Late last month, the U.S. Supreme Court held in Heimeschoff v. Hartford Life & Accident Ins. Co. that an employer may impose a limitations period on an employee’s right to sue for denial of long-term disability (LTD) benefits even though the three-year deadline adopted by the employer commenced before the plan’s claims review process had ended. The case involved a disability claim by a former Wal-Mart employee suing under an LTD insurance policy. The policy included a provision required by most states, including North Carolina, which permits a covered party to sue for denial of benefits if the suit is filed within three years after the deadline for providing the insurer with proof of the loss. Under the policy at issue, proof of loss was required within 90 days after the date when the employee first was unable to work due to a disability. The employee filed suit within three years after the plan denied her LTD claim in 2007 but more than three years after the deadline in 2005 for filing her proof of loss.
The Supreme Court, in a unanimous decision, concluded that nothing in the ERISA or any other statute precludes an employer from imposing a limitations period that commences prior to the exhaustion of administrative appeals where (i) the limitations period is reasonable, and (ii) no controlling statute provides for a different limitations period. The Court found that the three-year limitations period was reasonable in light of evidence that ERISA claims review procedures, which must be exhausted before a plaintiff may bring suit in federal court, generally are designed to process claims within 12 months. Also, insurance industry data showed that plan review of most claims is concluded within 16 months, thus leaving most plaintiffs with a three-year limitations period with sufficient time to file suit. In the instant case, which involved a longer appeals period than most, the Court pointed out that the plaintiff still had approximately one year after denial of her claim to file a lawsuit in order to meet the LTD plan’s three-year deadline.
The employee argued that because a participant’s claim under ERISA for recovery of denied benefits does not accrue until the exhaustion of a plan’s administrative process conducted in accordance with ERISA, any applicable limitations period should not commence until exhaustion of that process. However, the Court found no such requirement in ERISA or other statute. In response to the employee’s argument that commencing a limitations period before exhaustion of administrative appeals could lead employers to delay the process, the Court stated that past experience with plans does not support those fears, and that courts could impose equitable remedies to allow lawsuits that were time-barred due to bad faith delay tactics of employers.
This decision confirms that ERISA does not require a contractual limitations period to begin after a plan’s claims review procedures are exhausted. Employers may include reasonable limitations clauses in their ERISA plans based on other commencement dates and may want to examine their plans to make sure that such limitations are included.