Rory Eric Jurman, Esq. and Michael A. Monteverde, Esq.
IS IT POSSIBLE THAT THE SUPREME COURT IN HEIMESHOFF v. HARTFORD LIFE & ACCIDENT INS. CO. WAS IMPLORING CONGRESS TO AMEND ERISA IN ORDER TO ADD A UNIFORM STATUTE OF LIMITATIONS FOR DENIAL OF BENEFIT CAUSES OF ACTION
On October 15, 2013, the United States Supreme Court issued its opinion in Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S.Ct. 604 (2013). The specific question before the Court in that case, as expressly stated by Justice Thomas, was whether a contractual time limitation on filing suit contained in an ERISA benefits plan, which begins to run before the completion of the administrative review process, is enforceable. Id. at 608. A poignant question raised by the Heimeshoff opinion (which is well founded) is whether the opinion demonstrates that a statute of limitations provision should be added by Congress to the ERISA statutory construct so as to create a uniformity of outcome for plan participants. Is that precisely what the Supreme Court was imploring Congress to effect? Alternatively, is that what Congress will gather from the noise of Heimeshoff decision, whether intended by the Supreme Court or not? These are interesting policy matters to consider looking forward.
Heimeshoff involved a claim for long term disability benefits filed by an employee of Wal-Mart Stores, Inc. under a Group Long Term Disability Plan (the “Plan”) governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Specifically, Ms. Heimeshoff claimed that she was disabled due to “chronic pain and fatigue,” which she claimed interfered with her ability to perform her duties as a Senior Public Relations Manager for Wal-Mart. Ms. Heimoshoff, through her rheumatologist, advised Hartford that she suffered from symptoms of “extreme fatigue, significant pain, and difficulty in concentration.”
In November 2005, Hartford advised Ms. Heimeshoff that it did not have sufficient information to evaluate her claim because her Rheumatologist failed to provide requested information regarding her condition. Shortly thereafter, Hartford denied Ms. Heimeshoff’s claim for failing to provide satisfactory proof of loss. In July 2006, another physician evaluated Ms. Heimeshoff and determined that she was, in fact, disabled. Thereafter, Hartford’s physician examined Ms. Heimeshoff and issued a report in November 2006, in which he indicated his determination that Ms. Heimeshoff was not disabled. After additional physicians retained by Hartford examined Ms. Heimeshoff, Hartford denied the claim on November 26 2007. This was the final denial of her claim.
On November 18, 2010, Heimeshoff filed suit in federal district court against Hartford pursuant to 29 U.S.C. § 1132(a)(1)(B). This is the provision of ERISA that provides the authority for an ERISA plan participant to file a civil action to obtain benefits or enforce rights under an ERISA plan. The lawsuit was filed more than three years after proof of loss in support of the claim was due to be provided by Ms. Heimeshoff to Hartford. It was also just under three years from the date of the final denial of Ms. Heimeshoff’s claim by Hartford.
Hartford filed a motion for summary judgment in the district court on the grounds that Ms. Heimeshoff’s claim was time barred by the contractual limitations provision contained in the Plan, which provided that “[l]egal action cannot be taken against The Hartford. . .[more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.” The district court granted the motion for summary judgment, and that summary judgment was then appealed to the United States Court of Appeals for the Second Circuit. The Second Circuit affirmed the decision of the district court.
On appeal to the United States Supreme Court, Heimeshoff did not argue that the three year contractual limitations provision contained in the Plan was unreasonably short on its face. Rather, she argued that enforcing the contractual limitations provision as written would undermine the two tiered review scheme governing ERISA plans. Pursuant to ERISA, a participant is required to exhaust all administrative remedies under an ERISA plan before the participant is entitled to bring a civil action in the courts of the United States to enforce its rights or recover benefits under the Plan. Thus, the crux of Heimeshoff’s argument was that permitting a limitations provision to commence before the participant’s claim even accrued would result in inequitable and unfair results for plan participants.
More specifically, she argued that plan participants who were subjected to especially long administrative review processes might be foreclosed from filing suit to enforce their rights under such a structure. Additionally, she also argued that plan participants might shortchange themselves during the administrative review process in order to accelerate the exhaustion of administrative remedies so that they can preserve their rights to seek judicial review.
The Court unanimously rejected these arguments. First, the Court pointed out that ERISA, itself, does not provide a statutory limitations provision for such claims. It is from this recognition of ERISA’s lack of such a limitations provision that the Court began its analysis, and demonstrated that it was unwilling to rewrite or “amend” the apparent intended congressional limits of ERISA. The Court also appeared determined to enforce the fact that the ERISA plan, itself, is meant under the statute, to be the center of ERISA. See US Airways, Inc. v. McCutchen, 133 S.Ct. 1537, 1548 (2013) (acknowledging that ERISA is “built around reliance on the face of written plan documents”).
In determining that ERISA itself does not provide a statute of limitations, the Court reaffirmed the general rule that the applicable statute of limitation for ERISA causes of action that will control is the most closely applicable state statute of limitations. That is, unless, the written plan itself provides a contractual limitations provision that is not unreasonable.
