Does the statute of limitations for judicial review of an adverse determination on a disability benefits claim begin to accrue at the time specified by an insurance policy or when the claimant files an ERISA disability claim?
Julie Heimeshoff was a longtime Wal-Mart employee who became ill and applied for long-term disability benefits from the Hartford Life & Accident Insurance Company (“Hartford”). Hartford denied her claim and Heimeshoff sued under ERISA to challenge the insurance determination. The district court granted Hartford’s motion to dismiss because Heimeshoff had missed the filing deadline, and the Second Circuit affirmed. The Supreme Court will now consider when the statute of limitations starts to accrue for judicial review of an adverse determination on a disability benefits claim. Heimeshoff argues that a bright-line rule is necessary under federal law so that potential plaintiffs will be able to understand the filing deadline. Hartford contends that the statute of limitations on an ERISA disability claim should be determined by an insurance plan’s accrual provision unless the provision is unreasonable. The Supreme Court’s decision will impact the administration of long-term disability plans. A bright-line rule would lead to more compressed time periods in which claimants would be required to seek judicial review, while a reasonableness rule would lead to possible inefficiencies and inconsistencies in administration. The Court’s decision will impact insurance companies’ control over the statute of limitations on review of ERISA disability claims and the period during which disabled employees can seek relief through the courts.
Questions as Framed for the Court by the Parties
When should a statute of limitations accrue for judicial review of an ERISA disability adverse benefit determination?
Petitioner Julie Heimeshoff worked for Respondent Wal-Mart Stores Inc.(“Wal-Mart”) from 1986 to 2005 and eventually became Senior Public Relations Manager. During that time, Heimeshoff developed symptoms of fibromyalgia, irritable bowel syndrome, and lupus. These symptoms worsened until Heimeshoff could no longer work in June 2005. Because Heimeshoff was eligible for group long-term disability (“LTD”) benefits through Wal-Mart, she applied for the benefits on August 25, 2005. Under the benefits plan, proof-of-loss was due by September 6, 2005 . Respondent Hartford Life & Accident Insurance Company (“Hartford”) was the LTD-plan administrator. From October to November 2005, Hartford began evaluating Heimeshoff’s case and requesting additional information from her doctors, but did not receive any response. Hartford wrote a final request for information on November 29, 2005, and stated that it could not determine whether Heimeshoff was entitled to full disability benefits without the requested information. Hartford denied Heimeshoff’s LTD claim in a letter dated December 8, 2005.
The denial letter described the appeal procedures available to Heimeshoff under her LTD plan; it also explained that Heimeshoff must exhaust the internal appeals before she could bring an ERISA suit. Heimeshoff retained an attorney to assist with the internal appeal, but Hartford indicated that this appeal was inappropriate, and that Hartford would reconsider Heimeshoff’s claim once it received the requested medical information. Heimeshoff subsequently agreed to undergo an evaluation by a specialist, and she submitted the evaluation and other medical records to Hartford to show that she could not work. Hartford denied the claim on November 29, 2006 based on the conclusion of a Hartford-retained physician that Heimeshoff was able to perform her job.
In November 2010, Heimeshoff filed an ERISA action against Hartford and Wal-Mart in the United States District Court for the District of Connecticut. Hartford and Wal-Mart moved to dismiss the claim because the statute of limitations had expired. The district court granted the motion and held that the action was untimely. The court determined that, consistent with the insurance policy, the statute of limitations started to run when the proof-of-loss was due. Thus, the statute of limitations expired before Heimeshoff filed her claim in district court. On appeal, the Second Circuit affirmed. The court applied the policy’s written limitations provision, and notequitable tolling, because of Heimeshoff’s knowledge of when she must bring suit.
Heimeshoff petitioned for awrit of certiorari on December 11, 2012. The United States Supreme Court granted certiorari on April 15, 2013 to determine whether the statute of limitations starts to run when a claim can be filed, or at the time provided by the plan policy.
The Court will decide when the statute of limitations starts to run for a denied benefits claim under ERISA. Heimeshoff contends that the statute of limitations for challenging an adverse determination under ERISA starts to run when the adverse determination is finally issued. Hartford, joined by Wal-Mart, argues that the limitations period begins to run according to the benefits plan provisions as long as the provision is reasonable.
consequences of adopting a reasonableness standard
In support of Heimeshoff, the United States argues that a “reasonableness rule,” which allows parties to determine their own statute of limitations period so long as it is reasonable, would increase litigation over the validity of limitations periods. Furthermore, the United States contends that the fact-finding requirements of a reasonableness inquiry may lead to similarly situated beneficiaries receiving inconsistent determinations. At the same time, the United States claims that a reasonableness standard would encourage beneficiaries to forgo some of the time to internally appeal an initial adverse determination in order to protect the option of judicial review. United Policyholders, a non-profit organization whose goal is to provide information to insurance consumers, argues that a reasonableness rule would adversely impact claimants’ ability to pursue claims because such a rule would create uncertainty over the timeliness of a lawsuit and decrease ease of access to representation. They argue that a reasonableness standard raises potential timeframe concerns that could lead to difficulties finding representation and difficulty meeting deadlines once representation is found because counsel would be rushed.
