U.S. SC says terms of ERISA-covered plan must be upheld

WASHINGTON (Legal Newsline) -- A unanimous U.S. Supreme Court ruled Monday that the limitations provision of an Employee Retirement Income Security Act-covered plan is enforceable.

In Heimeshoff v. Hartford Life & Accident Insurance Co. et al., the nation's high court was tasked with settling differences among courts of appeals regarding the extent to which the terms of an ERISA-covered plan can establish the date on which the statute of limitations to file a claims for benefits complaint in federal court will begin to run.

The Employee Retirement Income Security Act protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire.

According to the U.S. Department of Labor, ERISA is a federal law that sets minimum standards for pension plans in private industry.

For example, if an employer maintains a pension plan, ERISA specifies when an employee must be allowed to become a participant, how long they have to work before they have a non-forfeitable interest in their pension, how long a participant can be away from their job before it might affect their benefit, and whether their spouse has a right to part of their pension in the event of their death.

Most of the provisions of ERISA are effective for plan years beginning on or after Jan. 1, 1975.

"Absent 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," Justice Clarence Thomas wrote for the court.

On Aug. 22, 2005, Julie Heimeshoff, a Wal-Mart employee, submitted a claim for long-term disability benefits under the ERISA-covered long-term disability plan sponsored by her employer.

The insurance policy funding the plan, issued by Hartford, required Heimeshoff to submit proof of loss by Dec. 8, 2005, and provided that the three-year statute of limitations to file a claim for benefits related to the denial of a disability claim would begin to run from the date proof of loss is due.

During the process of evaluating her claim, several faxes and requests for information were sent to Heimeshoff and her doctor, which went unanswered, and her claim was eventually denied for failure to provide proof of loss.

Five months later, Heimeshoff retained counsel and advised of her intent to appeal the denial decision made by the plan.

Through counsel, Heimeshoff sought and received plan-related documents that included the plan's contractual three-year limitations period and established that such period began to run from the date proof of loss was due.

After the conclusion of her informal appeal, Heimeshoff's claim was again denied on Nov. 25, 2007.

Heimeshoff's suit challenging the denial of benefits was not filed until Nov. 18, 2010.

Hartford moved to dismiss the complaint, challenging the denial of benefits on the grounds that the claim was barred by the plan's limitations period.

The U.S. District Court for the District of Connecticut agreed with Hartford and dismissed the case. The U.S. Court of Appeals for the Second Circuit affirmed.

The U.S. Supreme Court granted review in April.

In her brief on the merits, Heimeshoff argued that plans should not be allowed to impose a limitations period that begins before the claimant exhausts administrative remedies and is able to file suit because doing so could allow the limitations period to waste away while the claimant is going through the plan's administrative review process.

But the Supreme Court, in its ruling this week, said the limitations provision at issue in the case is "quite common."

"The vast majority of states require certain insurance policies to include three-year limitations periods that run from the date proof of loss is due," Thomas wrote in the court's 16-page opinion.

"There is no significant evidence that limitations provisions like the one here have similarly thwarted judicial review."

DRI: The Voice of the Defense Bar filed an amicus brief supporting Hartford's position in August.

"The court agreed that powerful and compelling reasons support the conclusion that courts should uphold express plan language that provides a reasonable period for claimants to challenge adverse decisions," Jerrold J. Ganzfried, co-author of the DRI brief, said of the Supreme Court's ruling.

"Judicial fidelity to contractual language will promote the orderly and fair administration of benefits plans."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.