Contract Sets Timing in ERISA Claim; Clock Ticks Before Accrual - U.S. Supreme Court
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Contract Sets Timing in ERISA Claim; Clock Ticks Before Accrual

When does the timer begin to tick?

Julie Heimeshoff filed a claim for long-term disability benefits with Hartford Life & Accident Insurance Co., the administrator of Walmart's Group Long Term Disability Plan, due to her diagnosis of lupus and fibromyalgia. Her claim was denied after multiple doctors, hired by Hartford, found that even with her condition, she could continue to work her largely sedentary position as a senior public relations manager. The decision took nearly two years, after both sides hired multiple doctors and ordered multiple tests.

The governing ERISA plan requires the claimant to initiate judicial action within three years after "proof of loss" is due, i.e. when she was required to submit the relevant medical evidence. She filed suit three years after her final administrative appeal was denied (or approximately five years after the "proof of loss" was due). Her argument? The clock should start when the judicial cause of action accrues -- not before. And at first blush, her argument makes sense. After all, what happens if the administrative process and appeals eats up the entire term limit?

Unfortunately for her, the Supreme Court sided with the insurer, but for good reason.

Contract Controls, Unless Unreasonable

The basic presumption is set in Order of United Commercial Travelers of America v. Wolfe, where the Court held that a contractual limitations provision is enforceable so long as the time period is of reasonable length and there is no controlling statute contradicting the contract's terms.

Furthermore, as Justice Thomas notes, "ERISA §502(a)(1)(B) authorizes a plan participant to bring suit "to recover benefits due to him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." (emphasis added by Justice Thomas). Notice the emphasis on enforcing the terms of the plan in the statute. Justice Thomas quotes a recent Supreme Court case to point out that the language "speaks of 'enforc[ing]' the 'terms of the plan,' not of changing them."

Is it Reasonable?

Still, the concern remains: if the timer starts before a claimant's cause of action accrues, doesn't that leave a very real possibility that time wasted in administrative proceedings will run out the clock?

Not so much. The governing regulations set up a claim resolution process that should conclude within about one year. Delays caused by the plan administrator can trigger immediate access to the courts, so any fear of gaming the clock to prevent litigation is unfounded. Even in Heimeshoff's case, where her own repeated requests for extensions stretched the process to two years, she still had a year left to file, yet waited three.

And despite the government and Heimeshoff's fears that claimants themselves will rush through the process, to ensure timely access to courts, such action seems unlikely, as the judicial review is limited to the developed administrative record. Short-changing the administrative process reduces chances for success in court.

For all those other rare instances where a claim process legitimately takes all or most of three years, and the remaining time to file is "unreasonable," Justice Thomas notes that the traditional doctrines of waiver and estoppel, or equitable tolling, are available. Those instances should be rare, however. Even in the cases cited by Heimeshoff, nearly all of the time-barred claims were due to the plaintiffs' failure to diligently pursue their rights.

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