On the other hand, The Voice of the Defense Bar (the “Defense Bar”) asserts that a reasonableness standard would not discourage claimants from pursuing benefits and challenges to adverse determinations. Here, the American Council of Life Insurers (“ACLI”), America Health Insurance Plans (“AHIP”) and the Chamber of Commerce of the United States of America, argue that claimants would not need the full three-year limitations period that the insurance contract in this case provided.
Effects on Benefit Plans
AARP and the National Employment Lawyers Association ("NELA") contend that the exhaustion requirement for ERISA benefits enables more efficient administration of plan fiduciaries. According to the AARP and NELA, the exhaustion requirement was created as a “simple, low cost, efficient, fair method” to protect the benefits of participants in ERISA programs. United Policyholders emphasize that ERISA is meant to protect the quality of insurance plans, which includes requiring a fair internal review process. In United Policyholders’ view, internal review of insurance claims is essential to ERISA’s goals and to the quality of insurance plans; thus, they argue that internal review should not be undercut with a rule that encourages the process to be rushed.
Supporting Hartford, the Defense Bar argues that abright-line rule, one that does not allow the parties to determine their own statute of limitations period, would decrease the amount of time that claimants have to seek judicial review. Additionally, the Defense Bar argues that a bright-line rule would allow stale claims to succeed and disrupt the finality of determinations on which LTD benefit plans rely. Similarly, the ACLI, AHIP, and Chamber of Commerce contend that a bright-line rule, in addition to lengthening the amount of time during which a claim may be litigated in court, would encourage insurance companies to reserve funds based on potential claims. In their view, these decisions would then increase the cost of disability insurance to employees. Instead, they urge the Court to adhere to the timing provisions in benefit plans, which would guarantee that insurers could appropriately budget for expected claims.
Congress enacted ERISA to protect “the interests of participants in employee benefit plans and their beneficiaries.” As part of this protection, ERISA affords participants the opportunity to bring a civil suit in federal court after the plan administrator denies their claim for benefits. However, ERISA is silent on when the statute of limitations begins on this opportunity to get judicial review of a denied ERISA disability claim. While the parties agree on the statute’s silence, they disagree on when the statute of limitations should begin. Heimeshoff suggests that the statute of limitations should begin to run after the internal review with the insurance company is exhausted. Hartford disagrees and argues that the statute of limitations can accrue after the proof-of-loss is due as is provided in a contractual provision in Hartford’s ERISA plan.
How Should the Court Interpret ERISA’s Silence on the period of a Statute of Limitations?
Many federal laws do not contain statute of limitations provisions. Usually, when faced with such an omission, federal courts borrow the state’s statute of limitations. In this case, the Second Circuit applied Connecticut’s statute of limitations framework, which allows the parties to determine a statute of limitations period by contract so long as the period is no less than one year.
According to Heimeshoff, while courts use state law to determine the period covered by a statute of limitations, the courts look to federal law to decide when statute of limitations begins to run. Heimeshoff asserts that a federal cause of action does not begin to accrue until the plaintiff is able to file suit. Therefore, Heimeshoff argues, the Second Circuit was mistaken when it used state law to determine that the statute of limitations begins to accrue before a claimant can file suit. Additionally, Heimeshoff believes that allowing the statute of limitations to accrue when proof-of-loss is due does not work well with ERISA because it lacks the mandatory exhaustion period for claims that ERISA requires.
Hartford points out that, besides borrowing from state law, the federal courts have also allowed parties to create contractually defined statute of limitation periods. Hartford argues that these contractually defined statute of limitation periods are generally enforced when they are reasonable and the statute does not prohibit it. Hartford believes that a plan with a contractually determined statute of limitations fits well with ERISA’s “purpose to protect contractually defined benefits.” Moreover, Hartford believes that the federal rule that Heimeshoff refers to is only a default rule of statutory interpretation. According to Hartford, this default rule does not restrict the parties from adopting a contractual statute of limitations. Since nothing in the statute expressly prohibits the enforcement of the policy’s statute of limitations provision and since this policy is reasonable, according to Hartford, the Court should enforce the statute of limitation provision as written in this policy. Hartford submits thatin other cases, the courts can easily apply a reasonableness test to discern whether a contractual statute of limitations provision should apply. Hartford points out federal courts have had no difficulty in developing tests to decide whether a contractual statute of limitations provision is reasonable in other commercial and insurance contracts.
