On December 16, 2013, the United States Supreme Court issued its opinion in Heimeshoff v. Hartford Life & Accid. Ins. Co., __ U.S. __, 2013 WL 6569594, 2013 U.S. LEXIS 9026 (S. Ct. Dec. 16, 2013), which could drastically shorten the statute of limitations period for the filing of ERISA civil actions in cases involving benefit denials under Section 503 of ERISA, 29 U.S.C. 1101 et seq. The Heimeshoff opinion not only applies to future ERISA cases, but could impact current ERISA matters you are now handling. As a result of this ruling, attorneys representing claimants in ERISA benefit matters should review their cases immediately to determine the applicable statute of limitations for filing suit. In many cases, attorneys likely will need to consider filing suit immediately.
Below is a synopsis of the case, its impact on current Fourth Circuit law, and its anticipated impact on current and future cases in the Fourth Circuit.
ERISA plans almost always require beneficiaries to pursue internal plan administrative appeal remedies before filing suit. This gives plan administrators the right to review a beneficiary’s claim before suit is filed. Since ERISA does not have a statute of limitations built into it, courts have in the past enforced the closest analogous state law cause of action’s limitations period. In North Carolina, the “default” statute of limitations period is the three-year limitation applicable to contract actions. However, ERISA plans have authority to shorten that period, and they often do. Pursuing administrative remedies can take time, however, and depending on the language of the Plan there are occasions where the statute of limitations may run before administrative review is completed. In other situations, the limitations period may be fast approaching before administrative review is completed by the plan administrator. The Fourth Circuit has long recognized this problem and has held that the statute of limitations is tolled until the claimant has fully exhausted administrative remedies under the Plan and a final administrative decision has been issued. White v. Sun Life Assurance Co. of Canada, 488 F.3d 240, 245 (4th Cir. 2007).
The Heimeshoff opinion reversed longstanding Fourth Circuit case authority holding that the statute of limitations is tolled until a claimant has exhausted internal administrative review steps required by the plan. In Heimeshoff the Court concluded that an ERISA disability plan’s provisions can prescribe both the length of the limitations period as well as when the period commences to run, so long as it is reasonable. Under Heimeshoff, now a plan’s terms can actually start the statute of limitations running long before a claimant ever has the right to file suit. For instance, the Plan at issue in Heimeshoff required participants to file suit for benefit claims within three years after “proof of loss” is due, which in that case occurred in December, 2005. The claimant went through the Plan’s administrative process, as is required, and a final denial was issued in November, 2007. Under existing Fourth Circuit law, the claimant’s statute of limitations would not have run until November, 2010, three years from issuance of the final denial, or, in other words, when she obtained the right to file suit for the first time. The Supreme Court, however, found that her statute of limitations had run in December, 2008, three years from when her initial proof of loss was due, despite the fact that she had to undergo almost two years of internal administrative review prior to securing the right to sue. In other words, approximately 2 years of her three year statute of limitations had run before she ever had the right to file suit in the first place.
The Court acknowledged that typically Congress does not intend for statutes of limitations to commence until their associated causes of actions accrue, i.e., when the plaintiff is permitted to file suit, but then nevertheless found that the Plan can control when the statute of limitations commences (even if before a cause of action has accrued) because the parties have agreed by contract to do so. The Court found this contractual privity to be so despite the fact that ERISA plan participants are rarely, if ever, given any say in negotiating the terms of their employer’s ERISA plan, much less given the chance to agree by contract to any specific provisions.
Not only does Heimeshoff establish that Plans may dictate when the limitations period commences, it also holds that the Plan can set the actual length of the limitations period, so long as it is reasonable. As of December 16th, plans may establish their own, presumably shorter, statutes of limitations, so long as they are reasonable. The Supreme Court did not establish a bright-line rule as to what is reasonable – although the opinion does suggest that shortening the statute of limitations from three years to one year is likely reasonable. This is sure to be another issue that will have to be sorted out in future litigation.
Based upon this Supreme Court ruling, we urge any attorneys who are representing claimants in ERISA benefit matters to immediately review their files to determine the applicable limitations period, taking the steps:
Check the language in the Plan to determine when the claim begins to accrue, and the applicable filing deadline, if any, prescribed by the plan. Most plans are silent on the time limitation, so that the North Carolina three-year limitation period for contract actions should still apply. Many plans, however, prescribe much shorter limitations periods, such as a one-year period for commencing a civil action.
Check the Plan language to determine whether the limitations period begins to run once a claim has been submitted, when “proof of loss” is due, following an elimination period, once administrative remedies have been exhausted, or some other set time. Most plans, in our experience, use the “proof of loss” submission as the date when the claim arises and the limitations period would been begin to run from that date. If the plan is silent on this issue, then the safer course of action is to assume that the limitation period begins to run upon submission of the proof of loss.
If you are concerned that the statute of limitations period has or is about to run while administrative remedies are pending, we encourage you to consider either immediately contacting the Plan to see if they are willing to enter into a tolling agreement, or immediately filing suit, followed by a motion to stay the litigation and remand back to the plan administrator for resolution of the administrative appeal process.
If you have questions about this, contact Norris Adams, Woody Connette, or Natalie Potter at Essex Richards: 704-377-4300.
Edward G. “Woody” Connette, Norris A. Adams, and Natalie D. Potter practice with Essex Richards, P.A. in Charlotte. Woody Connette has over thirty years of experience in personal injury and class action litigation. Woody has been recognized as one of the NC Legal Elite, the Best Lawyers in America, and NC Super Lawyers. Norris Adams’ practice centers on civil litigation, with an emphasis on ERISA litigation, construction litigation, personal injury, and business litigation. Natalie Potter focuses her work on personal injury, civil litigation, and intellectual property rights.