The Supreme Court recently announced that it will help decide how to apply private contractual limitations periods that can be imposed on claims under ERISA employee benefit plans. This development is significant because a decision is expected to resolve a conflict among the federal appeals courts over when private “contractual” limitations periods may begin to run under the federal benefits laws (known as ERISA). The outcome will be important to both insured and self-funded employee benefit plans and their administrators.
The underlying case, Heimeshoff v. Hartford Life & Accident Ins. Co., No. 12-651-CV, 2012 WL 4017133 (2d Cir. Sept. 13, 2012), involves a participant who was denied disability benefits under an ERISA plan. After receiving a “last and final denial” and exhausting administrative remedies, the participant filed suit in federal district court challenging the denial of benefits. The district court dismissed the claim as untimely because the suit was filed after the running of a specific contractual limitations period set forth in the plan. The Second Circuit Court of Appeals affirmed the district court’s dismissal and held that and that the limitation period was permissible under ERISA, notwithstanding the fact that the limitation period began running while the participant was still obligated to pursue administrative remedies. The court concluded that ERISA allows a contractual limitations period to begin running before a participant has completed the entire administrative process and before the participant has a valid legal claim to pursue in court.
The Supreme Court granted certiorari to examine when a private contractual limitations period for judicial review of an adverse benefit determination begins to run under ERISA. In the petition for certiorari, the petitioner asserts that the Fourth and Ninth circuits do not permit contractual limitations periods to begin accruing until after the administrative appeals process is complete and there is a valid legal claim, while the Second, Fifth, Sixth, Seventh, Eighth and Tenth circuits do permit contractual limitations periods to run in such circumstances. Although the respondent challenges the extent of the split in the courts of appeal, both parties agree there is some level of disagreement among federal courts on the issue. The petitioner is requesting the Supreme Court to rule that contractual limitations periods for judicial review of adverse benefit determinations may not begin to run until after the claims and administrative review process is complete and the plan administrator issues a “last and final denial.”
Depending on the approach taken by the Supreme Court, the statute of limitations in many ERISA plans may be affected. Buchanan Ingersoll & Rooney will continue to monitor this case and will provide more on any significant developments.