The Supreme Court’s recent decision in Heimeshoff v. Hartford Life & Accident Insurance Company held that an ERISA plan’s contractual limitation period can effectively be used to shorten a plan participant’s time to file suit following a claim denial.
The contractual limitation period at issue in Heimeshoff precluded a plan participant from bringing suit more than three years after “proof of loss” was due under the plan’s terms. ERISA, however, has been judicially construed to require that plan participants exhaust administrative remedies through an internal review and appeal process before a participant can sue to recover benefits. Notably, this means that under Heimeshoff, a contractual limitation period can begin running during the administrative review process and before the cause of action, or right to sue even accrues.
The unanimous Heimeshoff decision affirmed the 2nd Circuit’s ruling that the three-year contractual limitation period for filing suit to recover benefits under an ERISA plan is enforceable even though that limitation period begins to run before the participant’s right to sue accrues. The court concluded 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.”
Heimeshoff therefore highlights the importance of contractual limitation periods in ERISA-governed plans. Contractual limitation periods are often shorter (typically 3 years) than the applicable statute of limitations. Additionally, whereas the statute of limitations typically does not begin running until a claim is denied, the Heimeshoff decision allows a plan’s contractual limitation period to run concurrently with the administrative claim review process (e.g., by tying the contractual limitation period to an event other than the claim decision, such as the deadline for giving proof of loss.)
As long as a “reasonable” period of time is left to file suit after a claim is denied (and absent a controlling statute to the contrary), the contractual limitation period will be enforceable. In Heimeshoff, the court held that a one-year period of time to file suit after the claim denial was “reasonable.”
In the short time since the Supreme Court decided Heimeshoff on Dec. 16, 2013, three district court cases have already held that lawsuits to recover ERISA plan benefits were barred by the plan’s contractual limitation period: Wilson v. Std. Ins. Co. (contractual limitation period was enforceable when claimant had 18 months after exhausting administrative remedies to file suit); Upadhyay v. Aetna Life Ins. Co., (contractual limitation period was enforceable when claimant had 17 months after exhausting administrative remedies to file suit); and Barriero v. NJ BAC Health Fund (contractual limitation period was enforceable when claimant had 9 months after exhausting administrative remedies to file suit).
These cases demonstrate that Heimeshoff has made the contractual limitation period an effective and reliable tool to limit the time for filing suit. Without a contractual limitation period, a claimant may have several years to file suit after a claim denial under the applicable statute of limitations. Under the plan’s contractual limitation period, however, the time to file suit could be significantly shorter.