SCOTUS Says Three Years Is Long Enough to File ERISA Lawsuits

Earlier this month, the US Supreme Court unanimously upheld a three-year statute of limitations for filing lawsuits challenging claim denials under Wal-Mart’s disability plan. Dirk Bernhardt and John Seybert of Sedgwick explain:

“Julie Heimeshoff was a participant whose lawsuit for benefits under ERISA was barred by her plan’s three-year limitation of actions period that ran from the date proof of loss was due. Heimeshoff actually had at least one year to commence her lawsuit, but still failed to file her claim in a timely manner pursuant to the plan’s terms. On appeal to the Supreme Court, Heimeshoff argued that the plan’s three-year ‘clock’ should not start until the internal claim and appeal process had been completed. […] The Court resoundingly rejected Heimeshoff’s arguments, holding that ERISA plan terms must be enforced as written.”

For your reference, here’s a look at what experts on JD Supra have to say about the ruling:

U.S. Supreme Court Upholds ERISA Plans’ Modified Statute Of Limitations (Tony Dick at McNees Wallace & Nurick LLC):

“Obviously, the Supreme Court’s decision is a major victory for ERISA plans and their employer sponsors. In light of the decision, plan sponsors should give consideration to amending plan documents to include a statute of limitations provision similar to the one in Heimeshoff. Beyond the ERISA context, however, the Court’s decision may serve as a clear endorsement of suit limitation provisions in general and falls in line with similar decisions from various lower courts.” Read on>>

U.S. Supreme Court Holds that ERISA Plan Can Enforce Contractual Limitations Provision to Bar Benefit Claim Lawsuit (Deidre Grossman, Susan Katz Hoffman, and Daniel Srsic of Littler):

“In light of Heimeshoff, employers will want to examine their existing contractual limitations provisions in their plan documents or to consider inclusion of such a provision in the first instance.  Although Heimeshoff arose in the context of a disability plan, the decision does not appear limited to that context.  Contractual limitations provisions are particularly valuable to shorten limitations periods in states where the period would otherwise be lengthy.” Read on>>

Supreme Court Upholds ERISA Plan’s Three-Year Deadline to File a Lawsuit (McDermott Will & Emery):

“The Court held that an ERISA plan is a contract whereby, through participation in the plan, the participants can be required to agree to both a time limit for bringing lawsuits as well as how to define when that time limit will start to run.  Notably, in Heimeshoff, the three-year limitation period began to run when proof of loss was required and before completion of the administrative review process.  This decision underscores the importance of including a reasonable time limit in benefit plan documents to shorten otherwise applicable state law limitations periods and to provide uniformity for benefit claim accruals for all participants and beneficiaries.” Read on>>

Supreme Court Upholds Enforcement of Plan Document Limitations Period for Benefit Claims (Daniel Condon, Alison Douglass, Jamie Fleckner, and William Jay of Goodwin Procter LLP):

“The Court determined that the period specified under the Plan Limitations Provision – three years from the date proof of loss is due – was not unreasonably short, even though a claimant generally could bring suit only after exhaustion of  the administrative claims procedures under applicable ERISA regulations. In this regard, the Court noted that those administrative procedures typically would be exhausted within a year, leaving the claimant with another two years to file a court action challenging the claim denial.” Read on>>

High Court Limits Timing Of Certain ERISA Claims (Tabatha George of Fisher & Phillips LLP):

“The important question tackled by the Court is whether a statute of limitations specified by an ERISA plan for bringing a claim may begin to run before a claimant has exhausted her administrative remedies and can actually bring a legal action. The Court found it can, noting that it is ‘unlikely that enforcing limitations periods that begin to run before the internal review process is exhausted will endanger judicial review.’  As evidence, the Court points out that administrators who delay internal review processes in bad faith will allow participants immediate access to judicial review, and it is very rare for internal review processes administered in good faith to last three years.” Read on>>

Supreme Court Upholds ERISA Plan’s Statute of Limitations (Patricia Winchell of Thompson Coburn LLP):

In our experience, it has been easy for plan sponsors to prescribe a shortened limitations period that assures that once the administrator denies the administrative appeal, the participant promptly proceeds to court. In some instances it has been more difficult, however, to require a participant to file a prompt claim for benefits. Even when the plan requires a participant to file his claim within a specified period of time, courts are reluctant to enforce that time limit unless the plan can demonstrate that it was prejudiced by the participant’s delay in filing a claim. Showing that prejudice can sometimes be a difficult challenge. But a plan that includes a provision similar to Hartford’s in Heimeshoff has an added weapon.” Read on>>

The U.S. Supreme Court Unanimously Holds that ERISA Plans’ Limitation of Actions Provisions Must be Enforced as Written – Heimeshoff v. Hartford Life Insurance Company (Dirk Bernhardt and John Seybert of Sedgwick LLP):

“The Court recognized only a few exceptions to enforcing an ERISA plan’s limitation of actions provision: first, where a controlling statute does not allow for a contractual limitations period; second, if the plan’s prescribed period is unreasonably short; and third, when the administrator’s conduct causes a participant’s untimely filing. In these circumstances, the Court found that a reviewing court may fashion a remedy, noting that equitable tolling also would apply if the administrator chooses to offer another level of review after the mandatory administrative appeal has been exhausted, which is required by ERISA’s regulations.” Read on>>

ERISA: Good News — Supreme Court Enforces Suit Limitations Provision (Michael Reilly of Lane Powell PC):

“The opinion addresses a number of legal and theoretical objections to suit limitations provisions, and rejects them. The decision also provides excellent language emphasizing that ERISA plan language should be enforced.  This is a very helpful decision from the Supreme Court.” Read on>>

Find additional commentary and analysis on ERISA at JD Supra Business Advisories>>