In the absence of a contrary state statute, the Supreme Court found that any controlling contractual limitations provision needs to be reviewed and analyzed for “reasonableness” when determining if it should be enforced. In reaching this conclusion, the Court held that the ability of the parties to privately agree to limitations terms should not be disturbed by Courts.
In finding that the particular provision in this case was reasonable, the Court reasoned that Ms. Heimeshoff was left with approximately one year of the three year contractual limitations provision within which to file her lawsuit after her claim accrued. Thus even though the contractual limitation began to run before the claim accrued, the Court found that the period was reasonable because it left Ms. Heimeshoff with a “reasonable” amount of time within which she was able to bring a civil action.
In rejecting the public policy arguments raised by Ms. Heimeshoff, the Court found that the available evidence indicated that an exceedingly small number of ERISA plan participants would be precluded from filing suit based on similar contractual limitations provisions. The Court relied on the virtual total lack of decisional history demonstrating instances where such injustices occurred. It further found that in instances where such inequitable circumstances might arise due to no fault of the plan participant, then there were common law and equitable defenses and avoidances to the limitations provisions that could be used to protect the rights and interests of the participant.
The Court also rejected the suggestion that plan participants might limit their own rights during the administrative review process in order to protect their rights to bring suit within the confines of a contractual limitation period. First, the Court pointed out that judicial review of the administrative review process is generally limited to the administrative record. Therefore, there would be no incentive for a plan participant to intentionally try to short change its own administrative review in order to rush to suit.
Moreover, the Court pointed out that the typical administrative review process in ERISA benefits determination cases is completed well within three years. Finally, the Court again referenced the equitable and common law defenses to contractual limitations provisions that are available to those few plan participants who do, in fact, find them subject to inequitable and unreasonable circumstances in relation to contractual limitations provisions. Thus, the Court did not find Heimeshoff’s public policy arguments persuasive.
In the end, the Court’s holding in Heimeshoff was clear: contractual limitations provisions in ERISA plans are enforceable unless they are found to be unreasonable, or are precluded by a contrary state statute. You do not have to look any further than to subsequent decisional law to see the clarity provided by the Heimeshoff decision, as subsequent decisions have applied the holding of Heimeshoff to ERISA statute of limitation disputes. See e.g. Barriero v. NJ BAC Health Fund, 2013 WL 6843478 (D. N.J. 2013); Munro-Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, 2014 U.S. Dist. LEXIS 18156 (E.D. Miss. 2014); Simmers v. Hartford Life & Accident Ins. Co., 2014 WL 107002 (E.D. Wis. 2014); Upadhyay v. Aetna Life Ins. Co., 2014 WL 186709 (N.D. Cal 2014); Wilson v. Standard Ins. Co., 2014 WL 358722 (N.D. Ala. 2014).
Will this clarity result in a system of disparate application of limitation periods amongst plan participants, and if so, will Congress be implored to create a standard ERISA statute of limitations for uniform application? These are the questions to consider moving forward post-heimeshofsf.
The Supreme Court stuck to and implied that the current system of applying “reasonable” contractual limitation provisions in ERISA cases is a workable system. This is evidenced by the reference to the apparent lack of any actual reported cases demonstrating significant loss of rights by ERISA plan participants due to contractual limitations provisions. Moreover, the stated inherent safeguard of the “reasonableness” requirement arguably serves as a backstop to further protect against the risk of potential disparate injustices imposed against particular claimants.
However, the real question is: will Congress “hear” the "knocking" and implied endorsement of the current system by the Supreme Court, or will that be drowned out by the noise that claimant advocacy groups and lobbyist might direct towards Congress in an effort to compel a standard statute of limitations provision enacted for ERISA cases.
While the clarity provided by Heimeshoff limits the number of questions faced by ERISA practitioners presently, it also might create a benchmark from which plaintiff advocacy groups and the Plaintiff’s bar can work from in working to have Congress enact a standard, uniform limitations provision. The consequences of this possible lobbying push are that Congress could take the rights of plan administrators to set their own time limitations for litigation to be commenced away, and place it in the hands of the federal government.
In all likelihood, such action would likely result in limitations provisions that are less favorable to plan administrators and insurers than those that exist presently by way of private contractual agreement. While there is nothing to suggest that such congressional action will actually take place, the lack of uniformity of outcome that results under the current system is just the type of circumstance that claimants' groups generally relish the opportunity to change.
In the end, the Supreme Court did not appear to have been talking to Congress through the Heimeshoff decision in an effort to suggest a uniform ERISA statute of limitations enacted. Rather, the Court espoused the reasonableness of the current system of applying privately agreed to contractual limitations provisions where such provisions are “reasonable”. Notwithstanding that fact, that does not mean that ultimately the Heimeshoff decision will not be used to convey a message of alleged unfairness and inequity to Congress.
If that occurs, that message will not have come from the justices of United Supreme Court, but rather will come from lobbying and advocacy groups. It will be interesting to watch Congressional action on this issue moving forward over the next few years. Hopefully, Congress turns up the volume and hears what the Supreme Court may be saying.
 The authors acknowledge the Rolling Stones for inspiration for this article.
While not particularly relevant to this article, such contractual limitations provisions can, themselves, be limited or precluded by a contrary state statute that sets the “floor” on the time limit to bring an ERISA civil action.