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WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court on Dec. 16 ruled that the contractual limitations provision of a disability benefits plan that requires participants to bring suit within three years after “proof of loss” is due is enforceable under the Employee Retirement Income Security Act, even if the limitations period commences before the plan resolved the claim for benefits (Julie Heimeshoff v. Hartford Life & Accident Insurance Co., et al., No. 12-729, U.S. Sup.; See November 2013, Page 16).
Writing for a unanimous court, Justice Clarence Thomas said that “[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.”
Julie Heimeshoff worked for Wal-Mart Stores Inc. and was insured under Wal-Mart’s Group Long Term Disability Plan. In August 2005, she filed a claim for disability benefits based on fibromyalgia. In November 2005, Hartford, the plan administrator, asked for clarification, stating that it could not determine whether she was disabled.
Hartford denied the claim in December 2005 for failure to provide satisfactory proof of loss because it did not receive clarifying information. However, Hartford informed Heimeshoff of the right to administratively appeal the decision within 180 days and stated that Heimeshoff was required to exhaust her administrative remedies before she could file suit. The letter did not provide the time limit to bring a civil action.
In May 2006, Hartford said it would reopen the claim if Heimeshoff provided clarification of her functionality. Heimeshoff provided that information in October 2006, but Hartford denied her claim in November 2006. Hartford extended the deadline for filing additional information to Sept. 30, 2007. Heimeshoff appealed the benefits denial on Sept. 26, 2007. Hartford denied the appeal on Nov. 26, 2007, indicating that her internal appeal remedies had been exhausted. The letter notified Heimeshoff that she could bring a civil action under ERISA but did not provide the time limits for filing a lawsuit.
Heimeshoff sued Hartford in the U.S. District Court for the District of Connecticut on Nov. 18, 2010, within three years of the final denial but more than three years after proof of loss was due. Heimeshoff sought review of her denied claim pursuant to ERISA Section 502(a)(1)(B). The District Court granted Hartford’s motion to dismiss, finding that the complaint was barred by the plan’s three-year statute of limitations.
In affirming, the Second Circuit U.S. Court of Appeals said “Hartford’s plan provided that its three-year limitations period ran from the time that proof of loss was due under the plan. The policy language is unambiguous and it does not offend the statute to have the limitations period begin to run before the claim accrues. Appellant filed her claim challenging the denial of long-term disability benefits more than three years after her proof of loss was due.”
In affirming, the Supreme Court rejected Heimeshoff’s argument that because proof of loss is due before a participant can exhaust internal review, the contractual period runs afoul of the general rule that statute of limitations commence upon accrual of the cause of action.
The Supreme Court noted that Section 502(a)(1)(B) does not specify a statute of limitations. Citing Order of United Commercial Travelers of America v. Wolfe (331 U. S. 586 ), the court said that parties are permitted “to agree not only to the length of a limitations period but also to its commencement.”
Moreover, “[t]he principle that contractual limitations provisions ordinarily should be enforced as written is especially appropriate when enforcing an ERISA plan. . . . This focus on the written terms of the plan is the linchpin of “a system that is [not] so complex that administrative costs, or litigation expenses, unduly discourage employers from offering [ERISA] plans in the first place,” the court said.
In addition, the court noted that “Section 502(a)(1)(B) authorizes a plan participant to bring suit ‘to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U. S. C. §1132(a)(1)(B) (emphasis added). That ‘statutory language speaks of “enforc[ing]” the “terms of the plan,” not of changing them.’”
Finding that the plan’s three-year limitations period was not unreasonably short, the court said that it would give effect to the provision unless it determined that a controlling statute prevented the limitations provision from taking effect.
The court rejected Heimeshoff’s argument that the limitations period will undermine ERISA’s two-tiered remedial scheme that provides for judicial review after exhaustion of the internal review process.
First, the court said that “participants have much to lose and little to gain by giving up the full measure of internal review in favor of marginal extra time to seek judicial review.” Second, “there is no significant evidence that limitations provisions like the one here have similarly thwarted judicial review. . . . ERISA regulations structure internal review to proceed in an expeditious manner. It stands to reason that the cases in which internal review leaves participants with less than one year to file suit are rare. Heimeshoff identifies only a handful of cases in which §502(a)(1)(B) plaintiffs are actually time barred as a result of this 3-year limitations provision.”
Moreover, the court said that “even in the rare cases where internal review prevents participants from bringing §502(a)(1)(B) actions within the contractual period, courts are well equipped to apply traditional doctrines that may nevertheless allow participants to proceed.”
Heimeshoff is represented by Matthew W.H. Wessler and Leah M. Nicholls of Public Justice in Washington and Leslie A. Brueckner and Arthur H. Bryant of Public Justice in Oakland, Calif.; Steven P. Krafchick and Carla Tachau Lawrence of Krafchick Law Firm in Seattle; and Peter K. Stris, Brendan S. Maher and Victor O’Connell of Stris & Maher in Gardena, Calif.
Hartford is represented by Catherine M.A. Carroll, Seth P. Waxman, Weili J. Shaw and Ari Holtzblatt of Wilmer Cutler Pickering Hale and Dorr in Washington.
Amicus United States, in favor of Heimeshoff, is represented by Solicitor General Donald B. Verrilli Jr. and Deputy Solicitor General Edwin S. Kneedler of the U.S. Department of Justice and Solicitor of Labor M. Patricia Smith, Associate Solicitor Timothy D. Hauser, Counsel for Appellate and Special Litigation Nathaniel I. Spiller and Attorneys Ginger D. Anders and Jamila Minnicks of the U.S. Department of Labor. All are in Washington.
Amici AARP and National Employment Lawyers Association, in support of Heimeshoff, are represented by Mary Ellen Signorille of AARP Foundation Litigation and Melvin Radowitz of AARP in Washington; Ronald Dean in Pacific Palisades, Calif.; Nina Wasow of Lewis Feinberg Lee Renaker & Jackson in Oakland, Calif.; and Rebecca Hamburg Cappy of NELA in San Francisco. Amicus United Policyholders, in support of Heimeshoff, is represented by Cassie Springer and Michelle L. Roberts of Springer & Roberts in Oakland; Amy Bach of United Policyholders in San Francisco; Tybe A. Brett of Feinstein Doyle Payne Kravec in Pittsburgh; and Glenn Kantor of Kantor & Kantor in Northridge, Calif.
Amici American Council of Life Insurers (ACLI), America’s Health Insurance Plans and The Chamber of the Commerce of the United States of America, in support of Hartford, are represented by William M. Jay and Joshua M. Daniels of Goodwin Procter; Carl B. Wilkerson and Lisa Tate of ACLI; Kate Comerford Todd, Steven P. Lehotsky and Jane Holman of National Chamber Litigation Center Inc.; and Joseph Miller and Thomas Wilder of America’s Health Insurance Plans. All are in Washington. Amicus DRI— The Voice of the Defense Bar, in support of Hartford, is represented by Mary Massaron Ross of DRI in Bloomfield Hills, Mich., Jerrold J. Ganzfried of Holland & Knight in Washington and Ariadna Alvarez of Holland & Knight in Fort Lauderdale, Fla.
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