ERISA benefits plans may shorten limitations period for federal claims, SCOTUS holds
Public Justice argued on behalf of the beneficiary
By Sarah Jones
ERISA does not prohibit benefits plans from starting the clock running on an employee’s benefits lawsuit before that lawsuit could be filed in court, the U.S. Supreme Court held this week, departing from 200 years of common law holding that statutes of limitations on federal claims do not begin running until the claim is ripe.
The case, Heimeshoff v. Hartford Insurance, asked whether an ERISA plan can begin running limitations on a beneficiary’s federal challenge to a denial of disability benefits before the suit could be brought in court (due to administrative exhaustion requirements), thereby permitting the plan to run the clock down and nearly out on the beneficiary’s ability to file statutorily guaranteed federal claim. The Court granted certiorari to resolve a circuit split, and held in the affirmative.
“This is a disappointing decision that permits language in a one-sided contract to trump a federal statute and overturns nearly two centuries of well-settled law about when the limitations clock on a federal claim can start ticking,” said Public Justice Staff Attorney Matt Wessler, who argued before the U.S. Supreme Court on behalf of the beneficiary on October 15.
Despite being a low-profile case, Wessler said Heimeshoff will likely have far-reaching implications that extend beyond employees benefits contracts.
The new rule, delivered by Justice Thomas in a unanimous decision, states that:
Absent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.
Consistent with the Roberts Court’s regressive Lochner-ian contracts philosophy, it reasoned that because ERISA doesn’t explicitly say that a plan may not do this, it follows that a plan may do it.
“This decision triggered a seismic shift in the blackletter law,” Wessler said. “A lot of statutes are silent on the statute of limitations, so it’s conceivable that for any statute where Congress has not explicitly said that the limitations period begins when the claim can be filed in court, a contract can start the clock running earlier and potentially eliminate a plaintiff’s right to file a cause of action.”
The case was brought by Julie Heimeshoff, a former Wal-Mart employee who was denied benefits under Wal-Mart’s long-term disability plan. The plan contained a provision that the statute of limitations starts to run when the injured workers’ “proof of loss” is due—which is 60 days after initial filing—rather than after her ERISA plan’s final denial of benefits.
Wessler said that allowing ERISA plans to start the clock before final denial is contrary to long-settled law. Further, ERISA creates a framework that facilitates the process for internal resolution and grants the right to appeal a final denial in court—of which the latter could be completely eliminated through clever use of limitations provisions.
“The internal claims process can easily take more time than the limitations period,” Wessler said. “This decision incentivizes insurers and employers to make the process as long as possible.”
In addition to Wessler, Public Justice’s Senior Attorney Leslie Brueckner and Kazan-Budd Attorney Leah Nicholls are co-counsel with Peter Stris and Brendan Maher of Stris & Maher. Steve Krafchick is Counsel of Record.