A little over two weeks ago, the Supreme Court heard oral argument in a rather obscure ERISA case—Heimsehoff v. Hartford Life & Accident Ins. Co. The case asks a rather basic question without a readily apparent answer: when a beneficiary of an ERISA-regulated insurance plan seeks to claim benefits, may the statute of limitations period for judicial review of the benefit decision begin before the completion of the plan’s mandatory internal resolution process? In other words, can a statute of limitations for judicial review begin to run before a beneficiary is permitted to file suit?
The problem this lawsuit seeks to address can be clarified through a hypothetical: Imagine beneficiary B has an ERISA-regulated disability insurance plan with (i.e. provided by her employer but issued and administered by) insurer I. B’s contract with I states that a three-year statute of limitations for judicial review of benefit decisions begins running at the date that B sends I proof of loss. Then the following takes place:
- B sends I her proof of loss on January 1, 2010.
- I’s internal resolution process is completed on January 2, 2013, and B is denied her claim.
- B believes the decision was erroneous and seeks to challenge it in court.
- The court informs B that she has no claim because the statute of limitations—three years from January 1, 2010, the date that B sent I her proof of loss—has run.
B’s case certainly seems rather compelling. After all, I has functionally denied B any opportunity to receive independent review of I’s benefit decision. But at oral argument, the Justices raised several interesting arguments that make the outcome of this case far from clear.
First, the plaintiff in the case before the Court was not exactly like B. To be clear, the plaintiff went through quite an ordeal in dealing with Hartford Life — the issuer of the group LTD plan provided by her employer, Wal-Mart. Despite her diagnoses of lupus and fibromyalgia, Hartford repeatedly requested more information and repeatedly denied her application and appeals for LTD benefits. Similar to B, the plaintiff’s policy included a three-year statute of limitations from the date proof of loss was due. But unlike B, the plaintiff did not receive her final decision after the completion of the three-year statute of limitations. Rather, plaintiff had approximately one year between the time she received her final decision and the time the statute of limitations had run. But she did not file suit until approximately two years and fifty-one weeks after she received her final decision.
Second, and relatedly, there were not a whole lot of examples of people who faced the dilemma of our hypothetical beneficiary B. Indeed, in response to a question from Justice Kagan, the attorney for the plaintiff admitted that they had “not found any cases in which a claimant has actually lost the right to file a suit.” (Later in the argument, Justice Breyer noted that his clerks had actually found nine cases in which a beneficiary either had no time or a very short time to file suit. But even this total did not seem to impress Justice Scalia considering the nearly-forty-year history of ERISA.)
Third, several Justices noted that alternative judicial avenues exist for protecting beneficiaries like B. For example, Justice Breyer explained that a beneficiary could file a protective complaint within three years of proof of loss and the court would only hear the case if the insurer ultimately denied the claim. Similarly, Justice Scalia asked why equitable tolling would not apply if a beneficiary does not have sufficient time to file suit. And Justice Sotomayor questioned whether the government could simply pass a regulation guaranteeing that beneficiaries have at least some time from the end of the internal resolution process to file a suit.
None of this is to say that the plaintiff does not have a good case. ERISA is extremely complicated for judges and lawyers, let alone beneficiaries and employers, and the rule that the plaintiff seeks would provide clarity for both of these parties. After all, the status quo permits the highly counterintuitive scenario in which the time to file a claim in court begins running before a beneficiary is permitted to file such a suit. Meanwhile, the plaintiff’s rule would require a uniform start date (the date of final decision) for all statutes of limitations in ERISA-regulated plans. And perhaps most importantly, the plaintiff’s rule has the advantage of being fundamentally fairer to beneficiaries who need the time to institute a challenge to a benefit denial in court.
We’ll keep you updated when the Court ultimately weighs in….