanimous Court, Justice Thomas held the Plan’s limitations provision enforceable under the rule set forth in Order of United Commercial Travelers of America v. Wolfe, 331 U. S. 586, 608, which provides that a contractual limitations provision is enforceable so long as the limitations period is of reasonable length and there is no controlling statute to the contrary. This conclusion was especially supported, according to the Court, by the ERISA principle that contractual limitations should be enforced as written under ERISA’s written plan rule.
There may still be limitations in place in the future to finding these contractual SOLs valid. If the limitations period is unreasonably short or if there is a controlling statute to the contrary, the Plan’s limitations provision can be overridden. Moreover, the Court held that courts are well-equipped to apply traditional doctrines, such as waiver or estoppel and equitable tolling, that nevertheless may allow participants to proceed on stale claims. However, consider in this regard Heimseshoff in light of U.S. Airways vs. McCutcheon.
Although Heimeshoff says traditional equitable doctrines may circumscribe application of statutes of limitations to protect participants, McCutcheon said plans can include terms that explicitly preclude application of traditional equitable doctrines. So does this mean that employers will quickly amend their plans to preclude application of equitable doctrines? It very well could be the case.
Here, in any event, the period was not unreasonably short and, in fact, most internal benefit appeals are completed within one year so that there should be sufficient time for most ERISA plaintiffs to bring their suit in a timely manner. Even Justice Ginsburg remarked in oral argument that there might have been essentially legal malpractice in this case in that Heimeshoff’s attorney may have failed to diligently pursue her claim (she had about a year to file her case even after her internal appeal had been finally denied).
Although this decision may not be that important in the long-run as there is not much evidence that plan administrators have used these SOLs to prevent participants from bringing claims, the one part of the decision that seemed fanciful to me was this idea that plan participants and beneficiaries “agree” with their plans to these SOLs. The Court said this with regard to this critical aspect of the case: “the parties have agreed by contract to commence the limitations period at a particular time.”
As I wrote previously when oral argument occurred in this case in October, benefit plans are classic contracts of adhesion with usually no bargaining between the parties taking place. It is legal fiction to say that most participants consented to this provision. Nevertheless, it is hard to argue, under the circumstances, that this unilateral term is unreasonable, as long as equitable principles and regulations exist to prevent plan administrators from gaming the system to prevent judicial review of claims decisions. Whether such equitable principles will continue to exist, however, post-Heimeshoff and McCuthcheon is anyone’s guess but I am skeptical.
I somewhat called this case. Here is what I wrote in October: “I fear this pro-employer/pro-plan sponsor court will adopt the written plan requirement rule and permit the plan sponsor to unilaterally set in the plan document an accrual date and a length for the statute of limitations.”
[Cross-posted at Workplace Prof Blog.]