The U.S. Supreme Court addressed the question of when, under the Employee Retirement Income Security Act (ERISA), the statute of limitations begins to run for judicial review of an adverse disability-benefit determination (Heimeshoff v. Hartford Life & Accident Ins. Co., U.S., No. 12-729). It considered the issue on Oct. 15, 2013.
The case is on appeal from the 2nd U.S. Circuit Court of Appeals, which enforced a contractual agreement stating that the limitations period began when the employee’s proof of loss was due, not upon the final denial of the request for benefits. How long a participant has to bring a legal action challenging a claims denial is set by the limitations period.
Lower Courts Rule for Insurer
In 2005, Wal-Mart employee Julie Heimeshoff applied for long-term disability benefits from a plan managed by Hartford Life & Accident Insurance Co. Heimeshoff suffered from fibromyalgia and chronic pain. Hartford denied her claim in December 2005, concluding she had failed to provide satisfactory proof of her disability. After an appeal, Hartford issued its “last and final denial letter” on Nov. 25, 2007, according to Heimeshoff.
The Hartford plan had a three-year limitations period for legal actions challenging adverse benefit determinations. The plaintiff filed a lawsuit challenging Hartford's decision on Nov. 18, 2010. Hartford moved to dismiss her claim, arguing that it was barred by the limitations period. According to Hartford, the plan required Heimeshoff to file suit by Dec. 8, 2008, which was three years after her “proof of loss” was due to Hartford.
A federal district court in Connecticut sided with the insurer, concluding that the Hartford policy “unambiguously” provided that no legal action could be brought more than “3 years after the time written proof of loss is required to be furnished according to the terms of the policy.” Proof of loss must be submitted “within 90 days after the start of the period for which The Hartford owes payment,” the district court said. It found these provisions to be unambiguous and, thus, granted Hartford's motion to dismiss Heimeshoff's claim as time-barred.
The 2nd Circuit affirmed the ruling. It held that ERISA does not prohibit a contractual limitations period that begins to run before the time that an ERISA plan issues a final claim denial, causing the claimant's legal claim to accrue. Here the “policy language is unambiguous,” and it does not violate ERISA “to have the limitations period begin to run before the claim accrues,” the appellate court said.
Is Contractual Limitation Period Enforceable?
Arguing on behalf of Heimeshoff, Matthew W.H. Wessler of Public Justice PC in Washington,D.C., urged the court to strike down the contractual limitations period.
This provision “directly conflicts with ERISA's two-tiered remedial structure” and makes it “impossible for anyone to know in advance how much time will be left on the limitations clock after the internal process is complete,” Wessler argued.
Representing the insurance company, Catherine Carroll of WilmerHale's Washington, D.C., office defended the limitations period, contending that ERISA gives employers “broad leeway to choose the terms on which they agree to provide benefits.” Carroll asked the justices to uphold the terms of the plan, saying that “suits for benefits due under an ERISA plan can seek only to enforce those agreed-upon terms.”
Nicole Eichberger, an attorney in Proskauer Rose LLP's New Orleans office, told SHRM Online that “although it is hard to read the tea leaves of the court,” the justices could affirm the district and circuit court opinions without tackling the larger issues presented. “All the justices, except for Clarence Thomas, were engaged and posed questions,” she noted. “Each justice had thoughts about how to resolve the question presented.” However, it is not clear that the eventual decision will provide clarity for employers going forward, Eichberger added.
Lessons for HR
“An important takeaway for HR is to understand what your [benefits] plan says, how it says it, how clear it is,” she stressed. “Why is a particular provision in the plan? If you provide a time limitation, how does that relate to the exhaustion process?”
Also, HR professionals should examine the procedures the plan provides. “Look at the process required for exhaustion. Make sure you [are using] best practices,” she advised.
Joanne Deschenaux, J.D., is SHRM’s senior legal editor.