When Should the Statute of Limitations Begin to Run?
Congress passed ERISA with the goal to “protect… the interests of participants in employee benefit plans and their beneficiaries.” To this end, the United States argues in support of Heimeshoff, Congress created a two-part remedial scheme with an internal review and a possible judicial review. Heimeshoff contends that an ERISA benefit plan must have a procedure in place that provides an opportunity for an internal review, within the ERISA benefit plan, of a denied claim. While ERISA does not expressly require exhaustion of this internal review, Heimeshoff points out that the federal courts have required the completion of the internal process before allowing a judicial review of the denied claim.
According to Heimeshoff, it would be absurd to run the clock for when a claimant can sue before the claimant is able to sue because he or she is participating in a mandatory internal process. Heimeshoff believes that allowing the clock to run would undermine ERISA’s scheme by discouraging claimants from pursuing the internal process in good faith. For example, Heimeshoff suggests claimants might be apprehensive about responding to requests for more information when answering these requests will eat out of the statute of limitations period. Additionally, while it is possible for a statute of limitations period to begin before a person is able to bring suit, Heimeshoff points out that the Supreme Court has said it will not infer such an “odd result” unless Congress expressly provides for that result in the legislation. The way Heimeshoff characterizes Hartford’s scheme, the statute of limitation should begin when the proof-of-loss is due, potentially even before a final decision of a claim is made through the internal process ERISA requires.
Hartford points out that even if Heimeshoff could not have brought her claim during part of the three-year contractually-defined statute of limitations period, she still had at least a year after the denial of the claim to bring a lawsuit. Hartford believes that most claimants will have ample time to sue, like Heimeshoff did. Furthermore, Hartford points out, even in the most extreme case of a lengthy internal appeal with extensions not prohibited by law, the claimant would still likely have at least a year to seek judicial review. Moreover, Hartford asserts, even if a diligent claimant is prevented from suing because of circumstances beyond his or her control, the courts cantoll, or suspend the statute of limitations, in those unusual situations. Hartford also points out that a proposed one-year limitation running from the final decision would still give some claimants, like Heimeshoff, less time to sue than Hartford’s contractual limitation.
Tolling the Statute of Limitations
Heimeshoff submits that even if the contractual statute of limitations applies, it should still be automatically tolled, as equitable relief, until the claimant is able to bring suit. Heimeshoff suggests that this conclusion follows because if the federal courts borrow the state’s statute of limitations, then the courts should also borrow the state’s tolling laws. Heimeshoff points out that almost every state tolls the statute of limitations periods during a mandatory administrative process.Since ERISA’s internal claims process is mandatory, the limitations period should be tolled during that mandatory process under a state-framework, according to Heimeshoff.Even in a federal context, Heimeshoff maintainstolling for an administrative review process is based on whether this process is mandatory for the claimant or not.
In response, Hartford asserts that the Court should not consider this argument. Hartford points out that Heimeshoff failed to raise this issue in the lower courts and that Court has not been properly briefed to decide that issue. Second, even if the court reaches this issue, Hartford avers that tolling the statute as equitable relief would contradict express terms in Hartford’s ERISA policy that are supposed to govern the ERISA plan. Third, Hartford asserts that Heimeshoff misstates the Court’s tolling principles. According to Hartford, tolling is only afforded when the party seeking relief demonstrates that he or she exercised reasonable diligence and some extraordinary circumstance stood in the way of him or her filing the claim on time. Therefore, Hartford argues, the court should not toll the statute of limitation without, at least, a showing of due diligence by the claimant.
In this case, the United States Supreme Court will determine when the statute of limitations period starts to run for judicial review of an adverse benefit determination. The Court must consider whether to implement either a bright-line rule that a statute of limitations period begins to run after exhaustion of the internal review or a reasonableness standard for contractual statute of limitations provisions. The Court’s ruling will affect the ways in which plan administrators handle and budget for challenges by claimants to adverse determinations. The Court’s decision will also influence the behavior of future claimants challenging benefit plan decisions and, in some cases, decide whether a claimant can even bring suit.
- DRI Submits Amicus Brief to Supreme Court in Heimeshoff v. Hartford Life & Accident Insurance Co., DRI.org (Aug. 29, 2013)
- Mary Ellen Signorelli, U.S. Supreme Court Will Consider Statute of Limitations for ERISA Benefit Denials, AARP.org (August 27, 2013)