What is the statute of limitations for filing a lawsuit in relation to benefit claim under the Employee Retirement Income Security Act? It’s a trick question because the ERISA statute does not prescribe a statute of limitations for claims seeking recovery of benefits under Section 502(a)(1)(B) of the act.[1]
Consequently, in determining the timeliness of a benefits suit, courts generally apply the most analogous state limitations period.
However, if the benefit plan contains a contractually defined limitations period that is shorter than the statutorily prescribed limit, the U.S. Supreme Court has directed the contractual period must be followed.
In Heimeshoff v. Hartford Life and Accident Insurance Co.,[2] the Supreme Court in 2013 determined that contractual limitations periods are enforceable and may start to run even before the contractual limitations period begins to accrue so long as the period within which suit may be filed is reasonable.
That ruling created considerable confusion, particularly with respect to disability benefit cases, since lawsuits result both from initial denials of benefits or from terminations of benefits after commencement.
In an effort to clear up confusion, the U.S. Department of Labor amended its claims regulations[3] to require that ERISA claim denials include notification of the time limit for filing suit.[4]
However, that regulation did not become effective until Jan. 1, 2018, and does not apply to claims that accrued earlier.
A decision earlier this month from an Illinois federal court addressed that situation.
In Hewitt v. Lincoln Financial Corp.,[5] the U.S. District Court for the Northern District of Illinois joined a growing chorus of rulings that have interpreted the prior version of the ERISA claim regulations to require what the revised regulations now explicitly mandate.
The plaintiff, Rodney Hewitt, filed suit against Lincoln and Liberty Life Assurance Company of Boston for breach of contract and breach of fiduciary duty in relation to a denial of disability benefits.
The defendant asserted the claim was time-barred and moved for dismissal. The court denied the motion to dismiss.
In 2013, Hewitt retired from Dow Chemical Co., but prior to his retirement, he applied for long-term disability benefits.
Hewitt’s claim was denied on Oct. 23, 2013; and on Dec.16, 2013, Liberty upheld its determination following Hewitt’s appeal of the denial.
Neither the claim denial letter, nor the letter denying Hewitt’s appeal, stated the applicable date by which he needed to file suit if he wished to challenge the denial. Hewitt filed suit on Dec. 14, 2018.
Although Liberty asserted the complaint was untimely because it was filed more than three years after both the initial claim disallowance as well as the appeal denial, the contractual limitations period specified in the governing policy of insurance, Hewitt responded that the complaint was not time-barred because Liberty failed to notify him of the time limitation as required by ERISA.
The court agreed with Hewitt based on the Labor Department’s claim regulation then in effect, which provided:
The plan administrator shall provide claimant written or electronic notification of any adverse benefit determination … in a manner calculated to be understood by the claimant … (iv) A description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring civil action under section 502(a) of the Act following an adverse benefit determination on review.[6]
The court noted that its determination was consistent with rulings issued by other courts that have interpreted the language quoted above as mandating a requirement imposed upon claim administrators to state the applicable limitations date — the 2015 Mirza v. Insurance Administrator of America Inc. decision in the U.S. Court of Appeals for the Third Circuit;[7] the 2014 Moyer v. Metropolitan Life Insurance decision in the U.S. Court of Appeals for the Sixth Circuit;[8] and the 2016 Santana-Diaz v. Metropolitan Life Insurance Co. decision in the U.S. Court of Appeals for the First Circuit.[9]
In the Mirza decision, the court explained:
For purposes of interpretation, the most important word in the sentence [of the regulation] is “including.” “[I]ncluding” modifies the word “description,” which is followed by a prepositional phrase explaining what must be described — the plan’s review procedures and applicable time limits for those procedures. If the description of the review procedures must “includ[e]” a statement concerning civil actions, then civil actions are logically one of the review procedures envisioned by the Department of Labor. And as with any other review procedure, the administrator must disclose the plan’s applicable time limits.[10]
Santana-Diaz similarly found:
Our reading of the regulation is furthermore in keeping with [U.S. Code 29, Section 1133’s] purpose of ensuring a fair opportunity for judicial review, and with ERISA’s overall purpose as a remedial statute. Claimants are obviously more likely to read information stated in the final denial letter, as opposed to included (or possibly buried) somewhere in the plan documents, particularly since, as was the case here, plan documents could have been given to a claimant years before his claim for benefits denied. The Department of Labor, recognizing this, has required that the denial letters themselves include certain information that the Department has deemed critical to ensuring a fair opportunity for review. We think it clear that the Department has included the plan-imposed time limit for filing suit among this required information.[11]
While the court in Hewitt acknowledged the existence of contrary authority, the court applied the First, Third and Sixth Circuit rulings “because they consider the statute and
regulation in the context of the ameliorative intent of the Congress in enacting ERISA.”
The court further pointed out, “The Supreme Court teaches that ERISA is a remedial statute intended to protect participants in employee benefit plans, provide adequate remedies, and ensure ‘ready access to the federal courts.'”[12]
Thus, the court found the contractual limitations period was inapplicable and that Illinois’ 10-year limitations period on actions for breach of contract applied, or alternatively that Michigan’s six-year limitations period governed since that is where Dow is headquartered and where the plan was issued.
Hence, the court found the action was timely.
Given the uncertainty regarding limitations period following Heimeshoff, rulings such as Hewitt and the appellate rulings it followed help protect claimants and preserve their right to challenge benefit denials.
As the court noted, ERISA is a remedial statute, and Congress’ intent in passing the law was to make sure that those with meritorious claims receive the benefits they were promised.
This ruling also protects laypersons who try to prosecute their benefit claims on their own without the help of counsel, and who would likely not understand the complexities of determining when a contractual limitations period would expire.
By mandating that claim administrators notify claimants of the date they believe the limitations period would expire, claimants gain the protection of a safe harbor period within which to file suit while claim administrators are shielded against untimely stale claims.
Thus, the recent Hewitt decision has made calculating ERISA statutes of limitations less of a guessing game for claimants, and the Department of Labor’s revision to the ERISA claim regulations offers even clearer assurance to claimants as to the timeliness of litigation filed to challenge denials of benefit claims.
Mark DeBofsky is a shareholder at DeBofsky Law.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] 29 U.S.C. § 1132(a)(1)(B).
[2] 571 U.S. 99, 134 S.Ct. 604, 187 L.Ed.2d 529 (2013).
[3] 29 C.F.R. § 2560.503-1.
[4] 29 C.F.R. § 2560.503-1(j)(4)(iii) states that an adverse determination on pre-litigation review with respect to disability benefit claims must contain a “statement of the claimant’s right to bring an action under section 502(a) of the Act [and] shall also describe any applicable contractual limitations period that applies to the claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires for
the claim.
[5] 2021 U.S. Dist. LEXIS 19003, 2021 WL 353884 (N.D. Ill. February 2, 2021).
[6] 29 C.F.R. § 2650.503-1(g)(1)(iv).
[7] 800 F.3d 129, 136 (3d Cir. 2015).
[8] 762 F.3d 503, 505 (6th Cir. 2014).
[9] 816 F.3d 172, 180 (1st Cir. 2016).
[10] Mirza v. Ins. Adm’r of Am., Inc. , 800 F.3d 129, 134 (3d Cir. 2015).
[11] Santana-Díaz v. Metro. Life Ins. Co., 816 F.3d 172, 181 (1st Cir. 2016).
[12] Citing 542 U.S. 200, 208 (2004) (quoting 29 U.S.C. § 1001(b)).
This article was published by Law360 on February 17, 2021.
