Monday, December 16, 2013

SCOTUS on ERISA Plan Limitations Provisions

The Supreme Court just unleashed its unanimous opinion in Heimeshoff v. Hartford Life and Accident Ins. Co. Justice Thomas did a nice job of succinctly stating the gist of the case in plain English:
A participant in an employee benefit plan covered by the Employee Retirement Income Security Act of 1974(ERISA), 88 Stat. 829, as amended, 29 U. S. C. §1001 et seq., may bring a civil action under §502(a)(1)(B) to re- cover benefits due under the terms of the plan. 29 U. S. C. §1132(a)(1)(B). Courts have generally required participants to exhaust the plan’s administrative remedies before filing suit to recover benefits. ERISA does not, however, specify a statute of limitations for filing suit under §502(a)(1)(B). Filling that gap, the plan at issue here requires participants to bring suit within three years after“proof of loss” is due. Because proof of loss is due before a plan’s administrative process can be completed, the administrative exhaustion requirement will, in practice, shorten the contractual limitations period. The question presented is whether the contractual limitations provision is enforceable. We hold that it is.
Is there anything to prevent a dastardly plan-provider from adopting a limitations provision that effectively cuts off all claims? Well yes, there is. The limitations provision must be "reasonable."

What does "reasonable" mean? We're not exactly sure. But in this case, Justice Thomas noted that the provision would give the employee on-average two years from the conclusion of the administrative review process to file suit. In this case, the employee actually had only one-year from the conclusion of the process. The Court concluded that the one year was still reasonable.

So, what would be unreasonable? We don't know for sure. Justice Thomas notes prior precedent, Occidental Life Ins. Co. of Cal. v. EEOC, 432 U. S. 355 (1977), in which the Court held that 12-month state statutes of limitations for filing Title VII claims were unreasonable given an EEOC backlog of 18-24 months. So, we can probably assume that a limitations provision in a benefits plan that expired before the required administrative review was even completed would be unreasonable. Numerous courts have addressed the reasonableness of contractual alterations of statutes of limitations in other contexts, so there's some guidance out there.

What if a plan includes a "reasonable" limitations period but a dastardly administrator stalls to run out the clock? Justice Thomas notes that traditional doctrines apply and that courts may apply equitable tolling in such circumstances.

For plaintiffs' attorneys this means getting a copy of the plan and checking for limitations provisions immediately. I suspect plan administrators will check their existing plans for limitations provisions and adding them or altering them based on today's decision (and including them in future plans).

Image: The image is Justice Thomas' official portrait and is in the public domain as a work of the federal government.