Header graphic for print
Employee Benefits Legal Blog Employee Benefits Related to Labor & Employment Matters

The Plan Says What it Says: Plan Statute of Limitations Applies

Posted in Court Cases, Plan Administration, Retirement Plans, Welfare Plans

For the purposes of figuring out when a claim has to be brought, plans can, in some instances, dictate when the “statute of limitations” runs for bringing a lawsuit.  Part of this is for consistent administration and part of it may be to avoid untimely litigation.  This was the issue in the Supreme Court’s recent decision in Heimeshoff v. Hartford Life & Accident Ins. Co.

Factually, Heimeshoff submitted a claim under the long-term disability plan for her employer, Wal-Mart.  The plan was administered by Hartford Life & Accident Insurance, which denied the claim. Heimeshoff appealed the claim denial following the appropriate administrative appeals process, and Hartford issued its final claim denial on November 26, 2007.  That date is key because the plans had a provision which specified a three-year statute of limitations for bringing suits and her lawsuit contesting the denial was filed just 8 days shy of the closing of that 3 years window, in November of 2010.

However, according to the terms of the plan, the 3-year statute of limitations actually began running on the date that participants are required to submit written proof of loss.  The last date for Heimeshoff to submit her proof of loss was actually in September 2007 as part of her administrative appeal.  As a result, the lawsuit was outside the 3-year time limit.  Heimeshoff argued that commencing the limitations period as set forth in the plan denied her the “full benefit of the three-year limitations period,” and that, at a minimum, it could require participants to file suit before their administrative appeals were actually exhausted (which is a requirement under ERISA for filing a lawsuit). 

In response to Heimeshoff’s argument, the Supreme Court basically said that because the rules are clear that parties can contract around a default statute of limitations in ERISA plans, they can likewise provide when that limitations period commences.   So it starts to run when the plan says it runs and unless the limitation period is two short, or there is a “controlling statute” that dictates another limitations period, the provisions is valid.

This case is not a suggestion that all plan sponsors should run out and put short statute of limitations clauses in their plans, but it is something to consider.  But it should serve as a reminder that plan language means what it says and it can generally be expected to apply as written.  That goes for mistakes too.  So be careful about the language in your plan documents.  Review your provisions and make sure they say what you want them to say and are consistent with how you administer the plan.  For assistance in reviewing plan documentation, contact your attorney at Fox Rothschild.